Downing-Moore v. Volkswagen

CLASS ACTION COMPLAINT Page 1

JENNIFER L. JONAK (OSB #115802) JONAK LAW GROUP, P.C. 85100 Cloverdale Road Creswell, Oregon 97426 Telephone: (510) 501-6276 Facsimile: (510) 291-2910 Email: [email protected] JOSEPH W. COTCHETT (Pro Hac Vice to be filed) NANCY L. FINEMAN (Pro Hac Vice to be filed) JUSTIN T. BERGER (Pro Hac Vice to be filed) COTCHETT, PITRE & McCARTHY, LLP 840 Malcolm Road, Suite 200 Burlingame, California 94010 Telephone: (650) 697-6000 Facsimile: (650) 692-3606 Email: [email protected] Attorneys for Plaintiffs and the Proposed Class

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF OREGON

EUGENE DIVISION

EMILY DOWNING-MOORE, an Oregon resident; THADDEUS MOORE, an Oregon resident; ZACHARY A. BLALACK, an Oregon resident; and NATALIE B. BLALACK, an Oregon resident, on behalf of themselves and all others similarly situated,

Plaintiffs, v.

VOLKSWAGEN GROUP OF AMERICA, INC., a New Jersey corporation; VOLKSWAGEN AKTIENGESELLSCHAFT, a German corporation; and AUDI AG, a German corporation.

Defendants.

Case No. CLASS ACTION ALLEGATION COMPLAINT Action for Consumer Fraud/Unfair Trade Practices (28 U.S.C. § 1332) JURY TRIAL DEMANDED

Case 6:15-cv-01825-AA Document 1 Filed 09/25/15 Page 1 of 38


Plaintiffs Emily Downing-Moore, Thaddeus Moore, Zachary A. Blalack, and Natalie B.

Blalack, individually and on behalf of all others similarly situated (the “Class”), allege the

following:

PARTIES

1. Plaintiffs Emily Downing Moore and Thaddeus Moore are individuals residing in

Eugene, Oregon. In or about 2011, they purchased a 2011 TDI Jetta SportWagen from Sheppard

Volkswagen, an authorized Volkswagen dealer in Eugene, Oregon. Plaintiffs purchased the Jetta

specifically because it was advertised as being a “clean,” environmentally-friendly vehicle that

also provided excellent power, performance, and fuel mileage. Plaintiffs conducted extensive

research on the Jetta, and competing vehicles, before purchasing the vehicle. Plaintiffs would

not have purchased the vehicle but for VW’s representations regarding the “clean” emissions

characteristics of the Jetta TDI. Unbeknownst to the Plaintiffs, at the time the vehicle was

purchased, it was equipped with an emissions control “defeat device” which caused the vehicle

to get an undue EPA certification and pass emissions tests, but during normal driving conditions,

emit up to 40 times the allowed level of pollutants, including NOx. The false advertising by

Volkwagen induced the Moore Plaintiffs to pay the purchase price for their Volkswagen vehicle,

and without such false advertising, they would not have purchased it since the environmental

attributes, including the belief that their vehicle emitted low emissions while offering good

performance and fuel economy, was properly EPA certified, and was environmentally friendly,

were a significant motivation in selecting this vehicle over others. The use of the “defeat device”

by Volkswagen has caused the Moore Plaintiffs out of pocket loss, future attempted repairs, the

purchase price of the vehicle, and the diminished value of their vehicle. Volkswagen knew about

and purposefully used the “defeat device,” but did not disclose the “defeat device” and its effects

to the Moore Plaintiffs, deceiving them into purchasing a polluting vehicle instead of the

environmentally friendly vehicle that was advertised.

2. Plaintiffs Zachary A. Blalack and Natalie B. Blalack are individuals residing in

Eugene, Oregon. In 2013, they purchased a 2014 Volkswagen TDI Passat from Armstrong



Volkswagen, an authorized Volkswagen dealer in Gladstone, Oregon. Plaintiffs still own this

vehicle. Plaintiffs purchased the Passat specifically because it was advertised as being a “clean,”

environmentally-friendly vehicle that also provided excellent power, performance, and fuel

mileage. Plaintiffs conducted extensive research on the Passat, and competing vehicles, before

purchasing the vehicle. Plaintiffs would not have purchased the vehicle but for VW’s

representations regarding the “clean” emissions characteristics of the Passat TDI. Unbeknownst

to the Plaintiffs, at the time the vehicle was purchased, it was equipped with an emissions control

“defeat device” which caused the vehicle to get an undue EPA certification and pass emissions

tests, but during normal driving conditions, emit up to 40 times the allowed level of pollutants,

including NOx. The false advertising by Volkwagen induced the Blalack Plaintiffs to pay the

purchase price for their Volkswagen vehicle, and without such false advertising, they would not

have purchased it since the environmental attributes, including the belief that their vehicle

emitted low emissions while offering good performance and fuel economy, was properly EPA

certified, and was environmentally friendly, were a significant motivation in selecting this

vehicle over others. The use of the “defeat device” by Volkswagen has caused the Blalack

Plaintiffs out of pocket loss, future attempted repairs, the purchase price of the vehicle, and the

diminished value of their vehicle. Volkswagen knew about and purposefully used the “defeat

device,” but did not disclose the “defeat device” and its effects to the Blalack Plaintiffs,

deceiving them into purchasing a polluting vehicle instead of the environmentally friendly

vehicle that was advertised.

3. Defendant Volkswagen Group of America, Inc. is a domestic for-profit New

Jersey corporation, and is headquartered in Herndon, Virginia. Volkswagen is a wholly owned

subsidiary of Volkswagen AG, the world’s largest automobile manufacturer. Volkswagen

designs, manufactures, tests, markets, distributes and sells the Class Vehicles through the United

States, including within the State of Oregon.

4. Established in 1937, Defendant Volkswagen Aktiengesellschaft (hereinafter,

“Volkswagen AG”) is a German car corporation organized and existing under the laws of



Germany, with its principal place of business located in Wolfsburg, Germany. Volkswagen AG is

the parent company of Volkswagen Group of America, Inc., also named as a Defendant in this

Complaint. All three Defendants (Volkswagen AG, Audi, and Volkswagen Group of America,

Inc.) are collectively referred to in this complaint as “Volkswagen.”

5. In 1964, Volkswagen AG acquired Auto Union, and in 1969, Volkswagen AG

acquired NSU Motorenwerke AG. Volkswagen AG merged Auto Union and NSU to create Audi

AG (hereinafter, “Audi”), which has since been developed into Volkswagen’s luxury vehicle

brand. Audi is a German automobile manufacturer that designs, engineers, produces, markets, and

distributes luxury automobiles, and is a majority owned (99.55%) subsidiary of Volkswagen

Group. Since 2007, Audi has used the slogan “Truth in Engineering,” and is among the best-selling

luxury automobiles in the world.

JURISDICTION

6. This Court has jurisdiction pursuant to the Class Action Fairness Act of 2005, 28

U.S.C. § 1332(d), because the proposed Class consist of 100 or more members; the amount in

controversy exceeds $5,000,000, exclusive of costs and interest; and because a member of the

Plaintiff Class is a citizen of a state different than Volkswagen’s home states. The Court also has

supplemental jurisdiction over the state law claims pursuant to 28 U.S.C. § 1367.

VENUE

7. Venue is proper in this District under 28 U.S.C. § 1391 because a substantial part

of the events or omissions giving rise to Plaintiffs’ claims occurred in this District. Plaintiffs

reside in this District and purchased their Affected Vehicle in this District, a substantial part of

the property that is the subject of this action is situated in this District, and plaintiff Class

members residing in this district have been harmed as a result of Volkswagen’s acts or

omissions. Furthermore, Volkswagen has marketed, advertised, sold and leased Class Vehicles,

and regularly does business, within this District.



FACTUAL ALLEGATIONS

8. In 1970, Congress enacted the first major Clean Air Act, which act has been

amended. The Clean Air Act required a 90% reduction in emissions from new automobiles by

1975. In 1970, Congress also established the Environmental Protection Agency (“EPA”), which

has broad responsibility for regulating motor vehicle pollution.

9. Congress’ purpose in creating the Clean Air Act, in part, was “to protect and

enhance the quality of the Nation’s air resources so as to promote the public health and welfare

and the productive capacity of its population,” and “to initiate and accelerate a national research

and development program to achieve the prevention and control of air pollution.” 42 U.S.C. §

7401(b)(1)-(2).

10. The Clean Air Act requires vehicle manufacturers to certify to EPA that their

products will meet applicable federal emission standards to control air pollution. The EPA

administers a certification program to ensure that every vehicle introduced into United States

commerce satisfies applicable emission standards. Under this standard, the EPA issues

certificates of conformity (hereinafter, “COC”) and approves the introduction of vehicles

satisfying the standards into United States commerce. Every vehicle sold in the United States

must be covered by an EPA-issued certificate of conformity. This includes light-duty motor

vehicles such as the Class Vehicles at issue in this Complaint; the Class Vehicles needed to

satisfy emission standards for certain air pollutants, including nitrogen oxide (hereinafter,

“NOx”). 40 C.F.R. § 86.1811-04. Clean Air Act § 101(b)(1) - (2), 42 U.S.C. § 7401(b)(1)-(2).

