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The Law Firms of Arent Fox LLP and Colson Hicks Eidson Filed Lawsuits on Behalf of Braman Audi Dealerships against Volkswagen and Audi for Deceptive and Unlawful Business Practices

September 6, 2017
Colson Hicks Eidson

Allegations include Fraudulent Concealment, Civil RICO, Violations of Florida’s Deceptive and Unfair Trade Practices Act, and Seeks Injunctive Relief against Audi

CORAL GABLES, Fla. (Sept. 6, 2017) — The law firms of Arent Fox LLP and Colson Hicks Eidson filed lawsuits yesterday in West Palm Beach federal court on behalf of two Braman Audi dealerships – Braman Audi of West Palm Beach, Florida, and Prestige Audi in Lakewood, Colorado – against Defendants Volkswagen AG and other VW-affiliated companies, including Audi of America, Inc., Audi AG, and Volkswagen Credit, Inc.

According to the first lawsuit, the certain VW defendants engineered a criminal conspiracy for over a decade to defraud its dealers, such as Braman, the American consumer, and state and federal regulators. The fraud involved selling Audi-brand “clean diesel” turbo-charged direct ignition vehicles (TDI) with a “defeat device” software engineered by the defendants to deceive emissions testers and regulators into believing that the TDI vehicles were actually complying with clean air regulatory limits, when, in fact, they were polluting the atmosphere at a rate far greater than the legal level of emissions.

In January 2017, the defendants agreed to plead guilty, as a result of the TDI defeat device criminal scheme, to conspiracy to defraud the United States; wire fraud; violating the Clean Air Act; obstruction of justice; and importing goods into the stream of U.S. commerce by false statement.

This complaint alleges that once word of the defendant’s criminal wrongdoing became public, Braman, an authorized franchised Audi dealer, suffered damages in various ways, including no longer being able to sell its stock of TDI vehicles, selling fewer Audi vehicles overall than it otherwise would have, reputational damage and damage to Braman’s overall franchise value, and was left with unsalable inventory and dissatisfied customers.

The complaint further asserts that Braman relied on representations made by the defendants that the subject vehicles complied with all U.S. laws, including representations to government regulators that resulted in certifications allowing the vehicles to be sold in the U.S.

Additionally, the complaint alleges that while the TDI criminal conspiracy was ongoing, the defendants falsely marketed the subject vehicles as being environmentally friendly through public statements and advertisements and continued to sell the TDI vehicles to Braman and the consuming public at a premium.

During that same period, the defendants made false representations to its Audi dealers, including Braman, to invest heavily in the Audi brand. As a result, Braman and other Audi dealers invested heavily in Audi during this period, spending tens of millions of dollars in facility renovations and other upgrades to meet projected demand.

Allegations include breach of contract, violations of Florida’s Deceptive and Unfair Trade Practices Act, Fraudulent Concealment, violations of Civil Racketeer Influenced and Corrupt Organizations Act.

The second lawsuit, which adds plaintiff Terry Rhodes, in her official capacity as the Executive Director of the Department of Highway Safety and Motor Vehicles of the State of Florida, seeks injunctive relief against Audi for Audi’s unlawful business practices.

The second complaint alleges that Audi unlawfully enhanced its control over dealer operations by unilaterally changing its contractual relationship with the dealers by imposing arbitrary business practices that reduced dealer trading margin.

According to the second lawsuit, Audi reduced the trading margin and replaced it with so-called “bonus”-based programs where the dealer must earn lower new car wholesale pricing by meeting performance targets and other conditions arbitrarily set by Audi. As the complaint states, “Audi uses this unlawful leverage to serve ends that, through other direct means, would be immediately found illegal under the Florida Dealer Act. Audi is attempting to circumvent the law under the guise of “incentivizing” supposedly uniform franchise behavior.” Allegations against Audi include breach of contract, breach of the implied covenant of good faith and fair dealing, and violation of the Florida Dealer Act.

“Audi’s business practices are unfair to dealers and are part of an intentional strategy to put more coercive power in the hands of the vehicle manufacturer to the detriment of the dealer body,” said Russell P. McRory, a partner at Arent Fox LLP and co-lead counsel for the Plaintiffs along with Bob Martínez, partner at Colson Hicks Eidson. Added Mr. Martínez: “We hope these lawsuits bring an end to Audi’s unlawful behavior, and send a message to other manufacturers/distributors that they have an obligation to their dealers to act fairly and in good faith.”

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