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Media Coverage

Lawyers Line Up On Both Sides of the Volkswagen Scandal

2 November 2015
The American Lawyer

It's fair to say that Quinn Emanuel Urquhart & Sullivan probably isn't Volks­wagen AG's favorite law firm right now.

Quinn Emanuel is already acting for a group of hedge funds in litigation against Volkswagen subsidiary Porsche Automobile Holdings SE. The firm may soon be fighting the world's leading carmaker by sales on two additional fronts, representing litigants on both sides of the Atlantic following Volkswagen's admission that it fitted vehicles with engine-management software to cheat emissions tests.

But Quinn Emanuel is only one of a growing field of law firms revving their engines in the Volkswagen emissions scandal, which broke on Sept. 18, when the U.S. Environmental Protection Agency issued Volkswagen a notice of violation of the Clean Air Act. The EPA charged that so-called defeat devices had been fitted to 11 million Volks­wagen group vehicles worldwide, allowing the vehicles to circumvent clean air rules on diesel cars. In the U.S., Volks­wagen faces possible fines totaling just over $18 billion. Its share price crashed from over 160 euros ($182) to near 100 euros ($114) in just 48 hours, wiping around 25 billion euros ($28 billion) from its market capitalization.

The bad news for Volkswagen shareholders, customers and the environment looks to be good news for lawyers, with a bonanza of investigations and disputes work up for grabs.

At press time in mid-October, Volkswagen had already been hit with more than 175 class actions in the U.S. alone, involving plaintiffs firms across the country. The Judicial Panel on Multidistrict Litigation, which will decide where to coordinate the cases, is scheduled to review the Volkswagen class actions at a Dec. 3 meeting.

Quinn Emanuel has already teamed up with Seattle consumer rights firm Hagens Berman Sobol Shapiro to file a class action complaint in federal court in Los Angeles against Volkswagen and its U.S. subsidiary. Another major action may soon follow, with Quinn Emanuel recently drafted to act for Bentham Ventures B.V., a joint venture between litigation funder IMF Bentham Limited and U.S.-based advisory firm Elliott Management, which announced in October that it is coordinating a massive shareholder class action against Volkswagen in Germany. Richard East, co-managing partner of Quinn Emanuel's London office, says that the proposed 4 billion-euro claim will be "the most significant securities action that has ever been filed in Germany." The litigation, for alleged breaches of Germany's securities trading act, will be led by Quinn Emanuel's Hamburg managing partner, Nadine Herr­mann.

Volkswagen has close relationships with a number of global law firms. The Magic Circle's Clifford Chance and Freshfields Bruckhaus Deringer are long-standing counsel to Volkswagen and Porsche, respectively, regularly advising the companies on major transactions, including their $5.5 billion merger in 2009. The firms have been reported as having pitched to represent Volkswagen in the U.K. in relation to the emissions scandal, but both firms declined to comment. Sullivan & Cromwell also has links to the car group, recently acting for Porsche in defense of a $1 billion claim filed in the U.S. by a group of hedge funds that alleged the carmaker had subverted German disclosure laws to manipulate Volkswagen's share price.

But it is Mayer Brown that has scored a leading role defending the German carmaker in consumer lawsuits in the U.S., a source with knowledge of the situation confirmed. The firm's team, led by Los Angeles litigation partner John Nadolenco, has submitted a filing for Volkswagen in a federal lawsuit in Los Angeles brought by a group of plaintiffs. Mayer Brown isn't known to have strong links to Volkswagen, although appellate lawyer Timothy Bishop represented Volkswagen's German parent company in a wrongful death lawsuit heard by the U.S. Supreme Court in 1988, while the firm's German practice has advised the company on financings, according to its website.

Meanwhile, Volkswagen's board has appointed Jones Day to conduct an internal investigation, with partners Johannes Perlitt in Frankfurt and Johannes Zöttl in Düsseldorf playing a role, according to the German publication Juve. Both joined the firm last year from Clifford Chance as part of Jones Day's expansion in Germany. (While at Clifford Chance, Perlitt advised Volkswagen on its merger with Porsche.) Jones Day declined to comment.

Kirkland & Ellis has also been involved, according to the EPA notice of violation, which was sent to various Volkswagen executives and Kirkland partner Stuart Drake, an environmental defense specialist based in Washington, D.C., whose automotive industry clients have included General Motors Co. and Toyota Motor Corp. Drake has very relevant expertise: In the late 1990s, he represented the Truck Manufacturers Association after the EPA claimed that from 1987 to 1998, companies that sold heavy-duty diesel engines equipped them with defeat devices to make their engines appear less polluting. The companies eventually paid $1 billion to settle. Kirkland is currently representing General Motors in multidistrict litigation related to GM ignition switch and vehicle recalls. The firm declined to provide The American Lawyer with detail on the exact nature of its work for Volkswagen.

The truly global scandal has spread well beyond the U.S. and Germany. In Canada, Volks­wagen is facing investigations by Environment Canada and Ontario's Ministry of the Environment and Climate Change. In the United Kingdom, meanwhile, claimant firms Leigh Day and Slater & Gordon are preparing for potential class actions after Volkswagen admitted that almost 1.2 million cars sold in the U.K. may have been fitted with the cheat device. Slater & Gordon head of group litigation Jacqueline Young says that almost 2,100 Volkswagen car owners have contacted the firm for advice, while Leigh Day in September issued a letter to Volkswagen on behalf of more than 1,200 customers demanding compensation and a full refund of the premium they paid for supposedly "clean" diesel cars.

A spokeswoman for Volks­wagen, which has allocated 6.5 billion euros to cover the costs of the scandal, says that the company is unable to comment on specific litigation cases and is "fully cooperating with all investigations."

Reprinted with permission from the November 2, 2015 edition of The American Lawyer © 2015 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited.


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