Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_16-cv-07214/USCOURTS-cand-3_16-cv-07214-0/pdf.json

Nature of Suit Code: 470
Nature of Suit: Civil (Rico)
Cause of Action: 18:1962 Racketeering (RICO) Act

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Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

IN RE: VOLKSWAGEN “CLEAN DIESEL” 

MARKETING, SALES PRACTICES, AND 

PRODUCTS LIABILITY LITIGATION

_____________________________________/

This Order Relates To:

Dkt. Nos. 6330, 6332, 6333, 6334

_____________________________________/

MDL No. 2672 CRB (JSC)

ORDER GRANTING MOTIONS TO 

DISMISS

Volkswagen salespersons, in a proposed class action, contend that they were harmed by the 

company’s diesel scandal. Volkswagen and other defendants (who are alleged to have conspired 

with the company) have moved to dismiss the complaint. Because each claim in the complaint 

contains one or more pleading deficiencies, the Court GRANTS the motions. 

I. BACKGROUND1

Plaintiffs are three car salespersons who, at various times from 2010 to the present, have 

worked at Volkswagen dealerships in California. Their pay is almost entirely commission based: 

when they sell a car, they get a percentage of the dealer’s profits on the sale. An additional 

commission on each sale comes directly from Volkswagen. The remainder of their pay is bonus 

based. If they sell a target number of cars in a given month, for example, the dealer pays them a 

bonus. If their customer service ratings meet a certain threshold, Volkswagen will award them a 

separate bonus. 

After the public learned in 2015 that Volkswagen, for the better half of a decade, had 

installed defeat devices in its “clean diesel” line of cars to mask unlawfully high emissions, there 

 

1 The following allegations appear in the complaint. (See Dkt. No. 5053.)

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was a measurable drop in the sale of new Volkswagen cars. Consumers were shocked by the 

blatancy and scale of the fraud and became less interested in the brand. The decline in demand for 

Volkswagen cars in turn meant that Plaintiffs made less money. 

Seeking to recover that lost income, Plaintiffs filed this action. Styled as a proposed class 

action, they seek to represent Volkswagen salespersons nationwide. They have named as 

defendants Volkswagen AG (VWAG), Volkswagen Group of America, Inc. (VWGoA), Audi AG, 

Martin Winterkorn and Matthias Müller (former CEOs of VWAG), Rupert Stadler (former CEO 

of Audi AG), Bosch GmbH and Bosch LLC (electronics companies that partnered with 

Volkswagen), and Volkmar Denner (Bosch GmbH’s CEO). They also named Porsche AG as a 

defendant but later agreed to dismiss all claims against Porsche AG. (See Dkt. No. 6549.) 

The causes of action are for breach of contract, negligent interference with prospective 

economic advantage, fraud, and violation of RICO. Four motions to dismiss have been filed: one 

by VWAG, VWGoA and Audi AG (together “VW”), one by Bosch GmbH and Bosch LLC 

(together “Bosch”), one by Martin Winterkorn, and one by Rupert Stadler. (Defendants Müller

and Denner have not appeared in the case.) The arguments raised in the motions are considered 

below.

II. DEALER CLASS SETTLEMENT RELEASE

VW first argues that the claims against it should be dismissed because those claims were 

released as part of the class settlement that the company reached with its authorized franchise 

dealers. (See Dkt. No. 2807 (settlement approval order).) VW contends that under the plain terms 

of that agreement, Plaintiffs are among the “Releasing Parties” and their claims fall within the 

scope of the “Released Claims.”

The settlement defined the Releasing Parties as “Dealer Settlement Class Members, for and 

on behalf of themselves and their agents, heirs, executors, and administrators, successors, assigns, 

insurers, attorneys, representatives, shareholders, owners, owner associations, and any other legal 

or natural persons who may claim by, through or under them . . . .” (Dkt. No. 2802 ¶ 9.3.) The 

Releasing Parties agreed in the settlement to release VWAG, VWGoA, and other “Released 

Parties” from all “Released Claims.” (Id.; Dkt. No. 1970 ¶ 9.2.) “Released Claims” included “all 

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claims related in any way to the TDI Matter,” i.e., to the diesel scandal. (Dkt. No. 2802 ¶ 9.3; Dkt. 

No. 1970 ¶ 2.27.)

