By David Shepardson
WASHINGTON (Reuters) - Volkswagen AG (VOWG_p.DE), in another step to move past its costly diesel emissions cheating scandal, has agreed to pay $175 million (£143.6 million) to U.S. lawyers suing the German automaker on behalf of the owners of 475,000 polluting vehicles, two people briefed on the agreement said on Friday.
In August, the lawyers in the class action litigation sought up to $332.5 million in fees and costs for their work in a $10 billion settlement that gives U.S. owners of 2.0 liter polluting cars the ability to sell back their vehicles to Volkswagen (VW).
The latest deal with the lawyers means VW now has agreed to spend up to $16.7 billion to compensate U.S. owners and address claims from states, federal regulators and dealers arising from the "Dieselgate" scandal.
The amount to be paid out to lawyers was first reported by Reuters on Friday.
The resolution of legal fees clears another hurdle as the world's No. 2 automaker looks to resolve all of the outstanding aspects of a scandal that disrupted its global business, hurt its reputation and led to the ouster of its chief executive officer last year.
VW in September 2015 admitted using sophisticated secret software in its cars to cheat exhaust emissions tests, with millions of vehicles worldwide affected. The cheating allowed VW's U.S. vehicles sold since 2009 to emit up to 40 times legally allowable pollution levels.
The $175 million includes attorneys' fees and other costs, according to the sources, who spoke on condition of anonymity.
Lawyers for the owners of polluting vehicles and a spokeswoman for Volkswagen declined to comment.
Lead plaintiff lawyer Elizabeth Cabraser, who is part of a committee of 22 lawyers overseeing the owner suits, said in August the amount sought in attorneys fees was far less than the "judicially established benchmark" for class actions of approximately 25 percent of the settlement amount.
U.S. District Judge Charles Breyer on Tuesday is set to hold a hearing in San Francisco on whether to grant final approval of the vehicle owners' settlement announced in June, which would be the largest-ever automotive buy-back offer in the United States. Breyer must also decide whether to approve the legal fee agreement.
VW has agreed to spend up to $10.033 billion to buy back the vehicles and compensate owners. It may also offer vehicle fixes if regulators approve. Under a timetable announced this summer, regulators could approve a fix for some 2015 VW diesel vehicles as early as next month.
In addition, VW has agreed to pay up to $1.21 billion to compensate U.S. VW brand dealers, pay more than $600 million to 44 U.S. states, spend $2 billion on zero-emission vehicle promotion and infrastructure, and another $2.7 billion to offset diesel pollution.
It still faces billions of dollars in potential fines from the U.S. Justice Department in its criminal probe into VW's cheating scandal, and must resolve the fate of larger vehicles that were not part of the initial $10 billion settlement.
VW and U.S. regulators are in continuing discussions over whether the automaker should agree to buy back 85,000 larger 3.0-liter Porsche, Audi and VW vehicles that also exceeded U.S. emission standards, and whether it should offer additional compensation to those owners.
VW may have to pay additional owner attorneys' fees as part of a separate potential 3.0-liter settlement, the sources said.
(Reporting by David Shepardson, Editing by Soyoung Kim, Will Dunham and Diane Craft)