By David Shepardson and Jonathan Stempel
(Reuters) – A U.S. appeals court ruled on Monday that Volkswagen AG (DE:) cannot escape potential financial penalties from two counties in Florida and Utah that may amount to a “staggering” additional liability arising from the German automaker’s diesel emissions scandal.
The unanimous ruling by a three-judge panel of the 9th U.S. Circuit Court of Appeals, sitting in Anchorage, Alaska, was a victory for Utah’s Salt Lake County and Florida’s Hillsborough County. The counties sued VW for causing excess diesel emissions harmful to the environment and could in theory seek billions of dollars in damages.
Volkswagen settled U.S. criminal and civil actions prompted by the cheating scandal for more than $20 billion, but that did not shield it from liability from local and state governments, the 9th Circuit noted.
The 9th Circuit found that nothing in the Clean Air Act “raises the inference that Congress intended to place manufacturers beyond the reach of state and local governments.”
Volkswagen has admitted to using illegal software to cheat U.S. pollution tests in 2015, allowing up to 40 times legally allowable emissions.
The judges wrote that they were “mindful that our conclusion may result in staggering liability for Volkswagen. But this result is due to conduct that could not have been anticipated by Congress: Volkswagen’s intentional tampering with post-sale vehicles to increase air pollution.”
The two counties each have penalties of $5,000 per day for tampering violations and had a combined total of at least 6,100 polluting VW diesel vehicles. U.S. District Judge Charles Breyer, who had ruled in the case in 2018, noted at the time that “the potential penalties could reach $30.6 million per day and $11.2 billion per year.”
Volkswagen vowed to seek further review by the 9th Circuit or the U.S. Supreme Court if necessary, saying the ruling conflicts with the findings of other courts.
“Those other courts rightly recognized the chaos that would ensue if thousands of localities can regulate manufacturers’ updates of their software systems, which are an inherent feature of modern vehicles and, in this case, reduced emissions,” Volkswagen said.
The scandal triggered a global backlash against diesel vehicles that has so far cost VW 30 billion euros ($33.3 billion) in fines, penalties and vehicle buyback costs.
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