VW maintains that Plaintiffs were among the “Releasing Parties” because they were 

“agents” and “representatives” of Dealer Settlement Class Members. Plaintiffs object, arguing 

that as rank-and-file salespersons, they lacked the level of authority that would have given rise to 

an agency relationship with the dealerships at which they worked. 

Putting aside the question of whether Plaintiffs were the dealers’ agents or representatives,

the Court concludes that Plaintiffs are not Releasing Parties because they are not pursing claims 

“by, through or under” Dealer Settlement Class Members. As the Court previously explained in 

resolving a motion to enforce the settlement, the “by, through, or under” phrase modifies not just 

the catch-all phrase that precedes it (“any other legal or natural persons who may claim by, 

through or under” Dealer Settlement Class Members), but also each category of persons listed in 

the release (e.g., the dealers’ agents, heirs, representatives, owners, and shareholders). See In re 

Volkswagen “Clean Diesel” Mktg., Sales Practices, & Prod. Liab. Litig. (VW Altomare), No. 

MDL 2672 CRB, 2018 WL 1588012, at *6 (N.D. Cal. Mar. 30, 2018). Given this prior 

interpretation, the release only applies to the claims of a VW franchise dealer’s agents and 

representatives if those claims are made “by, through or under” a Dealer Settlement Class 

Member. Plaintiffs’ claims are not of this kind. 

Plaintiffs are not attempting to step into the shoes of franchise dealers and assert claims on 

their behalf. Instead they are alleging (i) that VW breached contracts that it had with its 

salespersons, (ii) that VW negligently interfered with its salespersons’ business relations, (iii) that 

VW committed fraud by making misrepresentations to (and concealing material facts from) its 

salespersons, and (iv) that VW committed wire fraud (and violated RICO) by participating in an 

enterprise whose purpose was to deceive regulators, VW salespersons, and the public. (See

Compl. ¶¶ 80, 87, 99–100, 103–04, 118.) These claims are not based on VW’s dealings with its 

franchise dealers; they are based on VW’s dealings with its salespersons, regulators, and 

consumers. The claims, then, are not brought “by, through or under” Dealer Settlement Class 

Members. 

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This conclusion is consistent with VW Altomare, where the Court held that the fraud claims 

of the sole owner of a VW dealership were brought “by, through, or under” a Dealer Settlement 

Class Member and were thus released. See 2018 WL 1588012, at *6–7. In VW Altomare, there 

was no real distinction between the claims of the dealership and the claims of the dealer’s owner, 

the latter of which were asserted in a separate, post-settlement complaint. The claims were all

based on a single person’s interactions with VW, and that person received compensation in the 

dealer class settlement. Here, there is a distinction between Plaintiffs and the dealerships at which 

they worked. Plaintiffs’ claims are based in part on the relationships that they had with VW as 

VW salespersons. Those relationships are separate and apart from the relationships that VW had 

with its franchise dealers. Unlike the claims in VW Altomare, then, Plaintiffs are not bringing their 

claims “by, through, or under” Dealer Settlement Class Members. This means Plaintiffs are not

Releasing Parties and that the settlement does not foreclose their claims. 

III. BREACH OF CONTRACT

Turning to the claims themselves, the first cause of action is for breach of contract and is 

against VWAG and VWGoA. A breach of contract claim has four elements: (1) the existence of a 

contract; (2) plaintiff’s performance or excuse for nonperformance; (3) defendant’s breach; and (4) 

damages to plaintiff as a result of the breach. See CDF Firefighters v. Maldonado, 158 Cal. App. 

4th 1226, 1239 (2008). The contract claim against VWAG does not satisfy the first of these 

elements, and the contract claim against VWGoA does not satisfy the third of these elements.

With respect to VWAG, the complaint makes no mention of any agreements between 

Plaintiffs and VWAG. With no allegations supporting the existence of a contract, a necessary 

element of the claim is missing. Plaintiffs have thus failed to state a breach of contract claim 

against VWAG. 

As for the contract claim against VWGoA, Plaintiffs have identified agreements that they 

entered into with VWGoA, but they have not adequately alleged that VWGoA breached those 

agreements. As alleged, VWGoA agreed to do two things: (i) to pay Plaintiffs a commission for 

each Volkswagen car that they sold, and (ii) to compensate Plaintiffs based on their customer 

service scores. (See Compl. ¶¶ 80–82.) At no point in the complaint is there a suggestion that 

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VWGoA did not honor these obligations. Plaintiffs do argue that VWGoA’s diesel scandal 

interfered with their ability to sell more VW cars and to obtain more compensation from VWGoA; 

but there is no contention that VWGoA promised Plaintiffs that they would sell a specific number 

of cars. Even if the diesel scandal caused Plaintiffs to sell fewer cars, that result did not breach the 

express terms of the agreements that are identified. 

