In another matter, Volkswagen will not be allowed to force a proposed class action over an alleged engine defect into arbitration. A New Jersey federal judge ruled last month, finding that the automaker wasn’t actually a party to the arbitration agreement car owners signed with Volkswagen dealerships. In his opinion, U.S. District Judge Jose L. Linares said that in order to force arbitration, he would first have to find that there was a valid arbitration agreement, and, if so, that the dispute falls within the scope of that agreement.
Volkswagen had argued that the vehicle owners had signed purchase and lease agreements that included an arbitration clause. However, Judge Linares sided with the drivers, who said Volkswagen itself wasn’t involved in the contracts. That was undisputed and quite clear. Instead, Judge Linares said the papers were signed by the Plaintiffs and the various dealers from which they obtained their vehicles. The Judge added:
Basic contract law requires parties to be in privity with each other in order for them to enforce the terms of a contract. Since the parties never personally entered into an agreement with each other, no privity of contract between plaintiffs and defendant can be established.
Both sides conceded that Volkswagen wasn’t a party to the agreements. Without that, the judge said the company can’t enforce the arbitration clause. Although some courts have allowed third parties like Volkswagen to force arbitration in certain cases, those situations were always due to a close relationship among the parties involved. Judge Linares said that relationship isn’t present in the instant suit.
Judge Linares also refused to dismiss the vast majority of the drivers’ claims in the first consolidated complaint. The vehicle owners seek to represent anyone in the U.S. who bought or leased a 2008 through 2013 model year Volkswagen or Audi vehicle with one of two types of 2-liter diesel engines that contained an allegedly defective timing chain system. The timing chain system synchronizes the moving parts within an engine, and, if it fails, it can cause loss of power or engine failure and possibly result in expensive repairs or parts replacements. The defect is in the part of the chain that keeps it at the proper level of tension. Part of the mechanism that keeps the chain taut during startup can fail, causing the chain to jump and ruin parts of the engine. The drivers said Volkswagen knew about the defect, or should have known, for six years.
The Plaintiffs are represented by Carella Byrne Cecchi Olstein Brody & Agnello PC, Kessler Topaz Meltzer & Check LLP, Kantrowitz Goldhamer & Graifman PC, Thomas P. Sobran PC, Mazie Seater Katz & Freeman LLC, McCuneWright LLP, Seeger Weiss LLP and Baron & Budd PC. The case is In re: Volkswagen Timing Chain Product Liability Litigation (case number 2:16-cv-02765) in the U.S. District Court for the District of New Jersey.
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