11. As used in this Complaint, “Class Vehicles” means the following vehicle models

equipped with 2.0 liter diesel engines: Volkswagen Jetta (model years 2009 – 2015),

Volkswagen Beetle (model years 2012 – 2015), Audi A3 (model years 2010 – 2015),

Volkswagen Golf (model years 2010 – 2015) and Volkswagen Passat (model years 2012 –

2015). Discovery may reveal that additional vehicle models and model years are properly

included as Class Vehicles.



A. Volkswagen’s “Clean Diesel” Campaign is a Hoax; the Class Vehicles Were Manufactured with Unlawful Defeat Devices.

12. Advertising has been a key part of Volkswagen’s business plan. For the period

2011-2013, Volkswagen spend over $2.9 billion per year world-wide on advertising.1

13. As explained by Volkswagen’s marketing chief, Tim Ellis in USA Today, even

though 2008 was a tough ad year for Volkswagen, its ad expenditures would be the same in

2009.2

14. In 2009, Volkswagen introduced a campaign called ‘Meet the Volkswagens.”

“Five ads running over eight weeks will promote fuel efficiency, green credentials, cost of

ownership and safety by highlighting VW’s performance compared with rival brands.”3 “‘Part

of the big plan is for Volkswagen to grow the brand in the U.S.,’ says Ellis. ‘As part of that

strategy, we can no longer afford to be a small, quirky niche brand here.”4 The marketing

included Volkswagen using Facebook with a link to a blog, tdi.vw.com/tdi to raise awareness of

VW’s TDI clean diesel model.

15. Part of its campaign was the slogan that “Today’s diesel-powered automobiles

aren’t your father’s diesel-powered automobiles.” “VW had a simple message in each instances:

its autos are fuel-efficient, green and safe vehicles that won’t break the bank.”5

16. “This ain’t your daddy’s diesel,” boldly declared Volkswagen, an international

automotive conglomerate, in its sleek advertising campaign on their main webpage.6

1 http://www.statista.com/statistics/286537/volkswagen-advertising-spending-worldwide/ 2 http://abcnews.go.com/Business/story?id=7493781 3 Id. 4 Id. 5 http://www.edmunds.com/autoobserver-archive/2009/05/volkswagen-playing-truth-or-dare-to-market-its-diesel-vehicles.html 6 See https://web.archive.org/web/20150816221300/http://www.vw.com/features/clean-diesel/. Last accessed September 22, 2015.



17. Another example of Volkswagen’s advertising touting its diesel cars:7

7 This advertisement has since been removed from Defendant’s webpage. Source: https://web.archive.org/web/20150816221300/http://www.vw.com/features/clean-diesel/.



18. The Class Vehicles, Volkswagen’s Mark Barnes once boasted, contained

“fantastic power train[s]” that “give[] very good fuel economy.” Yet “[i]t’s also good for the

environment because it puts out 25% less greenhouse gas emission than what a gasoline engine

would. And thanks to the uniqueness of the TDI motor, it cuts out the particulate emissions by

90% and the emissions of nitrous oxide are cut by 95%. So a very very clean running engine.

Clean enough to be certified in all 50 states.”8

19. From television to print advertisements to interviews to social media, Volkswagen

represented the environmental-friendliness, fuel efficiencies of the Class Vehicles to the public.

20. The advertising and promotion paid off as auto critics starting praising

Volkswagen’s diesel cars and sales increased.

21. In 2008, Jeep, Mercedes-Benz and Volkswagen were the only manufacturers

selling diesels in light-duty vehicles in the United States.9 Edmunds, a highly regarded vehicle

analyst, however, did not recommend any Volkswagen diesel cars as its top recommended.

Instead, it recommended: “If you want more options, we’d advise waiting until 2009 when the

ever popular Volkswagen Jetta TDI is slated to return to the U.S. as a 50-state vehicle.”10

22. Those recommendations began changing in 2009. In 2009, Edmunds made one

of its top recommended the 2009 Jetta, stating: “Though the majority of diesel engines are sold

in heavy-duty vehicles, the most anticipated of the new clean diesels coming out this year are a

sedan (and a wagon): the 2009 Volkswagen Jetta TDI. If you’re shopping for a compact sedan

or wagon, it’s the only diesel game in town. Starting at just a shade under $22,000 for the sedan

and $23,600 for the base Sportwagen, the new clean Jetta TDI brings with it the German

premium sedan feel without the premium sedan price. The Jetta TDI also qualifies for a $1,300

8 See Business Insider’s “Volkswagen: Our Diesel Cars Whup the Prius and Other Hybrids,” by Gayathri Vaidyanathan, October 9, 2009. http://www.businessinsider.com/volkswagen-preps-for-a-diesel-revolution-2009-10. 9 http://www.edmunds.com/diesel/2008/buying-guide.html 10 Id.



alternative motor vehicle federal tax credit, which can help offset the small premium you pay for

diesel efficiency.”11

23. In 2010, Edmunds recommended the Jetta as one of its top recommended diesels

and stated: “The Volkswagen Jetta TDI, for example, enters its second year on the market as one

of the most sought-after Jetta models, accounting for more than a third of stateside Jetta sales.

Starting at about $23,000 for the sedan and $25,000 for the SportWagen, the Jetta TDI provides

sprightly performance and a premium feel, along with the kind of fuel economy that only

gasoline-electric hybrids can match. It’s a bit pricey, but its unique collection of virtues makes it

an Edmunds staff favorite — and an interesting alternative to green machines like the Ford

Escape Hybrid and Toyota Prius.”12

24. In 2011, Edmunds recommended the Golf as one of its top recommended diesels

and stated: “Our favorite is the Volkswagen Golf TDI, which exploits the traditional fuel-

efficiency of its turbocharged four-cylinder diesel engine for truly frugal motoring when it comes

to fuel cost per mile.”13

25. In 2012 Edmunds included the Golf as one of its top recommended diesels and

stated: “Our favorite is the Volkswagen Golf TDI, which we feel offers a well-rounded package.

It has the premium interior of a more upscale vehicle, is easy to load cargo in thanks to its

hatchback, has a sporty suspension and is still capable of up to 42 mpg on the highway. The

Volkswagen Jetta TDI offers the same engine/transmission combination, but the car’s complete

redesign for 2011 left us wholly unimpressed. If you are looking for a larger sedan, consider the

more refined Volkswagen Passat TDI instead.”14

26. In 2013, Edmunds recommended both the Golf and the Passat as top

recommended diesels: “While the Volkswagen Golf TDI is one of the best-selling cars in

Europe, it hasn’t yet taken U.S. buyers by storm. Part of the reason is its price, since the TDI is

11 http://www.edmunds.com/diesel/2009/buying-guide.html 12 http://www.edmunds.com/diesel/2010/buying-guide.html 13 http://www.edmunds.com/diesel/2011/buying-guide.html 14 http://www.edmunds.com/diesel/2012/buying-guide.html



the top trim for the Golf. Still, we feel that the car is worth it because it offers a well-rounded

package that few cars in its class can match. The Golf has the premium interior of a more

upscale vehicle, is easy to load cargo in thanks to its hatchback, has a sporty suspension and is

still capable of up to 42 mpg on the highway. [¶] The Volkswagen Passat TDI offers the same

engine/transmission combination as the Golf TDI, but in a roomier midsize sedan body. The

Passat earned top honors in our last 40 MPG Challenge, when it surpassed its own EPA numbers

in real-world driving conditions. It is an excellent alternative to the Toyota Camry Hybrid or the

Ford Fusion Hybrid.”15

27. In the first half of 2015, Volkswagen passed Toyota as the world’s largest

automaker. Volkswagen AG sold 5.4 million vehicles, including 295,000 in the United States, to

Toyota’s 5.02 million vehicles. 16 Volkswagen’s projection of being the largest automaker in

the world by 2018 appeared to be coming true and meeting the goal three years early.

28. In fact, the Class Vehicles were not environmentally friendly with fuel efficiency

and power, but Volkswagen had knowingly and intentionally manipulated the Class Vehicle’s

emission system. The true facts were that the vehicles were actually emitting up to 40 times the

legal limit. Volkswagen had hidden its scheme for over six (6) years, but it was finally revealed

to the pubic in September of 2015.

29. The California Air Resources Board (“CARB”) and the EPA were first alerted to

emissions problems with the Class Vehicles in May 2014 when the West Virginia University’s

(hereinafter, “WVU”) Center for Alternative Fuels, Engines & Emissions published results of a

study that found significantly higher in-use emissions from two of Volkswagen’s light-duty diesel

vehicles.

