'Clean diesel' scandal makes running Volkswagen dealerships much less profitable, Napleton Auto's RICO class action says

By Scott Holland | Apr 7, 2016

A Chicagoland auto franchise is taking aim at Volkswagen federal court, arguing a scandal now surrounding the German automaker and its diesel cars - and Volkswagen’s handling of the scandal in the months since allegations first publicly surfaced of the automaker’s purported attempt to deceive government auto emissions testers - has damaged the ability of Volkswagen dealerships, including its own, to turn a profit.

In the class action racketeering complaint, filed April 6 in Chicago federal court, the Westmont-based Napleton Automotive Group argued Volkswagen Auto Group of America has ignored basic rules governing relationships between car makers and franchise dealers, and has harmed Napleton’s three Volkswagen dealerships, located in Urbana, and in Orlando and Sanford, Fla.

Referencing state and federal laws intended to prevent car makers from abusing power at the expense of their dealers, the plaintiffs contended “these laws stood no chance against Volkswagen’s culture of growth and profit at any cost. With remarkable hubris and little care for its dealers, customers, and our planet as a whole, Volkswagen flouted these laws.”

Not only was the company embroiled in a scandal over so-called “defeat devices” - mechanisms fitted to Volkswagen clean diesel engines that enabled them to perform at extremely more efficient levels when connected to emissions testing devices - but in the period between admitting this scheme to regulators and when that admission went public, “VW pushed through Ed Napleton’s purchase of a Volkswagen franchise in Urbana, Ill., at top dollar, as if the Dieselgate scandal was not about to toss the Volkswagen brand value off a proverbial cliff.”

In recounting the details surrounding the “clean diesel” issue, the lawsuit also named as a defendant Robert Bosch LLC, the firm that allegedly supplied the defeat device to Volkswagen. According to the lawsuit, Volkswagen sold so-called clean diesel vehicles at premium prices, and then used the popularity of such vehicles to drive up the value of dealer franchise rights. However, the “clean diesel” vehicles can no longer be sold in the United States, negatively affecting all Volkswagen sales, the complaint said.

Further, the complaint said Volkswagen “also abused dealers through creation of unlevel allocation and pricing, and coerced dealers into using Volkswagen’s affiliated loan company, VCI.” This involved benchmarks for penetration into what Volkswagen defines as “primary area of influence” for its dealers and a “dealer sales index” to measure sales performance, all of which factor into the prices dealers must pay to obtain auto inventory to sell to customers, the complaint said.

The class of plaintiffs would include those who owned Volkswagen franchise dealerships, as of Sept. 18, with separate subclasses for dealership owners in Florida and Illinois, both linked to the same date — the day a Los Angeles Times story first began to lift the curtain on the clean diesel scandal.

The lawsuit alleged VW’s actions violated the federal Automobile Dealers’ Day in Court Act and the Racketeer Influenced and Corrupt Organizations (RICO) Act, as well violated state law in Florida and Illinois.

In addition to class certification, the plaintiffs seek a court order blocking VW from continuing with its current practices towards its dealerships. It also seeks punitive and treble damages, plus attorney fees.

Napleton has requested a jury trial.

Napleton is represented in the matter by attorneys with the firm of Hagens Berman Sobol Shapiro, with offices in Chicago and Seattle.

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Hagens Berman Sobol Shapiro, LLP Napleton Automotive Group Volkswagen of America Group, Inc

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