In their opposition brief, Plaintiffs cite to six paragraphs from their complaint which they 

maintain include allegations that VWGoA also agreed to provide them with “marketable, legallycompliant vehicles,” which they assert VWGoA did not do. (Opp’n to VW, Dkt. No. 6441 at 31.) 

The cited paragraphs do not include any allegations supporting that VWGoA made such a promise 

to Plaintiffs, and Plaintiffs cannot use their opposition brief to amend their complaint. See Broam 

v. Bogan, 320 F.3d 1023, 1026 n.2 (9th Cir. 2003) (district court cannot consider facts in 

opposition brief in considering Rule 12(b)(6) motion to dismiss).

Even if VWGoA did not breach an express contractual term, Plaintiffs alternatively assert 

that VWGoA, through its diesel scandal, breached the covenant of good faith and fair dealing. 

(See Compl. ¶¶ 88–92.) Under California law, a covenant of good faith and fair dealing is an 

“implied term in every contract.” Chodos v. W. Publ’g Co., 292 F.3d 992, 996 (9th Cir. 2002). In 

general, the covenant “imposes upon each contracting party the duty to refrain from doing 

anything which would render performance of the contract impossible by any act of his own, [and] 

also the duty to do everything that the contract presupposes that he will do to accomplish its 

propose.” Pasadena Live v. City of Pasadena, 114 Cal. App. 4th 1089, 1093 (2004) (citation 

omitted).

As an example of its application, in construction contracts the covenant of good faith and 

fair dealing obligates the property owner to “furnish the selected site of operations to the 

contractor in order to enable him to adequately carry on the construction and complete the work 

agreed upon.” Hensler v. City of L.A., 124 Cal. App. 2d 71, 82–83 (1954) (internal quotation 

marks omitted). If the property owner does not make the property available, performance of the 

contract would be impossible. As another example, when benefits are due under an insurance 

policy, “delayed payment based on inadequate or tardy investigations . . . may breach the implied 

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covenant [by] . . . frustrat[ing] the insured’s right to receive the benefits of the contract in ‘prompt 

compensation for losses.’” Waller v. Truck Ins. Exchange, Inc., 900 P.2d 619, 639 (Cal. 1995) 

(citation omitted).

While the covenant will “prevent a contracting party from engaging in conduct that 

frustrates the other party’s rights to the benefit of the agreement,” id., it “cannot impose 

substantive duties or limits on the contracting parties beyond those incorporated in the specific 

terms of their agreement,” Agosta v. Astor, 120 Cal. App. 4th 596, 607 (2004) (citation omitted). 

So, for example, if an individual and a company enter into an at-will employment agreement, the 

covenant cannot be used by the individual to impose a requirement that termination only be for 

good cause. See Foley v. Interactive Data Corp., 765 P.2d 373, 400 n.39 (Cal. 1988). 

Plaintiffs’ implied covenant claim falls into this latter category, as one that attempts to 

impose substantive duties beyond those incorporated in the specific terms of the agreement. The 

injury asserted by Plaintiffs is that they were not able to sell more cars (and earn more 

commissions) because of VWGoA’s diesel scandal. But as noted above, there is no suggestion 

that the agreements in question contained sales volume terms (e.g., that Plaintiffs could expect to 

sell 100 cars per year). VWGoA did what the agreements presupposed it would do to accomplish 

their purpose: it provided Plaintiffs with cars to sell and compensated Plaintiffs when they sold 

those cars. VWGoA did not “render performance of the contract impossible” or fail to take steps 

“to accomplish [the agreements’] purpose.” Pasadena Live, 114 Cal. App. 4th at 1093. 

It was in VWGoA’s best interests that Plaintiffs would sell more Volkswagen cars; and 

from the allegations there is no reason to believe that VWGoA sought to (or did) interfere with 

Plaintiffs ability to sell those cars. That consumer demand for Volkswagen cars dropped after the 

diesel scandal does not mean that VWGoA breached the implied covenant of good faith and fair 

dealing in the commission agreements that it had with Plaintiffs. 

The allegations do not support Plaintiffs’ breach of contract claims against VWAG and 

VWGoA. VW’s motion to dismiss these claims is GRANTED and the claims are dismissed with 

leave to amend. 

