Fiat Chrysler Settles EcoDiesel Scandal for $800M

Chrysler Jeep Grand Cherokee.

Fiat Chrysler Automobiles N.V. has agreed to pay $800 million to settle class actions and governmental investigations over its “EcoDiesel” vehicles.

The deal, announced Thursday, resolved claims that Fiat Chrysler installed software in 100,000 vehicles nationwide that cheated emissions tests. It included a $307 million class action settlement and $400 million in civil penalties to federal and state regulators. A hearing for preliminary approval of the class action settlement is set for Jan. 23 in San Francisco federal court.

“We’re very pleased to present to the federal court today a class action agreement that will provide substantial cash compensation to the owners and lessees of Fiat Chrysler EcoDiesel vehicles while giving them back the car they were promised—a car that delivers on high performance and low emissions,” said Elizabeth Cabraser, of San Francisco’s Lieff Cabraser Heimann & Bernstein, in a conference call with the media Thursday. Cabraser was lead counsel in the multidistrict litigation against Fiat Chrysler over its EcoDiesel vehicles.

“Importantly,” she noted, “this class consumer agreement will aid our environment by assuring these EcoDiesels become true EcoDiesel vehicles and no longer pollute the environment.”

The agreements were similar to those carved out in a $14.7 billion settlement with Volkswagen in 2016 over its vehicles' fuel emissions. Cabraser also was lead plaintiffs counsel in that case, and Robert Giuffra of Sullivan & Cromwell represented both Volkswagen and Fiat Chrysler in their separate agreements.

But Cabraser noted some “key differences” between the settlements. The Chrysler settlement involved fewer than the 475,000 vehicles featured in that of Volkswagen. Further, Fiat Chrysler consumers will be able to keep driving their cars after a software fix that is available for two years following the settlement’s final approval. Volkswagen’s deal, in contrast, included buybacks for many of its "clean diesel" vehicles.

And unlike Volkswagen, Fiat Chrysler did not admit liability.

“We acknowledge that this has created uncertainty for our customers, and we believe this resolution will maintain their trust in us,” said Mark Chernoby, Fiat Chrysler’s head of North American safety and regulatory compliance, in a statement Thursday.

Fiat Chrysler was responsible for $280 million of the class action settlement, with software maker Robert Bosch GmbH contributing $27.5 million. In a separate deal announced Thursday, Bosch agreed to pay $98 million to attorneys general actions in 49 states and U.S. jurisdictions, including the District of Columbia, plus $5 million to the National Association of Attorneys General, to resolve emissions investigations involving both Volkswagen and Fiat Chrysler. That deal excluded California and West Virginia. And Texas, according to a Bosch spokeswoman, “supports the settlement in principle, but is not joining at this point for some state-specific issues.”

“Legal disputes would have resulted in lengthy and costly proceedings in numerous U.S. states and with a large number of different claimants,” said Stefan Hartung, chairman of Bosch’s Mobility Solutions business sector, in a statement. “As an innovation leader, we want to devote our attention and resources to developing our businesses and to intensifying our efforts to shape the future in our areas of activity.”

The government portion of the Fiat Chrysler deal included about $400 million in civil penalties, of which $86 million went to attorneys general in 50 states.

New York Attorney General Letitia James estimated that both the Fiat Chrysler and Bosch deals would give the state $171 million.

“Fiat Chrysler and Bosch attempted to pull the wool over the eyes of American consumers, and pollute their way to the bank, but the Office of Attorney General will not stand for that type of behavior from any company,” she said Thursday.

New York and Connecticut, which will receive $4.3 million from both companies, were part of a leadership team of nine states.

"Vehicle emission standards exist as a way to protect the air we all breathe, and companies that knowingly seek to circumvent those standards will be held accountable," said Connecticut Attorney General William Tong. "These settlements are critically important in righting the wrongs of the emissions cheating scandal."

California's portion of the Fiat Chrysler deal was $13.5 million. That amount, along with $45.8 million in penalties for violations of environmental laws and a $19 million mitigation payment, gave the Golden State a total of $78.4 million.

“California’s emission standards exist to protect our residents and the environment from harmful pollution,” said Attorney General Xavier Becerra in a statement Thursday. “Fiat Chrysler tried to evade these standards by installing software to cheat emissions testing."

Other government regulators involved in the deal included the U.S. Department of Justice, on behalf of the U.S. Environmental Protection Agency, and the California Air Resources Board, which received $305 million. U.S. Customs and Border Protection received another $6 million.

In the class action, U.S. District Judge Edward Chen of the Northern District of California early on appointed Kenneth Feinberg to serve as settlement master. Last year, the judge allowed claims to go forward against Fiat Chrysler under the federal Racketeer Influenced and Corrupt Organizations Act.

Thursday’s deal did not include a request for attorneys fees or expenses, which lawyers plan to file by Feb. 25. A motion for settlement filed Thursday said, “Fiat Chrysler and Bosch reserve all rights to object to an award of attorney’s fees and/or expenses beyond what they believe to be reasonable.”

The affected vehicles were Jeep Grand Cherokees and Dodge Ram 1500s, model years 2014 through 2016. Consumers who bring their vehicles in for the software fixes would be eligible for an extended warranty, estimated to cost $105 million, and, for most class members, cash payments of $3,075—although former owners and lessees also can make claims.

“The owners and lessees of these vehicles are literally the engines driving the repair program,” Cabraser said. “They’re the ones who will be bringing in their vehicles and getting repairs done.”

She said class members who still own their cars could make claims within 18 months after the settlement’s final approval. Under the deal, Fiat Chrysler will have to pay an additional $6,000 per vehicle in penalties if it does not obtain a claims rate of 85 percent.