The Globalization of Mass Civil Litigation: Lessons from the Volkswagen “Clean Diesel” Case

C O R P O R A T I O N DEBORAH R. HENSLER, JASMINKA KALAJDZIC, PETER CASHMAN, MANUEL A. GÓMEZ, AXEL HALFMEIER, IANIKA TZANKOVA The Globalization of Mass Civil Litigation Lessons from the Volkswagen “Clean Diesel” Case AUTHOR ET AL. For more information on this publication, visit www.rand.org/t/RRA917-1. About RAND The RAND Corporation is a research organization that develops solutions to public policy challenges to help make communities throughout the world safer and more secure, healthier and more prosperous. RAND is nonprofit, nonpartisan, and committed to the public interest. To learn more about RAND, visit www.rand.org. Research Integrity Our mission to help improve policy and decisionmaking through research and analysis is enabled through our core values of quality and objectivity and our unwavering commitment to the highest level of integrity and ethical behavior. To help ensure our research and analysis are rigorous, objective, and nonpartisan, we subject our research publications to a robust and exacting quality-assurance process; avoid both the appearance and reality of financial and other conflicts of interest through staff training, project screening, and a policy of mandatory disclosure; and pursue transparency in our research engagements through our commitment to the open publication of our research findings and recommendations, disclosure of the source of funding of published research, and policies to ensure intellectual independence. For more information, visit www.rand.org/about/principles. RAND’s publications do not necessarily reflect the opinions of its research clients and sponsors. Published by the RAND Corporation, Santa Monica, Calif. © 2021 RAND Corporation is a registered trademark. Cover: imac27 Studio/Getty Images/iStockphoto (Map); spawns/Getty Images/iStockphoto (Gavel) Limited Print and Electronic Distribution Rights This document and trademark(s) contained herein are protected by law. This representation of RAND intellectual property is provided for noncommercial use only. Unauthorized posting of this publication online is prohibited. Permission is given to duplicate this document for personal use only, as long as it is unaltered and complete. Permission is required from RAND to reproduce, or reuse in another form, any of its research documents for commercial use. For information on reprint and linking permissions, please visit www.rand.org/pubs/permissions. About This Report The RAND Institute of Civil Justice (ICJ) and the Kenneth R. Feinberg Center for Catastrophic Risk Management and Compensation have a long history of studying aggregate litigation. We were therefore delighted when Professor Deborah Hensler, one of the foremost experts on this subject (as well as a long-time board member and former director of the ICJ), suggested a collaboration between the RAND Corporation and Stanford Law School on a conference to study one of the more intriguing examples of this type of litigation, the recent Volkswagen (VW) “clean diesel” case, a global litigation that proceeded in parallel in multiple national jurisdictions. Many scholars and practitioners believe that this sort of transnational litigation represents the future of mass litigation. We were fortunate to gather a group of distinguished participants from across the civil justice system and around the globe—many of whom played key roles in the VW litigation—who were able to provide diverse viewpoints and inspire thoughtful dialogue. This report summa- rizes their discussion, which took place in April 2019 at Stanford Law School. Resolution of the VW litigation has followed different procedural paths in different jurisdictions and—not surprisingly—reached different outcomes. As background for our summary of the roundtable discussion, this report describes the procedural mechanisms that are available to resolve mass civil litigation in the jurisdictions represented at the workshop, as well as the progress and outcomes of the VW litigation in these jurisdictions through June 2020. As is revealed in these pages, although the roundtable participants were keenly interested in the challenges presented by global parallel litigation, few were prepared at this time to suggest procedural reforms that would coordinate such litigation. Instead, participants called for more empirical research and ongoing sharing of experiences and perspectives on this evolving form of mass litigation. We hope that RAND will contribute to this research and sharing of perspectives in the future. The RAND Kenneth R. Feinberg Center for Catastrophic Risk Management and Compensation The Feinberg Center seeks to identify and promote laws, programs, and institutions that reduce the adverse social and economic effects of natural and manmade catastrophes by improving incentives to reduce future losses; providing just compensation to those suffering losses while appropriately allocating liability to responsible parties; helping affected indi- viduals, businesses, and communities to recover quickly; and avoiding unnecessary legal, administrative, and other transaction costs. Questions or comments about this report should be sent to the project leader, Lloyd Dixon ([email protected]). For more information about the Feinberg Center, see www.rand.org/ ccrmc or contact the director at [email protected]. iii The Globalization of Mass Civil Litigation: Lessons from the Volkswagen “Clean Diesel” Case Funding Funding for this research was provided by the generous contributions of the RAND Kenneth R. Feinberg Center for Catastrophic Risk Management and Compensation Advisory Board. Acknowledgments The coauthors and organizers of the Stanford-RAND roundtable wish to thank the participants in the Volkswagen litigation who have generously shared their time and information with us, all those who participated in the roundtable, and our colleagues who have contrib- uted over the years to our knowledge about global mass civil litigation. We would also like to thank the peer viewers, Michelle Grisé and Roger Trangsrud, for their comments and sugges- tions and participants at the roundtable who offered additional information and explanations to this report. iv Summary As mass civil litigation has grown within legal jurisdictions, a new form of transnational mass litigation, which we term global litigation, has emerged. This litigation is characterized by parallel proceedings in multiple national jurisdictions, arising out of the same or similar factual circumstances. It typically targets the same or related multinational corporations but is brought on behalf of domestic plaintiffs, under different domestic substantive laws and applying different domestic legal procedures. The Volkswagen (VW) litigation over vehicles that were fitted with engine management software intended to mislead emission-monitoring regimes is a prime example of global litigation. This report seeks to use the VW litigation to better understand the features of global litigation and the problems that arise in the resolution of these types of claims. Such information can provide a foundation for developing reforms that can improve speed, equity, and efficiency. The report provides an overview of the procedural mechanisms that are available to resolve mass civil litigation in Australia, Brazil, Canada, Chile, Germany, the Netherlands, and the United States, countries that have well-developed representative or aggregate litigation procedures that judges, lawyers, and parties have relied on to resolve the massive number of claims that emerged against VW. It also provides an overview of the VW litigation in these jurisdictions through June 2020. In addition, we summarize key themes that arose during an April 2019 roundtable on global litigation sponsored by Stanford Law School, the RAND Institute for Civil Justice, and the RAND Kenneth R. Feinberg Center for Catastrophic Risk Management and Compensation. Today, virtually every large industrial nation has some sort of group or collective procedure for resolving mass claims; however, the structure of these procedures varies tremendously across jurisdictions. At the time of the roundtable, most of the VW litigation was still ongoing, although the shape of the outcomes in the United States and Canada had become quite clear. The Australian litigation was still being fiercely contested by VW, and while securities litigation was well under way in Germany using the special Kapitalanleger-Muster verfahrensgesetz (KapMuG; Capital Market Investors’ Model Proceedings Act) procedure, it was not clear whether the new model declaratory action for consumer claims would substantially benefit VW purchasers there. By carrying the story of the lawsuits against VW forward beyond the date of the roundtable, we are able to suggest some of the consequences of procedural variation. The roundtable discussion suggested that the VW litigation is not a “one-off.” Indeed, many participants thought that something similar is likely to occur again—albeit with a different set of facts, claimants, and potentially liable parties. There was also a sense that victims of the same event or wrongdoing in different countries seem increasingly to believe that they deserve the same (most generous) compensation that victims in other countries have received, without regard to differences in substantive law or regulation. This phenom- enon is driven by the availability of information about events outside one’s own country via mass and social media. It also became clear during the discussion that, compared with the

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