30. Over the course of the year, Volkswagen continued to assert to both the CARB and

the EPA that the increased emission from these vehicles could be attributed to various technical

issues and unexpected in-use conditions. Volkswagen issued a voluntary recall in December 2014

15 http://www.edmunds.com/diesel/2013/buying-guide.html 16 http://www.latimes.com/business/la-fi-hy-vw-toyota-20150728-story.html



to address the issue. CARB, in coordination with the EPA, conducted follow up testing of these

vehicles both in the laboratory and during normal road operation to confirm the efficacy of the

recall. When the testing showed only a limited benefit to the recall, the CARB broadened the tested

vehicles to pinpoint the exact technical nature of the vehicles’ poor performance, and to investigate

why the vehicles’ onboard diagnostic system was not detecting the increased emissions.17

31. None of the potential technical issues suggested by Volkswagen explained the

higher test results consistently confirmed during the CARB’s testing and it became clear that the

CARB and the EPA would not approve certificates of conformity for Volkswagen’s 2016 model

year diesel vehicles until Volkswagen could adequately explain the anomalous emissions and

ensure that the 2016 model year vehicles would not have similar issues. Only then did

Volkswagen admit it had designed and installed a defeat device in these vehicles in the form of a

sophisticated software algorithm that detected when a vehicle was undergoing emission testing.18

B. Volkswagen Admitted the Class Vehicles Were Made With Defeat

Devices.

32. On September 18, 2015, the EPA issued a notice of violation (hereinafter,

“NOV”) of the Clean Air Act, 42 U.S.C. §§ 7401 – 7671(q), and its implementing regulations to

Volkswagen. Exhibit 1. Amongst other allegations, the NOV alleges that four-cylinder

Volkswagen diesel cars from model years 2009-2015 contained software “manufactured and

installed” by Volkswagen to deliberately circumvent EPA emissions standards for certain air

pollutants. “Therefore, VW violated section 203(a)(3)(B) of the Clean Air Act, 42 U.S.C. §

7522(a)(3)(B).” CARB also issued its own letter regarding Volkswagen’s violations. Exhibit 2.

33. Defeat devices bypass, defeat, or render inoperative elements of a vehicles’

emission control system that exist to comply with Clean Air Act emission standards. Defeat

17 See United States Environmental Protection Agency Notice of Violation (Volkswagen): http://www3.epa.gov/otaq/cert/violations.htm. 18 See United States Environmental Protection Agency Notice of Violation (Volkswagen): http://www3.epa.gov/otaq/cert/violations.htm, attached as Exhibit 1 hereto.



devices, such as those installed in Volkswagen’s Class Vehicles, sense whether the vehicle is

being tested for compliance with EPA emission standards based on various inputs including the

position of the steering wheel, vehicle speed, the duration of the engine’s operation, and

barometric pressure. These inputs precisely track the parameters of the federal test procedure

used for emission testing for EPA certification purposes.

34. Due to the existence of the defeat systems in Volkswagen’s Class Vehicles, the

Class Vehicles do not conform in all material respects to the vehicle specifications described in

the applications for the COCs that purportedly cover them. Therefore, Volkswagen also violated

section 203(a)(1) of the Clean Air Act, 42 U.S.C. § 7522(a)(1), by selling, offering for sale,

introducing into commerce, delivering for introduction into commerce, or importing these

vehicles, or for causing any of the foregoing acts.

35. By making and selling vehicles with defeat devices that allowed for higher levels

of air emissions than they certified to EPA, Volkswagen violated the Clean Air Act. “Using

[these] defeat devices in cars to evade clean air standards is illegal and a threat to public health,”

said Cynthia Giles, Assistant Administrator for the Office of Enforcement and Compliance

Assurance.

36. Indeed, Volkswagen AG’s CEO Martin Winterkorn acknowledged as much and

admitted to Volkswagen’s illegal misconduct as news of the 7-year-long scandal broke:

“Millions of people all over the world trust our brand, our cars, and our technology. I am deeply

sorry we have broken this trust. I would like to make a formal apology to our customers, to the

authorities, and to the general public for this misconduct.” On September 23, 2015, Mr.

Winterkorn resigned as CEO of Volkswagen, stating that “[a]bove all, I am stunned that

misconduct on such a scale was possible in the Volkswagen Group.”

37. Michael Horn, the head of Volkswagen in the United States, also admitted that

Volkswagen has “totally screwed up.” “Let’s be clear about this, our company was dishonest

with the [EPA] and the California air resources board [sic], and with all of you.”



38. As a result of Volkswagen’s admitted scandal, Volkswagen’s brand and

reputation have been irreparably damaged, as evidenced by Volkswagen’s ever-tanking stock

price in the hours and days following the EPA’s NOV. The Administration’s forced recall has

also damaged Volkswagen’s brand and reputation; re-sale values. Volkswagen recognizes the

damage to their brand and reputation, setting aside $7.2 billion to pay for their emissions

cheating scheme. “‘The Volkswagen brand is at risk,’ Mike Jackson, CEO of Auto Nation, told

CNBC today [September 23, 2015].”

TOLLING OF THE STATUTE OF LIMITATIONS

Fraudulent Concealment

39. Upon information and belief, Volkswagen has known of the defects described

above since at least 2009. Volkswagen knew of the defects well before Plaintiffs and Class

members purchased the Class Vehicles, and have concealed from or failed to notify Plaintiffs,

Class members, and the public of the full and complete nature of the defects.

40. Volkswagen intentionally concealed the defect from the public, from the Plaintiffs

and from the Class until September 2015, and did not fully investigate or consciously failed to

investigate the seriousness of the issue.

41. Any applicable statute of limitations has therefore been tolled by Volkswagen’s

knowledge and active concealment.

Estoppel

42. Volkswagen was and is under a continuing duty to disclose to Plaintiffs and Class

members the true character, quality, and nature of the vehicles. They actively concealed the true

character, quality, and nature of the vehicles and knowingly made misrepresentations about the

quality, reliability, characteristics, and performance of the vehicles. Plaintiffs and Class members

reasonably relied upon Volkswagen’s knowing and affirmative misrepresentations and/or active



concealment of these facts. Based on the foregoing, Volkswagen is estopped from relying on any

statutes of limitation in defense of this action.

Discovery Rule

43. The causes of action alleged herein did not accrue until Plaintiffs and Class

members discovered in September 2015 that their vehicles were defective.

CLASS ACTION ALLEGATIONS

44. Plaintiffs bring this action as a class action pursuant to Federal Rule of Civil

Procedure 23 on behalf of themselves and all others similarly situated. Plaintiffs seek to

represent a Class (herein, the “Class”) initially defined as:

All current and former owners of Class Vehicles who reside in the State of Oregon and/or who purchased or leased Class Vehicles in Oregon. Expressly excluded from the Class are Defendants and their subsidiaries, affiliates, officers, directors, and employees.

45. Certification of the Class is appropriate pursuant to Fed. R. Civ. P. 23(a),

23(b)(1), 23(b)(2), or 23(b)(3).

Numerosity and Ascertainability

46. The proposed Class is composed of purchasers and lessees of many thousands of

Class Vehicles dispersed throughout Oregon and joinder is impracticable. The precise number

and identity of Class members are unknown to Plaintiffs at this time, but can be obtained from

Volkswagen’s internal records.

Common Issues of Law & Fact

47. There are questions of law and fact common to the members of the Class, which

predominate over questions affecting only individual Class members, inter alia:

Whether the Volkswagen misrepresented the environmental friendliness,

emission standards compliance and credentials, fuel efficiency and/or

performance of the Class Vehicles;



Whether the Volkswagen misrepresented the emissions levels, fuel efficiency

and/or performance that the Class Vehicles could achieve under normal

driving conditions;

Whether Volkswagen publicized and advertised the environmental

friendliness, fuel emission compliance, fuel efficiency and/or performance of

the Class Vehicles;

Whether Volkswagen’s publicity and advertising regarding the environmental

friendliness, fuel emission compliance, fuel efficiency and/or performance of

the Class Vehicles was misleading;

Whether Volkswagen has engaged in unlawful, unfair or fraudulent business

practices;

Whether Volkswagen’s misrepresentations and omissions regarding the

compliance with emissions levels, environmental friendliness, fuel efficiency

and/or performance of the Class Vehicles has deceived or is likely to have

deceived Plaintiffs and the Class;

Whether Volkswagen’s conduct violated the Magnuson-Moss Warranty Act;

Whether Volkswagen breach express and/or implied warranties;

Whether Volkswagen’s unlawful, unfair or deceptive practices have harmed

Plaintiffs and the class members;

Whether Plaintiffs and the members of the class are entitled to equitable or

injunctive relief and,

Whether Plaintiffs and the members of the Class are entitled to damages,

including punitive damages.

Typicality

48. Plaintiffs are members of the Class and Plaintiffs’ claims are typical of the claims

of the Class. Plaintiffs, like all Class members, have been damaged by Volkswagen’s

misconduct in that they have incurred losses arising from the purchase and/or lease of the Class



Vehicles as a result of Volkswagen’s misrepresentations and concealments. The factual bases of

Volkswagen’s misconduct are common to all Class members and represent a common thread of

misconduct resulting in injury to all Class members. The relief Plaintiffs seek is typical of the

relief sought for the absent Class members.

Adequacy of Representation

49. Plaintiffs are willing and prepared to serve the Court and the proposed Class in a

representative capacity. Plaintiffs will fairly and adequately protect the interests of the Class and

have no interests adverse to or which conflict with the interests of the other members of the

Class.

50. The self-interest of Plaintiffs are co-extensive with and not antagonistic to those

of absent Class members. Plaintiffs will undertake to represent and protect the interests of absent

Class members.

51. Plaintiffs have engaged the services of counsel who are experienced in complex

class litigation, will adequately prosecute this action, and will assert and protect the rights of and

otherwise represent the Plaintiffs and absent Class members.

