California owners of Volkswagen diesel cars caught up in the emissions-test rigging scandal might have a shot at getting the German automaker to buy back the vehicles.
A Seattle law firm filed a class action lawsuit against Volkswagen in Los Angeles federal court Monday demanding an immediate buyback under California emissions laws.
"We are asking for an injunction hearing in November, and if we win, we would want the refund program in place by the end of the year," said Steve Berman, the Seattle class action attorney who filed the case.
What makes the case viable is Volkswagen's public concession that it could take at least a year or longer to fix most of the 482,000 diesel vehicles it sold in the U.S. with secret software that tricks pollution tests, Berman said.
Both the Environmental Protection Agency and the California Air Resources Board are demanding that Volkswagen fix the vehicles. The software detects when the cars are undergoing laboratory emissions tests and changes how they operate to meet the requirements.
But when the vehicles are driven on the road they emit up to 40 times the limit for smog-forming nitrogen oxide pollution.
There are about 67,000 of the cars – 2009 to 2015 VW and Audis with 2-liter diesel engines – in California, according to auto information company Kelley Blue Book.
Volkswagen faces a Nov. 20 Air Resources Board deadline to provide remedies to bring the fleet of diesels in California into compliance with pollution regulations.
The lawsuit argues that "under California express warranty law," Volkswagen must either buy back the vehicles at the purchase price or provide replacement cars unless it can retrofit them "after a reasonable number of attempts."
It says Volkswagen executives have already conceded that the automaker cannot make the required repairs on most of the cars for at least a year or possibly longer. That obligates VW to take the cars back, Berman said.
"California law is quite clear that a manufacturer has a duty to refund or offer restitution if it can't fix the issue," Berman said.
Pressed by Jan Schakowsky (D-Ill.) at a congressional hearing last week, VW's U.S. Chief Executive Michael Horn said the company would consider buying back the cars. Kelley Blue Book estimates the price tag for such a program would reach $7.3 billion for just the vehicles sold in the U.S.
Horn also said the automaker was looking at giving owners rebates to cover the diminished value of their vehicles. Kelley Blue Book estimates that prices for used VW diesels have fallen about 13% since the scandal broke.
VW admitted to the cheating last month after being confronted by federal and California regulators. The company's chief executive, Martin Winterkorn, resigned a few days later in the wake of the scandal, and the company has already set aside more than $7 billion to pay fines, fix the cars and deal with hundreds of consumer lawsuits.
It faces as much as $18 billion in U.S. Clean Air Act fines as well as a criminal probe by the Department of Justice and sanctions from the California Air Resources Board. It also faces hundreds of lawsuits in the U.S.
The cheating software is on as many as 11 million vehicles worldwide, Volkswagen said.