Tuesday, 23 April 2019 11:14

VW, Audi Face Proposed Class-Action Lawsuit Involving CPO

Written by Joe Overby, Auto Remarketing



Volkswagen Group of America, Audi of America and their respective German parent companies (Volkswagen AG and Audi AG) are facing a proposed class-action lawsuit filed in U.S. District Court for the Eastern District of Virginia.


The consumer plaintiffs accuse the companies of having allegedly “defrauded and endangered them and others by selling vehicles labeled as certified pre-owned (CPO) that were actually pre-production models that did not comply with U.S. motor vehicle regulations and should never have been placed on American roads,” according to a news release from The Law Offices of Michael J. Melkersen, P.C.


Michael Melkersen filed the suit on behalf of representative plaintiffs in New Jersey, Colorado and Washington state. Motley Rice LCC is providing additional class representation.


“Not only has Volkswagen knowingly sold cars in violation of applicable safety standards, Volkswagen tried to hide its misconduct by committing Federal Odometer Fraud by lying to consumers about when and how the mileage on these cars occurred,” Melkersen said in a news release. “By providing a secret data feed to Carfax that manipulated how and when the mileage would appear in the Carfax vehicle history reports, Volkswagen and Audi were able to use Carfax to perpetrate this mileage-fraud scheme.”


A copy of the filing can be found here.


The suit claims the defendants aimed to “yet again defraud its consumers by illegally titling, marketing and selling so-called ‘certified pre-owned’ (‘CPO’) vehicles to unsuspecting customers who would have never otherwise purchased these cars or who would have paid less for such vehicles had the truth been known.


“Specifically, Volkswagen misrepresented the certification, prior use and mileage of these vehicles to induce the fraudulent sale of these CPO cars in three interrelated ways,” the suit said.


It alleges that the defendants “sold certain Audi-branded and Volkswagen-branded CPO-designated vehicles commonly known as pre-series, zero series or pre-production cars (“Pre-Production Cars”) by falsely representing to consumers that such vehicles conformed to all Federal Motor Vehicle Safety Standards (‘Federal Safety Standards’), when in fact, Volkswagen knew that these Pre-Production Cars violated Federal Safety Standards and could not be legally sold in the United States.”


Next, it alleges that defendants “sold certain Audi-branded and Volkswagen-branded corporate fleet vehicles (“Corporate Fleet Cars”) without disclosing that these CPO-designated cars had been regularly driven for testing and evaluation by members of the automotive press (“Press-Fleet Cars”) before these same vehicles were advertised and resold to unsuspecting consumers.


“Volkswagen misleadingly marketed these Corporate Fleet Cars as ‘CARFAX 1-Owner’ vehicles purportedly entitled to a price premium in the marketplace as a result of such ‘1-Owner’ status. Press-Fleet Cars, however, are significantly less valuable than similarly situated vehicles that have not been test-driven by a myriad of persons within the automotive press. Therefore, by misrepresenting the history of its Corporate Fleet Cars, Volkswagen was able to sell PressFleet Cars that it would not have been able to otherwise sell at a price it would not have been otherwise able to obtain,” the suit said.


And third, the defendants are alleged to have “sold certain Audi-branded and Volkswagen-branded vehicles without disclosing that these CPO-designated cars had been assigned to a pool of vehicles (the ‘Pool-Fleet Cars’) that were loaned for personal use by employees within VWGOA prior to being leased to a particular employee (the ‘LeasedFleet Cars’). These Leased-Fleet Cars were then advertised and resold to unsuspecting consumers. Volkswagen misleadingly sold these Leased-Fleet Cars as “CARFAX 1- Owner” vehicles purportedly entitled to a price premium in the marketplace as a result of such “1-Owner” status, even though Volkswagen knew that such Leased-Fleet Cars had been driven by a myriad of other individuals prior to being resold to consumers for more than those cars were otherwise worth had the true history of the Leased-Fleet Cars been disclosed.”


The law firm added in its news release: “Pre-production cars are often built with non-standard parts or using assembly practices that may not meet U.S. safety standards. They can't be certified to comply with federal motor vehicle standards and are normally destroyed or exported.


“The lawsuit alleges that in order to boost sales, Volkswagen diverted the vehicles to its CPO program. Then, when it faced the likelihood of public scrutiny, Volkswagen engineered a ‘sneaky recall’ that was delayed for two years until May 2018 and offered to buy back far fewer vehicles than the number allegedly sold illegally under the CPO program. (NHTSA Campaign Number: 18V329000).”


Volkswagen Group of America and Audi of America did not immediately respond to requests for comment.


Carfax declined to comment.


Auto Remarketing reached out to compliance expert Randy Henrick for reaction to this development. A leading voice about compliant advertising practices, Henrick was Dealertrack’s regulatory and compliance counsel for 12 years and now conducts industry consulting at www.autodealercompliance.net.


“The allegations, if true, would constitute serious violations by Volkswagen of multiple federal and state automobile consumer protection laws and regulations,” Henrick said via email on April 12. “In the aftermath of Dieselgate, it is hard to imagine that Volkswagen would perpetrate another fraud on U.S. consumers. Their reputation and possibly their survival as a viable brand in the U.S. market is at stake.


“Trust is not a quality that can easily be regained, especially in the motor vehicle industry,” he added.


Auto Remarketing staff writer Nick Zulovich contributed to this story. 


We thank Auto Remarketing for reprint permission.