Superiority

52. The prosecution of separate actions by individual members of the Class would

create a risk of inconsistency and varying adjudications, establishing incompatible standards of

conduct for Volkswagen.

53. Volkswagen has acted on grounds generally applicable to the Class, thereby

making relief with respect to the members of the Class as a whole appropriate.

54. A class action is superior to other available means for the fair and efficient

adjudication of this controversy. Prosecution of the complaint as a class action will provide

redress for individual claims too small to support the expense of complex litigation and reduce

the possibility of repetitious litigation.

55. Plaintiffs anticipate no unusual management problems with the pursuit of this

Complaint as a class action.



CLAIMS FOR RELIEF

COUNT I

Violation of the Mangson-Moss Warranty Act 15 U.S.C. §§ 2301 et seq.

56. Plaintiffs bring this Claim for Relief individually and on behalf of all Class

members.

57. Plaintiffs incorporate by reference paragraphs 1-55 above as if fully set forth

herein, and further declare:

58. This Court has jurisdiction to decide claims brought under 15 U.S.C. § 2301 by

virtue of 28 U.S.C. § 1332 (a)-(d).

59. The Class Vehicles are “consumer products” within the meaning of the

Magnuson-Moss Warranty Act, 15 U.S.C. § 2301(1).

60. Plaintiffs and Class members are “consumers” within the meaning of the

Magnuson-Moss Warranty Act, 15 U.S.C. § 2301(3). They are consumers because they are

persons entitled under applicable state law to enforce against the warrantor the obligations of its

express and implied warranties.

61. Volkswagen is a “supplier” and “warrantor” within the meaning of the

Magnuson-Moss Warranty Act, 15 U.S.C. § 2301(4)-(5).

62. The Magnuson-Moss Warranty Act, 15 U.S.C. § 2310(d)(1) provides a claim for

relief for any consumer who is damaged by the failure of a warrantor to comply with an

expressed or implied warranty.

63. Volkswagen provided Plaintiffs and Class members with expressed and implied

warranties of merchantability in connection with the purchase or lease of their vehicles that are

warranties within the meaning of the Magnuson-Moss Warranty Act, 15 U.S.C. § 2301(7).

Volkswagen warranted that the Class Vehicles were eco-friendly and fit for their ordinary

purpose as passenger motor vehicles, would pass without objection in the trade as designed,

manufactured, and marketed, and were adequately contained, packaged, and labeled.



64. Volkswagen breached these warranties, as described in more detail above, and are

therefore liable to Plaintiffs and the Class pursuant to 15 U.S.C. § 2310(d)(1). Without

limitation, the Class Vehicles share common defects in that they are equipped with defeat

devices. Volkswagen has admitted that the Class Vehicles are defective in issuing its recalls, but

the recalls are woefully insufficient to address each of the defects.

65. In their capacity as warrantors, as Volkswagen had knowledge of the inherent

defects in the Class Vehicles, any efforts to limit the implied warranties in a manner that would

exclude coverage of the Class Vehicles is unconscionable, and any such effort to disclaim, or

otherwise limit, liability for the Class Vehicles is null and void.

66. The limitations on the warranties are procedurally unconscionable. There was

unequal bargaining power between Volkswagen and Plaintiffs and the other Class members, as,

at the time of purchase or lease, Plaintiffs and the other Class members had no other options for

purchasing warranty coverage other than directly from Volkswagen.

67. The limitations on the warranties are substantively unconscionable. Volkswagen

knew that the Class Vehicles were defective. Volkswagen failed to disclose these defects to

Plaintiffs and Class members. Thus, Volkswagen’s enforcement of the durational limitations on

those warranties is harsh and shocks the conscience.

68. Plaintiffs and Class members have had sufficient direct dealings with Volkswagen

or their agents (dealerships) to establish privity of contract. Nonetheless, privity is not required

here because Plaintiffs and Class members are intended third-party beneficiaries of contracts

between Volkswagen and their dealers, and specifically, of the implied warranties. The dealers

were not intended to be the ultimate consumers of the Class Vehicles and have no rights under

the warranty agreements provided with the Class Vehicles; the warranty agreements were

designed for and intended to benefit consumers.

69. Pursuant to 15 U.S.C. § 2310(e), Plaintiffs are entitled to bring this class action

and are not required to give Volkswagen notice and an opportunity to cure until such time as the



Court determines the representative capacity of Plaintiffs pursuant to Rule 23 of the Federal

Rules of Civil Procedure.

70. Furthermore, affording Volkswagen an opportunity to cure its breach of written

warranties would be unnecessary and futile here. At the time of sale or lease of each Affected

Vehicle, Volkswagen knew, should have known, or were reckless in not knowing of their

misrepresentations concerning the Class Vehicles’ inability to perform as warranted, but

nonetheless failed to rectify the situation and/or disclose the defective design. Under the

circumstances, the remedies available under any informal settlement procedure would be

inadequate and any requirement that Plaintiffs resorts to an informal dispute resolution procedure

and/or afford Volkswagen a reasonable opportunity to cure their breach of warranties is excused

and thereby deemed satisfied.

71. Plaintiff and Class members would suffer economic hardship if they returned their

Class Vehicles but did not receive the return of all payments made by them. Because

Volkswagen has no available cure, Plaintiffs and Class members have not re-accepted their Class

Vehicles by retaining them.

72. Pursuant to 15 U.S.C. § 2310(d)(3), the amount in controversy of Plaintiffs’ and

each Class member’s individual claim exceeds the sum of $25. The total amount in controversy

in this Class action exceeds the sum of $50,000, exclusive of interest and costs, computed on the

basis of all claims to be determined in this lawsuit. The size of each plaintiff class far exceeds

100 members but the precise number of Class members is entirely within the defendants’

knowledge and control. Plaintiffs, individually and on behalf of the other Class members, seek

all damages permitted by law, including diminution in value of their vehicles, in an amount to be

proven at trial. In addition, pursuant to 15 U.S.C. § 2310(d)(2), Plaintiffs and Class members are

entitled to recover a sum equal to the aggregate amount of costs and expenses (including

attorneys’ fees based on actual time expended) determined by the Court to have reasonably been

incurred by Plaintiffs and Class members in connection with the commencement and prosecution

of this action.



73. Further, Plaintiffs and the Class are also entitled to equitable relief under 15

U.S.C. § 2310(d)(1). Based on Volkswagen’s continuing failures to fix the known defects,

Plaintiffs seek a declaration that Volkswagen have not adequately implemented their recall

commitments and requirements and general commitments to fix its failed processes, and

injunctive relief in the form of judicial supervision over the recall process is warranted. Plaintiffs

also seek the establishment of a Volkswagen-funded program for Plaintiffs and Class members

to recover out-of-pocket costs incurred.

74. Plaintiffs also request, as a form of equitable monetary relief, re-payment of the

out-of-pocket expenses and costs they have incurred in attempting to rectify the defects. Such

expenses and losses will continue as Plaintiffs and Class members must take time off from work,

pay for rental cars or other transportation arrangements and expenses involved in going through

the recall process.

75. The right of Class members to recover these expenses as an equitable matter to

put them in the place they would have been but for Volkswagen’s conduct presents common

questions of law. Equity and fairness requires the establishment by Court decree and

administration under Court supervision of a program funded by Volkswagen, using transparent,

consistent, and reasonable protocols, under which such claims can be made and paid.

COUNT II

Fraud

76. Plaintiffs incorporate by reference paragraphs 1-75 above as if fully set forth

herein, and further declare:

77. Volkswagen has fraudulently and falsely represented that the Class Vehicles use

the “clean diesel” technology described above in a manner that complies with EPA emission

standards.

78. Volkswagen knowingly made false representations or material omissions

regarding the nature of the Class Vehicles.



79. Further, as set forth above, Volkswagen concealed and suppressed material facts

concerning the nature of the Class Vehicles. Volkswagen knew that the Class Vehicles were

designed and manufactured with illegal defeat devices, but Volkswagen concealed those material

facts, knowing that they were material to consumers because Plaintiffs and Class members

highly valued the environmental attributes of the Class Vehicles and were induced to purchase

them, and paid higher premiums for such cars, based on the representations that they were

environmentally friendly. Volkswagen recklessly and intentionally manufactured and distributed

the Class Vehicles to consumers in the United States, even though Volkswagen knew, or should

have known, at the time of distribution, that the Class Vehicles contained such defects. Plaintiffs

and Class members had no knowledge of these defects at the time they purchased or leased the

Class Vehicles.

80. Plaintiffs and Class members’ Class Vehicles were, in fact, defective at the time

of purchase or lease.

81. Volkswagen had a duty to disclose these material defects to Plaintiffs, Class

members, the public and the EPA, but failed to do so.

