A federal judge dismissed a proposed class action against Volkswagen and excluded plaintiffs’ expert evidence.
Retained by Sullivan & Cromwell
Counsel for Volkswagen retained Cornerstone Research to support economics expert Professor Lorin Hitt and a marketing expert in a proposed class action brought by buyers and lessees of “clean diesel” Volkswagen and Audi vehicles. Based on the testimony of Cornerstone Research experts, U.S. District Court Judge Charles R. Breyer concluded that plaintiffs failed to provide any evidence that the putative class members were economically damaged and excluded plaintiffs’ analyses. The judge dismissed the case.
Plaintiffs had purchased or leased Volkswagen or Audi diesel vehicles that contained a defeat device causing excess NOx emissions, but had sold their vehicles or ended their leases before the disclosure of the emissions issue. Plaintiffs claimed that they had paid a premium for the vehicles at the time of acquisition, and did not fully recover this premium upon selling or ending their leases because the vehicles’ value had depreciated.
In an interview with the American Lawyer, the lead attorneys from Sullivan & Cromwell stated, “Our experts, not only showed the flaws in plaintiffs’ experts’ methodologies, but also demonstrated that these plaintiffs would have recovered any emissions premium when they sold their cars.”
Lorin Hitt: Damages Rebuttal
Professor Lorin Hitt of the Wharton School of the University of Pennsylvania submitted a report rebutting several damages methods put forth by plaintiffs’ experts. Professor Hitt testified that plaintiffs’ damages methods did not attempt to measure the premium that solely stemmed from the vehicles’ emissions. He also showed that plaintiffs’ damages methods inappropriately assumed that the change in the value of the alleged premium could be measured by the vehicle’s overall depreciation rate.
In his ruling, Judge Breyer reiterated the critical flaws in plaintiffs’ analyses identified by Professor Hitt and found that plaintiffs’ damages methods were unreliable and inadmissible. In his opinion, Judge Breyer stated that “[c]ar features and characteristics are likely to affect depreciation to different degrees” and that “low emissions might hold a relatively stable value over a vehicle’s lifetime compared to features that naturally wear down.” These conclusions are in line with the critiques Professor Hitt offered in his testimony.
Marketing Expert: Conjoint Rebuttal
A marketing expert supported by Cornerstone Research submitted a report rebutting the conjoint survey and analysis put forth by plaintiffs as evidence of overpayment. The expert pointed out several critical flaws in plaintiffs’ conjoint analysis. He testified that it could not be used to calculate the market price that consumers would have paid if they had been informed of the diesel emissions issue at the time of purchase or lease.
In dismissing the case, Judge Breyer ruled that plaintiffs’ conjoint analysis was unreliable and inadmissible. Judge Breyer also cited decisions in MacDougall v. American Honda Motor Co. and In re General Motors LLC Ignition Switch Litigation. In these cases, experts supported by Cornerstone Research successfully argued that conjoint analysis cannot be used to reliably estimate a market price premium because it does not adequately account for supply-side considerations.