Volkswagen AG will pay $48 million to settle an investors' class-action lawsuit against it for losses after its emissions testing improprieties became public, according to an agreement given preliminary approval by U.S. District Judge Charles R. Breyer in San Francisco.
The class-action suit brought by pension funds led by the $1.9 billion Arkansas State Highway Employees' Retirement System, Little Rock, and the Miami Police Relief and Pension Fund, centers on purchases of American depository receipts. (The size of the Miami fund could not be learned.)
In January 2017, Mr. Breyer denied motions by Volkswagen and several executives to dismiss the case, saying at the time that "despite its knowledge that the vehicles did not comply with U.S. and European emissions regulations, Volkswagen and its executives misled the investing public before and during the class period." He also rejected the company's central argument that the shares were beyond the territorial reach of U.S. securities law and would be more properly litigated in Germany, saying that because Volkswagen sponsored the ADRs that were purchased in the U.S., the U.S. has an interest in protecting domestic investors against securities fraud.
The $48 million settlement fund will first be used to pay plaintiffs' attorneys' fees up to 25% of the fund, and costs capped at $500,000, with the remaining balance to be distributed to class members who submit timely and valid claims, according to the order.
The class period covers ADR purchases from Nov. 19, 2010, through Jan. 4, 2016, although claims for purchases before May 2014 will be reduced by half, because proving liability during that period would be more difficult.
Mr. Breyer on Wednesday gave preliminary approval in part because "the proposed settlement appears to be the product of serious, informed and non-collusive negotiations." Parties had sufficient information to assess the strengths of the case, and they engaged in discovery for nearly a year before they reached an agreement in principle to settle, he said.
Notices will be sent to class members by Dec. 19; claims are due by April 18, 2019. The court will hold a fairness hearing on May 10 in San Francisco.
Jim Harrod, partner at Bernstein Litowitz Berger & Grossmann LLP, the law firm representing the pension funds, said in a statement that the funds' leadership was critical to the success of the case. "We are very pleased with the court's decision granting preliminary approval of the settlement and believe that the $48 million recovery is an excellent result for the class. It is critical that the institutional investor community stay vigilant in seeking to hold companies and their executives accountable for fraud and misconduct, and we are very proud to represent the Arkansas State Highway Employees Retirement System and Miami Police Relief and Pension Fund in this important litigation. Their leadership in the case was critical to the successful resolution."
Calls to Volkswagen Group of America were not immediately returned.