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IV. NEGLIGENT INTERFERENCE WITH PROSPECTIVE ECONOMIC 

ADVANTAGE

Plaintiffs’ second cause of action, which they bring against all Defendants, is for negligent 

interference with prospective economic advantage. To support this claim, Plaintiffs must allege 

that Defendants interfered with one or more existing relationships that Plaintiffs stood to benefit 

from. See Venhaus v. Shultz, 155 Cal. App. 4th 1072, 1077–78 (2007). They must also identify 

those relationships with particularity. See UMG Recordings, Inc. v. Glob. Eagle Entm’t, Inc., 117 

F. Supp. 3d 1092, 1118 (C.D. Cal. 2015). 

Defendants argue that Plaintiffs have not satisfied the particularity requirement, and the 

Court agrees. Plaintiffs allege that Defendants, through the diesel scandal, interfered with 

economic relationships that Plaintiffs had “with third parties.” (Compl. ¶ 94.) Not until their 

opposition brief do Plaintiffs identify who those third parties were: (i) repeat Volkswagen 

customers, and (ii) the franchise dealers that employed Plaintiffs. (See Opp’n to VW, Dkt. No. 

6441 at 22–23.) For their negligent interference claim against Bosch, Plaintiffs add a third 

relationship: stating in their opposition brief that Bosch also interfered with Plaintiffs’ 

relationships with Volkswagen. (See Opp’n to Bosch, Dkt. No. 6451 at 15–16.) These three 

relationships are not readily apparent from the general allegation that Defendants interfered with 

economic relationships that Plaintiffs had with third parties. 

Citing to the factual background section of their complaint, Plaintiffs argue that, in fact, 

they have identified these relationships with the necessary particularity. (See Opp’n to VW, Dkt. 

No. 6441 at 23 (citing Compl. ¶¶ 46–49, 60–62).) The Court disagrees, because as currently 

structured the complaint leaves significant guesswork for Defendants and the Court. At no point 

in the complaint do Plaintiffs explicitly identify the relationships on which their negligent 

interference claim is predicated. The result is that Defendants, in their motions to dismiss, were 

forced to guess about the relevant relationships; and only after Plaintiffs filed their opposition 

were Defendants, in reply, able to fully address the claim. 

Because the complaint does not identify with particularity the relationships that Defendants 

interfered with, Plaintiffs’ negligent interference claim is inadequately pled. Defendants’ motions 

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to dismiss the claim are GRANTED and the claim is dismissed with leave to amend.2 

V. FRAUD

Plaintiffs’ third cause of action, which is brought against all Defendants, is for common law 

fraud. As alleged “Volkswagen,” a term Plaintiffs use to refer to all Defendants, “affirmatively 

misrepresented to Plaintiffs . . . in advertising and other forms of communication . . . that [its 

diesel cars] had no significant defects, complied with EPA regulations and would perform and 

operate properly when driven in normal usage.” (Compl. ¶ 104.) Plaintiffs maintain that these 

representations were false, and that Defendants knew so, because they had installed illegal defeat 

devices in the cars, and they knew that the cars were “defective, non-EPA compliant, unsafe, and 

unreliable because [they] contained faulty and defective Clean Diesel engine systems.” (Id.

¶¶ 105-06.) 

Plaintiffs also allege that “Volkswagen intentionally concealed that the Clean Diesel 

engine systems [in its diesel cars] were not EPA-compliant and used a ‘defeat device.’” (Id.

¶ 103.) They assert that this concealed information was “highly relevant to their business 

decisions to sell VW vehicles” and that Defendants had a duty to disclose this information because

Plaintiffs “relied on Volkswagen’s material representations that the Defective Vehicles they were 

selling for commission were environmentally clean, efficient and free from defects.” (Id. ¶¶ 103, 

107.) 

Defendants argue that Plaintiffs’ fraud allegations do not satisfy Rule 9(b). The Court 

agrees. Two Rule 9(b) requirements are relevant. First, the rule requires the pleader of fraud to 

“state the time, place, and specific content of the false representations as well as the identities of 

the parties to the misrepresentation.” Odom v. Microsoft Corp., 486 F.3d 541, 553 (9th Cir. 2007) 

(en banc) (citation omitted). For example, if a plaintiff alleges that false or misleading 

advertisements were directed at him, he must specify “what the . . . advertisements . . . specifically 

stated, . . . when he was exposed to them[,] [and] which ones he found material.” Kearns v. Ford 

 

2 The Court will not consider Defendants’ other arguments for dismissal of the negligent 

interference claim unless Plaintiffs amend their complaint and identify with particularity the 

relevant economic relationships on which their claim is based. 

