Why Volkswagen Picked Ken Feinberg To Run Its Fund For Emissions Cheating Claims

23 Dec 2015 | Author: | No comments yet »

Lawyers for car owners warn VW: Hiring Feinberg won’t get you out cheap.

In the 1994 crime drama “Pulp Fiction,” actor Harvey Keitel plays a character nicknamed “the Wolf” whose signature skill is mopping up messes (sometimes literally) left behind by killers. Ken Feinberg is about to try to do for Volkswagen’s emissions-cheating scandal what he did with GM’s ignition-switch scandal: Use an alternative dispute resolution program to settle claims outside of the courts.The Volkswagen #dieselgate investigation is still ongoing, and the company has just recently appointed lawyer Kenneth Feinberg to manage a claims resolution process in response to the scandal. An expert in compensation and mediation who formerly served as Massachusetts Senator Ted Kennedy’s chief of staff, Feinberg, 70, has become a legal guru for companies and organizations facing huge settlements — which is what experts say the automaker will need to clean up the logistical and legal mess stemming from its diesel-emissions test deceptions. “If you want someone who’s really good at this, the list is short,” said David Logan, a law professor at Roger Williams University in Bristol, Rhode Island. “Feinberg’s got this experience with rushing to a place and hiring a bunch of people… and starting to write checks.” Feinberg’s expertise giving away money is nearly unparalleled, much of it under tragic circumstances: He oversaw $7 billion in payouts to 9/11 victims and their families, a wrenching process Feinberg described in his 2005 book, “What is Life Worth?: The Unprecedented Effort to Compensate the Victims of 9/11.” In the years since demand for his specialized skills has increased markedly. He has earned their regard in designing and implementing settlement programs over the past 30 years, including funds for victims of the 9/11 attacks, the Boston Marathon bombing, and the General Motors ignition switch defect.

And more importantly, the claims process will likely allow owners of diesels with emission-cheating software to request for monetary compensation from Volkswagen. He has been called on to oversee claims and compensation in the aftermath of high-profile tragedies like the deadly shooting rampage at Virginia Tech (2007); a mass shooting in a movie theater in Aurora, Colorado and the Jerry Sandusky sex abuse scandal at Penn State and the Sandy Hook Elementary School shooting, all in 2012. Just days after announcing his work managing a General Motors victim compensation fund is nearing completion, America’s most well-known legal-liability referee has been hired by Volkswagen to figure out how much money will satisfy hundreds of thousands of bilked VW diesel car owners in the United States. District Judge Charles Breyer of San Francisco invited recommendations for a court-appointed settlement mediator in the gigantic consolidated clean diesel litigation against Volkswagen, Feinberg was suggested by at least a half-dozen plaintiffs’ firms that sang his praises.

It’s also worth noting that there are no details yet on what owners might receive or how the law firm decides which owners are eligible for compensation. On Thursday, Feinberg and Volkswagen announced that the lawyer will indeed oversee a settlement fund for claimants affected by VW emissions cheating – but not through the class action litigation before Judge Breyer. Volkswagen admitted to putting cheat software in cars equipped with 2.0-liter and 3.0-liter diesel engines that recognized when it was being tested for emissions and changed the engine’s tuning enough to pass the test. Feinberg is also trying to crack his head around the most challenging question that they have come to accept: what’s the most appropriate remedy that would give the owner total peace?

Feinberg also was the initial lawyer assigned to administer a $20 billion compensation fund for people and businesses who suffered financial losses due to the BP Deepwater Horizon oil spill in 2010. Now Volkswagen is hoping Feinberg, 70, can use a similar process to settle with as many as 500,000 U.S. car owners who bought Volkswagens, Audis and Porsches that pollute far more than the company claimed.

The Volkswagen scandal doesn’t carry the emotional weight of Feinberg’s 9/11 Commission duties, or even of his work on GM’s ignition-switch compensation program last year, in which 124 deaths have been linked to the defect. The voluntary program, whose terms have not yet been set, will be entirely separate from whatever happens in the VW litigation, according to Feinberg’s VW deputy, Camille Biros.

The primary hurdle Feinberg will face in dealing with VW’s emissions scandal is that at least some company officials apparently deliberately approved the deception, as opposed to a case like GM, where executives allegedly exhibited poor judgment or bad management, Logan said. While being made whole via vehicle buybacks or replacements might be sufficient to placate vehicle owners in a different scenario, the specter of fraud could prompt plaintiffs’ lawyers to push for higher, punitive damages. But legal experts say whatever Volkswagen decides to do, relying on Feinberg will be the quickest path to settlement, one that doesn’t involve prolonged courtroom drama, hefty lawyers’ fees and the risk of an unsatisfying outcome. “If I were an individual VW car owner, I would look seriously at what Feinberg offers in this case,” said John C. Lawyers representing VW owners said in interviews Friday that if the company wants their clients to drop out of the litigation, it will have to offer car owners almost as much as plaintiffs’ lawyers believe they can obtain in the consolidated litigation.

Both Robert Hilliard and James Kreindler have worked with Feinberg in previous cases, Hilliard in the GM ignition switch death and injury fund and Kreindler in the 9/11 victims fund. For GM, Feinberg settled 399 claims through his program, costing the company nearly $595 million but avoiding drawn-out legal battles with these individuals. “What’s strong about Feinberg’s program is that it’s economically comparable to what someone would get through litigation, where at least 25 percent of the money goes to an attorney,” said Frank J. Though Feinberg ended the gridlock, extracting a $180 million settlement from manufacturers for victims, some criticized him for earning $800,000 for six weeks of work while some veterans waited up to two years to receive a little as $3,500 in compensation, about $8,000 in today’s dollars. For his work at Volkswagen, Feinberg won’t be doing the grim task of valuing human life and debilitating lifelong injuries as he has done in the past.

It won’t be like the BP oil spill where he had to measure the financial impact of the spill to everyone from coastal oyster fishers to Bourbon Street bartenders. The work he’ll do for Volkswagen is a relatively straightforward process of determining the value of the damage individual car owners received when they were misled about fuel economy, performance and emissions levels of their “clean diesel” cars. It will take years for Volkswagen to heal its self-inflicted wounds, but by hiring a man who has already been in the trenches over more serious harms, the automaker has at least begun a proven dispute-resolution process for righting its wrongs.

Scores if not hundreds of plaintiffs’ lawyers are expected to appear, and it’s a good bet that some will raise concerns about VW’s out-of-court settlement program. Chris Seeger, for instance, told my colleague Jessica Dye that VW’s sudden announcement of a private settlement program, even as firms are responding to Judge Breyer’s invitation to nominate mediators in the litigation, “doesn’t pass the smell test.” “I do not see Judge Breyer allowing VW to set up their own program without court guidance and oversight, particularly when these were filed as class actions,” Seeger told Dye. “I need to be open-minded but VW is off to a bad start.”

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