82. Volkswagen had a duty to disclose the true facts about the Class Vehicles because

Volkswagen had superior knowledge and access to those facts, and the facts were not known to

or reasonably discoverable by Plaintiffs and Class members. Volkswagen knew that Plaintiffs

and Class members had no knowledge of the illegal defeat devices in the Class Vehicles, and that

neither Plaintiffs nor the other Class members had an equal opportunity to discover the facts to

inform them of those defects. Indeed, Plaintiffs and Class members trusted Volkswagen not to

sell or lease vehicles to them that were defective or that violated the Clean Air Act. Volkswagen

also had a duty to disclose its emissions scheme because it made affirmative representations

about the qualities of the Class Vehicles and their emissions standards which were misleading,

deceptive and incomplete without the disclosure of additional facts set forth above regarding the

actual emissions and Volkswagen’s emissions scheme. Having volunteered to provide



information to Plaintiffs, Volkswagen had the duty to disclose not just the partial truth, but the

entire truth.

83. Plaintiffs and Class members reasonably relied on Volkswagen’s representations

that the vehicles they were purchasing, leasing, and/or retaining were free from defects and

complied with Volkswagen’s representations, advertising and warranties.

84. The aforementioned concealment was material, because if the true facts had been

disclosed, Plaintiffs and Class members would not have bought, leased or retained their vehicles.

85. The aforementioned representations were also material because they were facts

that would typically be relied on by a person purchasing, leasing or retaining a new or used

motor vehicle. Volkswagen each knew or recklessly disregarded that their representations and/or

statements regarding the Class Vehicles were false.

86. As a direct and proximate result of Volkswagen’s knowingly false

representations, concealment and/or suppression of facts, Plaintiffs and Class members have

sustained and will continue to sustain damages consisting of the purchase price of the Class

Vehicles, since they would not have purchased the vehicles without the false representations and

advertising from Volkswagen; the difference between the actual value of that which Plaintiffs

and the Class paid and the actual value of that which they received; the higher fuel costs

resulting from any emissions repairs by Volkswagen; and other actual damages to be proven at

trial.

87. Volkswagen’s acts were done maliciously, oppressively, deliberately, with intent

to defraud, and in reckless disregard of Plaintiffs’ and Class members’ rights and well-being to

enrich Defendants. Defendants’ conduct warrants an assessment of punitive damages in an

amount sufficient to deter such conduct in the future, which amount is to be determined

according to proof, and for Oregon state law claims for the Class Members, Plaintiffs will seek to

amend the Class Complaint to include a claim for punitive damages at the appropriate time.



COUNT III

Unjust Enrichment

88. Plaintiffs incorporates by reference the allegations in paragraphs 1-83 above as if

fully set forth herein, and further declare:

89. As a result of Volkswagen’s unlawful and deceptive actions described above,

Volkswagen was enriched at the expense of Plaintiffs and the Class.

90. Under the circumstances, it would be against equity and good conscience to

permit Volkswagen to retain the ill-gotten benefits it received from Plaintiffs and Class

members. Thus, it would be unjust and inequitable for Volkswagen to retain the benefit without

restitution to Plaintiffs and the Class for the monies paid to Volkswagen for the Class Vehicles.

COUNT IV

Breach of Contract

91. Plaintiffs incorporates by reference the allegations in paragraphs 1-90 above as if


92. Volkswagen’s misrepresentations and omissions alleged herein, including

Volkswagen’s failure to disclose the existence of the “defeat devices” and emissions scheme,

caused Plaintiffs and other Class members to purchase or lease their Class Vehicles. Absent

those misrepresentations and omissions, Plaintiffs and the Class members would not have

purchased or leased the Class Vehicles, and would not have purchased or leased the Class

Vehicles at the prices they paid. Accordingly, Plaintiffs and the Class members overpaid for

their Class Vehicles and did not receive the benefit of their bargain.

93. Each and every sale or lease of an Affected Vehicle constitutes a contract between

Volkswagen and the purchaser or lessee. Volkswagen breached these contracts by selling or

leasing Plaintiffs and the other Class members defective Class Vehicles and by misrepresenting

or failing to disclose the existence of the “defeat devices” and its emissions scheme, information



known to Volkswagen, rendering each Affected Vehicle non-EPA complaint and diminishing

their value.

94. As a direct and proximate result of Volkwagen’s breach of contract, Plaintiffs and

the Class members have been damaged in an amount to be proven at trial, which shall include,

but is not limited to, all compensatory damages, incident and consequential damages, and other

damages allowed by law.

COUNT V

Violation of Oregon’s Unlawful Trade Practices Act Or. Rev. Stat. §§ 646.605, et seq.

95. Plaintiffs incorporate by reference the allegations in paragraphs 1-94 above as if


96. Volkswagen is a person within the meaning of Or. Rev. Stat. § 646.605(4).

97. The Class Vehicles at issue are “goods” obtained primarily for personal family or

household purposes within the meaning of Or. Rev. Stat. § 646.605(6).

98. The Oregon Unfair Trade Practices Act (“UPTA”) prohibits a person from, in the

course of the person’s business, doing any of the following: “(e) Represent[ing]

that…goods…have…characteristics…uses, benefits, …or qualities that they do not have; g)

Represent[ing] that…goods…are of a particular standard [or] quality…if they are of another; (i)

Advertis[ing]…goods or services with intent not to provide them as advertised;” and “(u)

engag[ing] in any other unfair or deceptive conduct in trade or commerce.” Or. Rev. Stat. §

646.608(1).

99. Volkswagen engaged in unlawful trade practices, including representing that

Class Vehicles have characteristics, uses, benefits and qualities that they do not have;

representing that Class Vehicles are of a particular standard and quality when they are not;

advertising Class Vehicles with the intent not to sell them as advertised; and engaging in other

unfair or deceptive acts.



100. Volkswagen also engaged in unlawful trade practices by employing deception,

deceptive acts or practices, fraud, misrepresentations and/or concealment, suppression or

omission of material facts with intent that others rely upon such concealment, suppression or

omission, in connection with the sale of Class Vehicles.

101. Volkswagen’s actions as set forth above occurred in the conduct of trade or

commerce.

102. By failing to disclose and actively concealing the “defeat device” and its

emissions scheme, instead marketing its vehicles as safe, environmentally friendly, and efficient,

with low emissions, Volkswagen engaged in deceptive business practices in violation of the

UTPA.

103. Volkswagen’s unfair or deceptive acts or practices were likely to and did in fact

deceive reasonable consumers, including Plaintiffs and Class members, about the true

cleanliness, efficiency, performance, and emissions of the Class Vehicles, as well as their true

value.

104. Volkswagen intentionally and knowingly misrepresented material facts regarding

the Class Vehicles with an intent to mislead Plaintiffs and Class members into purchasing the

Class Vehicles.

105. Volkswagen knew or should have known that its conduct violated the UPTA.

106. As a direct and proximate result of Volkwagen’s violations of the UPTA,

Plaintiffs and the Class members have suffered actual damages, injury-in-fact and ascertainable

losses.

107. Volkswagen’s violations present a continuing risk to Plaintiffs and the Class

members, as well as to the general public. Volkswagen’s unlawful acts and practices complained

of herein affect the public interest.

108. Plaintiffs and the Class members are entitled to recover the greater of actual

damages or $200 pursuant to Or. Rev. Stat. § 646.638(1), attorney’s fees and costs, as well as



punitive damages because Volkswagen engaged in conduct amounting to a particularly

aggravated, deliberate disregard of the rights of others.

PRAYER FOR RELIEF

Plaintiffs, on behalf of themselves and all others similarly situated, requests the Court to

enter judgment against Volkswagen, as follows:

A. An order certifying the proposed Class designating Plaintiffs as the named

representative of the Class, and designating the undersigned as Class Counsel;

B. A declaration that the Class Vehicles are defective;

C. A declaration that the Volkswagen is financially responsible for notifying all

Class members about the defective nature of the Class Vehicles;

D. An order enjoining Volkswagen to desist from further deceptive distribution,

sales, and lease practices with respect to the Class Vehicles, and directing

Volkswagen to permanently, expeditiously, and completely repair the Class

Vehicles to eliminate the illegal defeat devices;

E. An award to Plaintiffs and Class members of compensatory, exemplary, and

statutory penalties, damages, including interest, in an amount to be proven at trial;

F. An award to Plaintiffs and Class members for the return of the purchase prices of

the Class Vehicles, with interest from the time they was paid, for the

reimbursement of the reasonable expenses occasioned by the sale, for damages

and for reasonable attorney fees;

G. A declaration that the Volkswagen must disgorge, for the benefit of Plaintiff and

Class members, all or part of the ill-gotten profits it received from the sale or

lease of the Class Vehicles, or make full restitution to Plaintiffs and Class

members;

H. An award of attorneys’ fees and costs, as allowed by law;

I. An award of prejudgment and postjudgment interest, as provided by law;



J. Leave to amend this Complaint to conform to the evidence produced at trial; and

K. Such other and further relief as the Court deems appropriate under the

circumstances.

JURY TRIAL DEMAND

Plaintiffs hereby demand a jury trial on all issues so triable.

