An estimated 17 diesel-tainted Volkswagen vehicles exist in Europe today for every one in the United States. Yet, thanks to the German automaker’s $15 billion U.S. settlement over emissions cheating, American owners will receive up to $20,000 as recompense—a far cry from the software update and plastic tubing Europeans stand to gain.
Europeans’ deeply ingrained aversion to American litigation culture, and thus its lack of a class action mechanism, has resulted in a vast disparity between the rewards available to Volkswagen owners across the Atlantic. However, a group of online legal start-ups are teaming with European lawyers in an attempt to circumvent the traditional restrictions on class actions, the New York Times reported.
Such efforts won’t be easy because European Volkswagen owners need to first be identified and then induced to opt-in to the suit, said Fordham Law School Professor Martin Gelter, an expert in comparative law and corporate governance. U.S. class actions, by contrast, function on an opt-out basis, meaning people identified as wronged Volkswagen owners would need to formally request not to participate in the suit.
“It’s difficult to induce all these people to get together and join the lawsuit,” Gelter said of European Volkswagen owners. “There is no one person or firm in Europe that collects all these claims and has the bargaining power that an American law firm has as counsel in a class action.”
The potential financial windfall for the European start-ups and lawyers could be immense—if they are able to sign up enough plaintiffs. The service providers are seeking 5,000 euros per car, or about $5,600. There are an estimated 8.5 million tainted Volkswagens on the continent.
A German website has announced that the suit’s service providers are seeking 35 percent of whatever damages consumers potentially receive, Gelter said. Even though this is comparable to an American contingency fee, how attractive European consumers will find the offer remains uncertain, the professor said.
Lawsuits in European countries operate on a “loser pays” principle—in other words, losers must pay the other side’s court fees. As a means of mitigating such costs, dispute resolution processes that involved a third party bankrolling a lawsuit in exchange for potential proceeds gained acceptance in Germany in the late 1990s.
For instance, third party litigation trailblazer FORIS will pay for individual lawsuits on almost anything based on probability of success and whether the defendant is likely to pay, Gelter said. The purchase of a share in the proceeds of a lawsuit remains illegal in many European countries.
Though an outside entity funding litigation for scores of claimants is a potentially new proposition, Gelter does not see the case altering European antipathy toward class action suits or changes to the loser-pays model. Generally, Europeans benefit more than Americans from consumer protection law, such as mandatory warranties, thus reducing the need for future tort claims, he noted.
“The bottom line is the majority of policymakers and the legal community think the American-style class action is not desirable because it leads to too many frivolous lawsuits brought because there is money to be made,” Gelter said.