VW must face US emissions-linked lawsuit, rules judge

Volkswagen AG and its former chief executive officer Martin Winterkorn must defend an investor lawsuit in California over the company's diesel emissions cheating scandal, a US judge ruled on Wednesday.

District Judge Charles Breyer also rejected a request by VW brand chief Herbert Diess to have the proposed securities fraud lawsuits tossed out of a California court. Other defendants include VW's US unit and its Audi of America unit and the former head of its US unit, Michael Horn.

The investors suing are mostly US municipal pension funds that invested in VW through American Depositary Receipts (ADR), a form of equity ownership in a non-US company that represents the foreign shares of the company held on deposit by a bank in the company's home country.

Volkswagen argued that German courts were the proper place for investor lawsuits. But Breyer said in his ruling that "because the United States has an interest in protecting domestic investors against securities fraud" the lawsuits should go forward in a US court.

The pension funds include those representing Arkansas State Highway Employees and Miami Police. The lawsuits said VW's market capitalisation fell by $63 billion after the diesel cheating scandal became public.

A VW spokeswoman had no immediate comment Wednesday.

Winterkorn resigned days after the scandal became public and much of the company's management has changed since 2015.

VW in September 2015 admitted using sophisticated secret software in its cars to cheat exhaust emissions tests, with 11 million vehicles worldwide affected. The cheating allowed nearly 580,0000 VW diesel vehicles sold in the US since 2009 to emit up to 40 times legally allowable pollution levels.

The lawsuits said VW and its executives misled the investing public "assuring them to the contrary - namely, that the diesel vehicles met all applicable emissions standards" and it "understated the liabilities that it would suffer as a result of its known emissions non-compliance".

Volkswagen has agreed to spend as much as $17.5 billion in the United States to resolve claims from owners and federal and state regulators over polluting diesel vehicles.

Volkswagen could still spend billions of dollars more to resolve a US Department of Justice criminal investigation and federal and state environmental claims; come under oversight by a federal monitor and face other conditions.

The Justice Department and VW are in settlement talks and it is possible a deal could be reached before 20 January, when President Barack Obama leaves office, according Reuters' sources briefed on the matter.