Dated this 25th day of September, 2015. Respectfully submitted,

By: /s/ Jennifer L Jonak . JENNIFER L. JONAK (OSB #115802) JONAK LAW GROUP, P.C. 85100 Cloverdale Road Creswell, Oregon 97426 Telephone: (510) 501-6276 Facsimile: (510) 291-2910 Email: [email protected] JOSEPH W. COTCHETT (Pro Hac Vice to be filed) NANCY L. FINEMAN (Pro Hac Vice to be filed) JUSTIN T. BERGER (Pro Hac Vice to be filed) COTCHETT, PITRE & McCARTHY, LLP 840 Malcolm Road, Suite 200 Burlingame, California 94010 Telephone: (650) 697-6000 Facsimile: (650) 692-3606 Email: [email protected] Email: [email protected] Email: [email protected] Attorneys for Plaintiffs and the Proposed Class


EXHIBIT 1


UNITED ST ATES ENVIRONMENT AL PROTECTION AGENCY

WASHINGTON, D.C. 20460

VIA CERTIFIED MAIL RETURN RECEIPT REQUESTED

Volkswagen AG Audi AG Volkswagen Group of America, Inc. Thru :

David Geanacopoulos

SEP 1 8 2015

Executive Vice President Public Affairs and General Counsel Volkswagen Group of America, Inc. 2200 Ferdinand Porsche Drive Herndon, VA 20171

Stuart Johnson General Manager Engineering and Environmental Office Volkswagen Group of America, Inc. 3800 Hamlin Road Auburn Hills, MI 48326

Re: Notice of Violation

Dear Mr. Geanacopoulos and Mr. Johnson:

OFFICE OF ENFORCEMENT AND

COMPLIANCE ASSURANCE

The United States Environmental Protection Agency (EPA) has investigated and continues to investigate Volkswagen AG, Audi AG, and Volkswagen Group of America (co llectively, VW) for compliance with the Clean Air Act (CAA), 42 U.S.C. §§ 7401- 7671q, and its implementing regulations. As detailed in this Notice of Vio lation (NOV), the EPA has determined that VW manufactured and installed defeat devices in certain model year 2009 through 20 15 diesel lightduty vehicles equipped with 2.0 liter engines. These defeat devices bypass, defeat, or render inoperative elements of the vehicles' emission contro l system that exist to comply with CAA emission standards. Therefore, VW violated section 203(a)(3)(B) of the CAA, 42 U.S.C. § 7522(a)(3)(B). Additionally, the EPA has determined that, due to the existence of the defeat

Internet Address (URL) • httpJ/www.epa.gov Recycled/Recyclable • Printed with Vegetable Oil Based Inks on 100% Postconsumer, Process Chlorine Free Recycled Paper


devices in these vehicles, these vehicles do not conform in all materia l respects to the vehicle specifications described in the applications for the certificates of confo rmity that purportedly cover them. Therefo re, VW also violated section 203(a)(l ) of the CAA, 42 U.S .C. § 7522(a)( l ), by selling, offering for sale, introducing into commerce, deli vering for introduction into commerce, or importing these vehicles, or for causing any of the foregoing acts.

Law Governing Alleged Violations

This NOV arises under Part A of Title II of the CAA, 42 U.S.C. §§ 752 1-7554, and the regulations promulgated thereunder. In creating the CAA, Congress fo und, in part, that " the increasing use of motor vehicles . . . has resulted in mounting dangers to the public health and welfare." CAA§ IOl (a)(2), 42 U.S.C. § 740l (a)(2). Congress' purpose in creating the CAA, in part, was "to protect and enhance the quality of the Nation ' s air resources so as to promote the public health and welfare and the productive capacity of its population," and "to initiate and accelerate a national research and development program to achieve the prevention and control of air pollution." CAA§ lOl (b)(l)- (2), 42 U.S.C. § 740l (b)(l )- (2). The CAA and the regulations promulgated thereunder aim to protect human health and the environment by reducing emissions of nitrogen oxides (NOx) and other pollutants from mobile sources of air pollution. N itrogen oxides are a family of highly reactive gases that play a major ro le in the atmospheric reactions with volatile organic compounds (VOCs) that produce ozone (smog) on hot summer days. Breathing ozone can tri gger a variety of health problems including chest pain, coughing, throat in-itation, and congestion. Breathing ozone can also worsen bronchitis, emphysema, and asthma. Children are at greatest risk of experiencing negative health impacts fro m exposure to ozone.

The EPA's allegations here concern light-duty motor vehicles fo r which 40 C.F.R. Part 86 sets emission standards and test procedures and section 203 of the CAA, 42 U.S.C. § 7522, sets compliance provisions. Light-duty vehicles must satisfy emission standards for certain air pollutants, including NOx. 40 C.F.R. § 86. 1811-04. The EPA administers a certification program to ensure that every vehicle introduced into United States commerce satisfi es applicable emission standards. Under this program, the EPA issues certificates of conformity (COCs), and thereby approves the introduction of vehicles into United States commerce.

To obtain a COC, a light-duty vehicle manufacturer must submit a COC application to the EPA for each test group of vehicles that it intends to enter into United States commerce. 40 C.F.R. § 86.1843-01 . The COC application must include, among other things, a li st of a ll auxiliary emission control devices (AECDs) installed on the vehicles. 40 C.F.R. § 86. 1844-0l (d)(l l ). An AECD is "any element of design which senses temperature, vehicle speed, engine RPM, transmission gear, manifo ld vacuum, or any other parameter for the purpose of activating, modulating, delaying, or deactivating the operation of any part of the emission control system." 40 C.F.R. § 86. 1803-0 I. The COC application must also include "a justification fo r each AECD, the parameters they sense and control, a detailed justification of each AECD that results in a reduction in effectiveness of the emission control system, and [a] rationale for why it is not a defeat device." 40 C.F.R. § 86. 1844-0 l (d)(l l ).

A defeat device is an AECD "that reduces the effectiveness of the emission control system under conditions which may reasonably be expected to be encountered in normal vehicle operation and

2


use, unless: (1 ) Such conditions are substantially included in the Federal emission test procedure; (2) The need for the AECD is justified in terms of protecting the vehicle against damage or accident; (3) The AECD does not go beyond the requirements of engine starting; or (4) The AECD applies only for emergency vehicles .. . . " 40 C.F.R. § 86. 1803-01 .

Motor vehicles equipped with defeat devices, such as those at issue here, cannot be certified . EPA, Advisory Circular Number 24: Proh;bUion on use of Emission Control Defeat Dev;ce (Dec. 11 , 1972); see also 40 C.F.R. §§ 86-1 809-0 1, 86-1 809-1 0, 86-1809-1 2. Electronic control systems which may receive inputs from multiple sensors and control multiple actuators that affect the emission control system' s performance are AECDs. EPA, Advisory Circular Number 24-2: Prohibition of Emission Control Defeat Devices - Optional Objective Criteria (Dec. 6, 1978). "Such elements of design could be control system logic (i.e ., computer software), and/or calibrations, and/or hardware items." Id.

"Vehicles are covered by a certificate of conformity onl y if they are in all material respects as described in the manufac turer ' s application for certification . .. . " 40 C.F.R. § 86. 1848-1 O(c)(6). Similarly, a COC issued by EPA, including those issued to VW, state express ly, " [t]his certificate covers only those new motor vehicles or vehicle engines which conform, in all material respects, to the design specifications" described in the application fo r that C OC. See also 40 C.F.R. § § 86. 1844-01 (listing required content for COC applications), 86.1 848-0 1 (b) (authorizing the EPA to issue COCs on any terms that are necessary or appropriate to assure that new motor vehicles satisfy the requirements of the CAA and its regulations).

The CAA makes it a violation "for any person to manufacture or sell , or offer to sell , or install, any part or component intended for use with, or as part of, any motor vehicle or motor vehicle engine, where a principal effect of the part or component is to bypass, defeat, or render inoperative any device or element of design installed on or in a motor vehicle or motor vehicle engine in compliance with regulati ons under this subchapter, and where the person knows or should know that such part or component is being offered for sale or installed for such use or put to such use." CAA § 203(a)(3)(B), 42 U.S.C. § 7522(a)(3)(B); 40 C.F.R. § 86. l 854-1 2(a)(3)(ii). Additionally, manufacturers are prohibited from selling, offering fo r sale, introducing into commerce, delivering for introduction into commerce, or importing, any new motor vehicle unless that vehicle is covered by an EPA-issued COC. CAA § 203(a)( l ), 42 U.S.C. § 7522(a)(l ) ; 40 C.F.R. § 86. 1854-1 2(a)( l ). It is also a violation to cause any of the foregoing acts. CAA § 203(a), 42 U.S.C. § 7522(a); 40 C.F.R. § 86-1 854-1 2(a) .

Alleged Violations

Each VW vehicle identified by the table below has AECDs that were not described in the application fo r the COC that purportedly covers the vehic le. Specifically, VW manufactured and installed software in the electronic control module (ECM) of these vehicles that sensed when the vehicle was being tested for compliance with EPA emission standards. For ease of reference, the EPA is calling this the "switch." The "switch" senses whether the vehicle is being tested or not based on various inputs including the position of the steering wheel, vehicle speed, the duration of the engine' s operation, and barometric pressure. These inputs precisely track the parameters of the federal test procedure used for emission testing for EPA certification purposes. During EPA

3


emission testing, the vehicles' ECM ran software which produced compliant emission results under an ECM calibration that VW referred to as the "dyno calibration" (referring to the equipment used in emissions testing, called a dynamometer). At all other times during normal vehicle operation, the "switch" was activated and the vehicle ECM software ran a separate "road calibration" which reduced the effectiveness of the emission control system (specificall y the selective catalytic reduction or the lean NOx trap). As a result, emissions of NOx increased by a factor of l O to 40 times above the EPA compliant levels, depending on the type of drive cycle (e .g., city, highway).

