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Mon, Oct. 21

Volkswagen fights consumer fraud charge in Arizona
Lawyers for company say claims were ‘puffery’

In new court filings, the legal team for Volkswagen is acknowledging that the company had designed and sold vehicles under the VW, Audi and Porsche labels with “defeat devices,” essentially allowing its cars to emit more pollutants of oxides of nitrogen during actual on-road driving than show up when they are actually being tested. (Michael Probst/AP)

In new court filings, the legal team for Volkswagen is acknowledging that the company had designed and sold vehicles under the VW, Audi and Porsche labels with “defeat devices,” essentially allowing its cars to emit more pollutants of oxides of nitrogen during actual on-road driving than show up when they are actually being tested. (Michael Probst/AP)

PHOENIX — Attorneys for Volkswagen are telling a judge the firm can’t be found guilty of consumer fraud and fined potentially hundreds of millions of dollars because its now-disproved claims of the cleanliness of the diesel vehicles it was selling were just promotional “puffery.”

In new court filings here, the legal team is acknowledging that Volkswagen had designed and sold vehicles under the VW, Audi and Porsche labels with “defeat devices,” essentially allowing its cars to emit more pollutants of oxides of nitrogen during actual on-road driving than show up when they are actually being tested. And the emissions were many times higher than federal standards.

VW eventually pleaded guilty to three felonies, including defrauding the U.S. Environmental Protection Agency, and agreed to $4.3 billion in penalties and another $4.9 billion to address pollution from the supposedly low-emission diesel vehicles. And Arizona is getting $57 million for projects to reduce emissions of oxides of nitrogen.

But the legal team, represented in Arizona by attorney Keith Beauchamp, told Maricopa County Superior Court Judge Randall Warner he should reject a bid by Attorney General Mark Brnovich to have VW also found guilty of consumer fraud because it advertised and marketed the vehicles to Arizona consumers as “clean.”

In essence, VW contends that when the firm said it was promoting “clean diesel” that phrase really has no legal meaning. More to the point, VW’s legal team says the consumers were not led to believe that the statements actually meant VW was making specific environmental claims concerning its nitrogen oxide emissions.

“Simply put, ‘clean diesel’ is legal puffery under Arizona law,” the legal briefs argue. And that, the lawyers said, means there was no violation of the state’s Consumer Fraud Act.

To buttress this argument, the lawyers told Warner that it’s not like VW was claiming some actual factual basis of cleanliness — or that the term “clean” has an actual meaning.

“Consider how one perceives how immaculate different ‘clean’ locations are: a ‘clean’ bedroom, a ‘clean’ locker room, a ‘clean’ operating room, and a ‘clean’ semiconductor fabrication facility,” they wrote. “Each conveys different degrees of cleanliness -- driven not by the word ‘clean’ but by the location ‘clean’ describes.”

And VW said the state, in filing suit, never claims there is any “objective meaning” of the word “clean” or that those who viewed its commercials would share such a meaning.

Even if it did convey some meaning to those who bought its vehicles, VW said the statement is true to the extent that the vehicles emit less soot and carbon dioxide than earlier diesels, even if its nitrogen oxide emissions were higher than legal standards.

Similarly, the company’s lawyers brushed aside other claims by the state of consumer fraud based on statements by VW claiming that diesel is “no longer dirty.”

“No standard is provided to measure ‘dirty’ or ‘clean,’ they said.

VW’s contention is getting a fight from Assistant Attorney General O.H. Skinner who is leading the legal team that filed the 2016 lawsuit. He hopes to get Warner, after reviewing the company’s commercials at a January trial, to conclude they misled viewers.

That finding would open the door to fines of $10,000 per violation. With VW admitting in other legal documents that more than 11,000 of these vehicles were sold or leased to Arizonans between 2009 and 2016, that would total $110 million.

But the state also is claiming that Arizona laws also make false advertising a violation. And that makes each ad and each commercial run in the state a separate offense.

Skinner does not deny that courts have ruled that mere puffery does not give rise to claims of consumer fraud. But he told Warner in his own court filings that VW’s efforts to use that to have the case dismissed should be rejected.

“The ‘puffery’ doctrine does not protect criminal schemers from the consequences of their intentional deception,” he wrote.

“Puffery is no defense to the specific representations made in the ads,” said, saying it cannot apply to “long-running intentional deceptive practices” in which the state claims VW engaged.

Skinner said he sees the commercials as part of a “master scheme” that started with VW manufacturing vehicles designed to defeat emission testing and then concealing that from regulators. He told Warner that allowing the company to claim the commercial were puffery would require the judge to conclude that the statements were unlikely to induce consumers to rely on those claims.

“This does not track,” he said.

The lawsuit claims that Arizonans were effectively duped into buying vehicles with the special diesel engine that was advertised as having just a fraction of the emissions as similar cars. Buyers paid anywhere from $1,000 to $7,000 more than comparable vehicles.

But those low emissions were, in many ways, on paper only.

VW engineers had programmed each vehicle’s computer to recognize when it was being tested for emissions. At that point, it would go into a low-power mode with sharply reduced pollution.

Once the test was over, the engine returned to full power. Only thing is, that mode produced more pollutants, including as much as 40 times the maximum allowable standards of nitrogen oxides.

Aside from claiming there was no consumer fraud, VW attorneys say the penalties the state is seeking are duplicative.

“Volkswagen has already been penalized, multiple times,” they said. And they said it would be “inequitable and serve no purpose” to impose penalties which are not based on the number of people who purchased a diesel VW or Audi vehicles.

Skinner, in the latest filings, defended the broad relief sought.

“To limit defendants’ Consumer Fraud Act violations to the number of sales and leases allows them to evade liability commensurate with the true effect of their deceptive conduct,” he told Warner, saying that VW and Audi “must be accountable for their actions.”

“Even if this results in millions of violations, such would be proper given the sweeping nature of this fraud, which involves multiple parties and advertising campaigns spanning a decade-long conspiracy,” Skinner said.

At the hearing Warner has scheduled for January, the judge will review several of the company’s commercials aired in Arizona to determine if they cross the line into consumer fraud.

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