The California Air Resources Board (CARB) and the EPA were alerted to emissions problems with these vehicles in May 20 14 when the West Virginia University' s (WVU) Center for Alternative Fuels, Engines & Emissions published results of a study commissioned by the International Council on Clean Transportation that found significantly higher in-use emissions from two light duty diese l vehicles (a 20 12 Jetta and a 2013 Passat) . Over the course of the year following the publication of the WVU study, VW continued to assert to CARB and the EPA that the increased emissions from these vehicles could be attributed to various technical issues and unexpected in-use conditions. VW issued a voluntary recall in December 20 I 4 to address the issue. CARB, in coordination with the EPA, conducted follow up testing of these vehicles both in the laboratory and during normal road operation to confirm the efficacy of the recall. When the testing showed only a limited benefit to the recall, CARB broadened the testing to pinpoint the exact technical nature of the vehicles' poor performance, and to investigate why the vehicles' onboard diagnostic system was not detecting the increased emissions. None of the potential technical issues suggested by VW explained the higher test results consistently confirmed during CARB's testing. It became clear that CARB and the EPA would not approve certificates of conformity for VW's 2016 model year diesel vehicles until VW could adequately explain the anomalous emissions and ensure the agencies that the 201 6 model year vehicles would not have similar issues. Only then did VW admit it had designed and installed a defeat device in these vehicles in the form of a sophisticated software algorithm that detected when a vehicle was undergoing emissions testing.

VW knew or should have known that its "road calibration" and "swi tch" together bypass, defeat, or render inoperative elements of the vehicle design related to compliance with the CAA emission standards. This is apparent given the design of these defeat devices. As described above, the software was designed to track the parameters of the federal test procedure and cause emission control systems to underperform when the software determined that the vehicle was not undergoing the federal test procedure.

VW' s " road calibration" and "switch" are AECDs 1 that were neither described nor justified in the applicable COC applications, and are illegal defeat devices. Therefore each vehicle identified by the table below does not conform in a material respect to the vehicle specifications described in the COC application. As such, VW violated section 203(a)(l) of the CAA, 42 U.S.C. § 7522(a)(l ), each time it sold, offered for sale, introduced into commerce, delivered for introduction into commerce, or imported (or caused any of the foregoing with respect to) one of the hundreds of thousands of new motor vehicles within these test groups. Additionally, VW

I There may be numerous engine maps associated with VW 's " road calibration" that are AECDs, and that may a lso be defeat devices. For ease of description, the EPA is referring to these maps collective ly as the " road calibration."

4


violated section 203(a)(3)(B) of the CAA, 42 U.S .C. § 7522(a)(3)(B), each time it manufactured and installed into these vehicles an ECM equipped with the "switch" and "road calibration."

The vehicles are identified by the table below. All vehicles are equipped with 2.0 liter diesel engmes.

Model Year EPA Test Group Make and Model(s)

2009 9VWXV02.035N VW Jetta, VW Jetta Sportwagen 2009 9VWXV02.0U5N VW Jetta, VW Jetta Sportwagen 2010 A VWXV02.0U5N VW Golf, VW Jetta, VW Jetta Sportwagen, Audi A3 20 1 l BVWXV02.0U5N VW Golf, VW Jetta, VW Jetta Sportwagen, Audi A3 20 12 CVWXV02.0U5N VW Beetle, VW Beetle Convertible, VW Golf, VW

Jetta, VW Jetta Sportwagen, Audi A3 2012 CVWXV02.0U4S VW Passat 2013 DVWXV02.0U5N VW Beetle, VW Beetle Convertible, VW Golf, VW

Jetta, VW Jetta Sportwagen, Audi A3

2013 DVWXV02.0U4S VW Passat 2014 EVWXV02.0U5N VW Beetle, VW Beetle Convertible, VW Golf, VW

Jetta, VW Jetta Spo11wagen, Audi A3 2014 EVWXV02.0U4S VW Passat 2015 FVGA V02.0V AL VW Beetle, VW Beetle Convertible, VW Golf, VW

Golf Soortwagen, VW Jetta, VW Passat, Audi A3

Enforcement

The EPA's investigation into thi s matter is continuing. The above table represents specific violations that the EPA believes, at thi s point, are suffic iently supported by evidence to warrant the allegations in this NOV. The EPA may find additional violations as the investigation continues.

The EPA is authorized to refer this matter to the United States Department of Justice for initiation of appropriate enforcement action. Among other things, persons who violate section 203(a)(3)(B) of the CAA, 42 U.S.C. § 7522(a)(3)(B), are subject to a civil penalty of up to $3,750 for each violation that occurred on or after January 13, 2009) 11 CAA § 205(a), 42 U.S.C. § 7524(a); 40 C.F.R. § 19.4. In addition, any manufacturer who, on or after January 13, 2009, sold, offered for sale, introduced into commerce, delivered for introduction into commerce, imported, or caused any of the foregoing acts with respect to any new motor vehicle that was not covered by an EPA-issued COC is subject, among other things, to a civi l penalty of up to $37,500 for each violationJ21 CAA§ 205(a), 42 U.S.C. § 7524(a); 40 C.F.R. § 19.4. The EPA may seek, and district courts may order, equitable remedies to further address these alleged violations. CAA § 204(a), 42 U.S.C. § 7523(a).

Ill $2,750 for violations occurring prior to January 13, 2009. l2J $32,500 for violations occurring prior to January 13 , 2009.

5


The EPA is available to discuss this matter with you. Please contact Meetu Kaul , the EPA attorney assigned to this matter, to discuss this NOV. Ms. Kaul can be reached as fo llows:

Copy:

Meetu Kaul U.S. EPA, Ai r Enforcement Division 1200 Pennsylvania Avenue, NW William Jefferson Clinton Federal Building Washington, DC 20460 (202) 564-5472 [email protected]

Director Air Enforcement Division Office of Civil Enforcement

Todd Sax, California Air Resources Board Walter Benjamin Fisherow, United States Department of Justice Stuart Drake, Kirkland & Ellis LLP

6


EXHIBIT 2


Matthew Rodriquez Secretary for

Environmental Protection

www.arb.ca.gc,vhMMsrel/in_use_coml,'lliall.l8J.aer.htm

Air Resources Board Mary D. Nichols, Chair 9480 Telstar Avenue, Suite 4

El Monte, California 91 731 • www.arb.ca.gov Edmund G. Brown Jr. Governor

Reference No. IUC-2015-007

September 18, 2015

Volkswagen AG Audi AG Volkswagen Group of America, Inc. Through:

David Geanacopoulos Executive Vice President and General Counsel, Government Affairs Volkswagen Group of America 2200 Ferdinand Porsche Drive Herndon, VA 20171

Stuart Johnson General Manager Engineering and Environmental Office Volkswagen Group of America 3800 Hamlin Road Auburn Hills, Ml 48326

Re: Admission of Defeat Device and California Air Resources Board's Requests

Dear Mr. Geanacopoulos and Mr. Johnson:

In order to protect public health and the environment from harmful pollutants, the California Air Resources Board (GARB) rigorously implements its vehicle regulations through its certification , in use compliance, and enforcement programs. In addition to the new vehicle certification process, GARB regularly tests automobiles to ensure their emissions performance is as expected throughout their useful life, and performs investigative testing if warranted. CARB was engaged in dialogue with our European counterparts concerning high in use emissions from light duty diesels. CARB deployed a number of efforts using portable measurement systems and other approaches to increase our understanding for the California fleet. In 2014, the International Council for Clean Transportation (ICCT) and West Virginia University (WVU) identified through their test program, and brought to the CARB's and the United States Environmental Protection Agency's (EPA) attention, concerns of elevated oxides of nitrogen (NOx) emissions over real world driving. The ICCT actions were consistent and

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California Environmental Protection Agency

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Mr. Geanacopoulos and Mr.Johnson: September 18, 2015 Page 2

complementary to our activities. This prompted CARS to start an investigation and discussions with the Volkswagen Group of America 0fW) on the reasons behind these high NOx emissions observed on their 2.0 liter diesel vehicles over real world driving conditions. As you know, these discussions over several months culminated in VW's admission in early September 2015 that it has, since model year 2009, employed a defeat device to circumvent GARB and the EPA emission test procedures.

VW initiated testing to replicate the ICCTIWVU testing and identify the technical reasons for the high on-road emissions. WJ shared the results of this testing and a proposed recalibration fix for the Gen1 (Lean NOx Trap technology) and Gen2 (Selective Catalytic Reduction (SGR) technology) with CARB staff on December 2, 2014. Based on this meeting, CARB and EPA at that time agreed that WI/ could implement the software recall; however, CARB cautioned VW that if our confirmatory testing showed that the fix did not address the on-road NOx issues, they would have to conduct another recall. Based on this meeting, VW initiated a voluntary recall in December 2014 which, according to VW, affected approximately 500,000 vehicles in the United States (-50,000 in California). The recall affected all 2009 to 2014 model-year diesel fueled vehicles equipped with Gen1 and Gen2 technology. This recall was claimed to have fixed among other things, the increased real world driving NOx issue.

CARB commenced confirmatory testing on May 6, 2015 to determine the efficacy of the recall on both the Gen1 and Gen2 vehicles. CARB confirmatory testing was completed on a 2012 model~year Gen2 WI/, test group CWJX02.0U4S, to be followed with Gen1 testing. GARB staff tested this vehicle on required certification cycles (FTP, US06 and HWFET) and over-the-road using a Portable Emission Measurement Systems (PEMS). On some certification cycles, the recall calibration resulted in the vehicle failing the NOx standard. Over-the-road PEMS testing showed that the recall calibration did reduce the emissions to some degree but NOx emissions were still significantly higher than expected.

To have a more controlled evaluation of the high NOx observed over the road, CARB developed a special dynamometer cycle which consisted of driving the Phase 2 portion of the FTP repeatedly. This special cycte revealed that VW's recall calibration did increase Diesel Exhaust Fluid (DEF) dosing upon initial startup; however, dosing was not sufficient to keep NOx emission levels from rising throughout the cycle. This resulted in uncontrolled NOx emissions despite the SGR reaching sufficient operating temperatures.

CARB shared its test results with WI/ on July 8, 2015. GARB also shared its results with the EPA Several technical meetings with VW followed where VW disclosed that Gen1 , Gen2 and the 2015 model-year improved SCR vehicle (known as the Gen3) had a second calibration intended to run only during certification testing. During a meeting on September 3, 2015, WI/ admitted to CARB and EPA staff that these vehicles were

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Mr. Geanacopoulos and Mr.Johnson: September 18, 2015 Page 3

designed and manufactured with a defeat device to bypass, defeat, or render inoperative elements of the vehicles' emission control system. This defeat device was neither described nor justified in the certification applications submitted to EPA and CARB. Therefore, each vehicle so equipped would not be covered by a valid federal Certificate of Conformity {COC) or CARB Executive Order {EO) and would be in violation of federal and state law.

Based upon our testing and discussions with VW, CARB has determined that the previous recall did not address the high on-road NOx emissions, and also resulted in the vehicle failing certification standards. Therefore, the recall is deemed ineffective and is deemed unapproved. VW must immediately initiate discussions witlh CARB to detennine the appropriate corrective action to rectify the emission non-compliance and return these vehicles to the claimed certified configuration. CARB program and enforcement staff is prepared to work closely wi1h VW to find corrective actions to bring these vehicles into compliance.

CARB has also initiated an enforcement investigation of VW regarding all model-year 2009 through 2015 light-duty diesel vehicles equipped with 2.0 liter engines. We expect VW's full cooperation in this investigation so this issue can be addressed expeditiously and appropriately.

Annette Hebert, Chief Emissions Compliance, Automotive Regulations and Science Division

cc: Mr. Byron Bunker, Director Compliance Division Office of Transportation and Air Quality Office of Air and Radiation U.S. Environmental Protection Agency

Mr. Linc Wehrly, Director Environmental Protection Agency Light-Duty Vehicle Center 2000 Traverwood Drive Ann Arbor, Ml 48105

Dr. Todd P. Sax, Chief Enforcement Division California Air Resources Board

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CIVIL COVER SHEET

(SEE INSTRUCTIONS ON NEXT PAGE OF THIS FORM.)

I. (a) PLAINTIFFS DEFENDANTS

(b)(EXCEPT IN U.S. PLAINTIFF CASES) (IN U.S. PLAINTIFF CASES ONLY)

(c) (Firm Name, Address, and Telephone Number) (If Known)

II. BASIS OF JURISDICTION (Place an “X” in One Box Only) III. CITIZENSHIP OF PRINCIPAL PARTIES (Place an “X” in One Box for Plaintiff(For Diversity Cases Only) and One Box for Defendant)

PTF DEF PTF DEF(U.S. Government Not a Party) or

and(Indicate Citizenship of Parties in Item III)

IV. NATURE OF SUIT (Place an “X” in One Box Only)CONTRACT TORTS FORFEITURE/PENALTY BANKRUPTCY OTHER STATUTES

PERSONAL INJURY PERSONAL INJURY

PROPERTY RIGHTS

LABOR SOCIAL SECURITY PERSONAL PROPERTY

REAL PROPERTY CIVIL RIGHTS PRISONER PETITIONS FEDERAL TAX SUITSHabeas Corpus:

IMMIGRATIONOther:

V. ORIGIN (Place an “X” in One Box Only)

(specify)

VI. CAUSE OF ACTION(Do not cite jurisdictional statutes unless diversity)

VII. REQUESTED IN COMPLAINT:

CLASS ACTION DEMAND $JURY DEMAND:

VIII. RELATED CASE(S) IF ANY (See instructions):

FOR OFFICE USE ONLY

DOWNING-MOORE, EMILY; MOORE, THADDEUS; BLALACK,ZACHARY A.; BLALACK, NATALIE B.,

Lane

See attachment

VOLKSWAGEN GROUP OF AMERICA; VOLKSWAGENAKTIENGESELLSCHAFT; AUDI AG

Fairfax, VA

28 U.S.C. § 1332

Class Action for Consumer Fraud/Unfair Trade Practices

09/25/2015 /s/ Jennifer L. Jonak, OSB #115802

Case 6:15-cv-01825-AA Document 1-1 Filed 09/25/15 Page 1 of 2

Attachment to JS 44 Civil Cover Sheet

Counsel for Plaintiffs:

JENNIFER L. JONAK (OSB #115802) JONAK LAW GROUP, P.C. 85100 Cloverdale Road Creswell, Oregon 97426 Telephone: (510) 501-6276 JOSEPH W. COTCHETT (Pro Hac Vice to be filed) NANCY L. FINEMAN (Pro Hac Vice to be filed) JUSTIN T. BERGER (Pro Hac Vice to be filed) COTCHETT, PITRE & McCARTHY, LLP 840 Malcolm Road, Suite 200 Burlingame, California 94010 Telephone: (650) 697-6000


AO 440 (Rev. 06/12) Summons in a Civil Action

UNITED STATES DISTRICT COURTfor the

__________ District of __________

))))))))))))

Plaintiff(s)

v. Civil Action No.

Defendant(s)

SUMMONS IN A CIVIL ACTION

To: (Defendant’s name and address)

A lawsuit has been filed against you.

Within 21 days after service of this summons on you (not counting the day you received it) — or 60 days if youare the United States or a United States agency, or an officer or employee of the United States described in Fed. R. Civ.P. 12 (a)(2) or (3) — you must serve on the plaintiff an answer to the attached complaint or a motion under Rule 12 ofthe Federal Rules of Civil Procedure. The answer or motion must be served on the plaintiff or plaintiff’s attorney,whose name and address are:

If you fail to respond, judgment by default will be entered against you for the relief demanded in the complaint. You also must file your answer or motion with the court.

CLERK OF COURT

Date:Signature of Clerk or Deputy Clerk

District of Oregon

EMILY DOWNING-MOORE,THADDEUS MOORE,ZACHARY A. BLALACK, and NATALIE B.

BLALACK, on behalf of themselves and all otherssimilarly situated,

VOLKSWAGEN GROUP OF AMERICA, INC.a New Jersey corporation, VOLKSWAGEN

AKTIENGESELLSCHAFT, a German corporation,and AUDI AG, a German corporation.

VOLKSWAGEN GROUP OF AMERICA, INC.c/o CORPORATION SERVICE COMPANY1127 BROADWAY STREET NE STE 310SALEM, OR 97301

Jennifer L. JonakJONAK LAW GROUP, P.C.85100 Cloverdale RoadCreswell, Oregon 97426


AO 440 (Rev. 06/12) Summons in a Civil Action (Page 2)

Civil Action No.

PROOF OF SERVICE(This section should not be filed with the court unless required by Fed. R. Civ. P. 4 (l))

This summons for (name of individual and title, if any)

was received by me on (date) .

I personally served the summons on the individual at (place)

on (date) ; or

I left the summons at the individual’s residence or usual place of abode with (name)

, a person of suitable age and discretion who resides there,

on (date) , and mailed a copy to the individual’s last known address; or

I served the summons on (name of individual) , who is

designated by law to accept service of process on behalf of (name of organization)

on (date) ; or

I returned the summons unexecuted because ; or

Other (specify):

.

My fees are $ for travel and $ for services, for a total of $ .

I declare under penalty of perjury that this information is true.

Date:Server’s signature

Printed name and title

Server’s address

Additional information regarding attempted service, etc:

0.00




__________ District of __________

))))))))))))

Plaintiff(s)

v. Civil Action No.

Defendant(s)






CLERK OF COURT


District of Oregon





VOLKSWAGEN AKTIENGESELLSCHAFTD-38436 WOLFSBURGGERMANY




Civil Action No.





on (date) ; or






on (date) ; or


Other (specify):

.





Server’s address


0.00




__________ District of __________

))))))))))))

Plaintiff(s)

v. Civil Action No.

Defendant(s)






CLERK OF COURT


District of Oregon





AUDI AG85045 INGOLSTADTGERMANY




Civil Action No.





on (date) ; or






on (date) ; or


Other (specify):

.





Server’s address


0.00


Documents

Downing-Moore v. Volkswagen