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Motor Company, 567 F.3d 1120, 1126 (9th Cir. 2009). Second, under Rule 9(b), a complaint 

cannot “merely lump multiple defendants together,” but must instead “identify the role of each 

defendant in the alleged fraudulent scheme.” Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir. 

2007) (citation omitted). 

The allegations fall short of Rule 9(b) in several ways. First, Plaintiffs have not identified 

the time and place of Volkswagen’s representations to them. In arguing to the contrary—as to 

time—Plaintiffs point to allegations that the fraud began “in at least 2009” and ended when 

Volkswagen publicly admitted to the fraud in September 2015. (See Opp’n to VW, Dkt. No. 6441 

at 26 (citing Compl. ¶¶ 28, 40).) That representations were made at some point during a seven

year window is not specific enough to put Defendants on notice of the representations on which 

Plaintiffs intend to rely. 

As to the “place” where the representations were made, Plaintiffs point to allegations that 

representations were made “in the various media through which Volkswagen disseminated its 

advertising materials and sold its vehicles.” (Id. (citing Compl. ¶¶ 32-39).) From context it 

appears that the referenced advertisements were directed at consumers, not VW salespersons. 

(See, e.g., Compl. ¶ 35 (discussing Volkswagen television advertisements).) In any event, 

Plaintiffs have not identified which of the advertisements they were exposed to and found 

material. See Kearns, 567 F.3d at 1126. General allegations about Volkswagen’s media 

campaign are not sufficient to support Plaintiffs’ misrepresentation claims. See, e.g., In re 

Chrysler-Dodge-Jeep Ecodiesel Mktg., Sales Practices, & Prod. Liab. Litig., 295 F. Supp. 3d 927, 

987 (N.D. Cal. 2018) (“While the [complaint] does refer to [Fiat’s] website and some blogs 

operated by a [Fiat] entity, there is no allegation that any named plaintiff actually saw the website 

or blogs, or any promises contained therein, regarding fuel economy and performance.”) (citations 

omitted).

Second, Plaintiffs have not adequately identified the parties to the representations. See 

Odom, 486 F.3d at 553. Alleging, as they do, that the representations were made by 

“Volkswagen” is insufficient under the circumstances. Without more detailed allegations, it is 

simply implausible that every defendant made every misrepresentation at issue. (Why, for 

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example, would Bosch GmbH’s CEO, Volkmar Denner, have made representations about 

Volkswagen’s diesel cars in Volkswagen television advertisements?) 

Third, Plaintiffs have not sufficiently alleged that the individual defendants knew that 

Volkswagen’s diesel cars were “defective, non-EPA-compliant, unsafe, and unreliable.” (Compl. 

¶¶ 105-06.) Although Rule 9(b) permits knowledge to be alleged generally, allegations of 

knowledge must still be factual, not conclusory. See Ashcroft v. Iqbal, 556 U.S. 662, 678, 680–81

(2009). The allegations of knowledge here fall into this latter category. Without any supporting 

facts, Plaintiffs simply allege that Winterkorn, Stadler, Müller, and Denner “approved, authorized, 

directed, ratified, and/or participated in the acts complained of herein.” (Compl. ¶¶ 16-18, 21.) 

Plaintiffs respond by noting that they used the umbrella term “Volkswagen” to refer to all 

Defendants. They argue that when considering the allegations against the individual defendants, 

the Court should thus look not only to the paragraphs where they are named, but also to any 

paragraph that makes reference to “Volkswagen’s” conduct. This form of group pleading is not 

permitted by Rule 9(b), which “does not allow a complaint to merely lump multiple defendants 

together.” Swartz, 476 F.3d at 764. The group pleading is particularly inapt as to Stadler, who 

notes in his motion to dismiss that it cannot possibly be true that all references to “Volkswagen” 

are to him. The “Volkswagen” misconduct began “in at least 2009, if not sooner,” which is one 

year before Stadler became CEO of Audi AG. (See Compl. ¶¶ 18, 28.) Even if Stadler worked at 

Audi AG prior to 2010, an allegation that is not explicitly made, there is no reason to believe that 

prior to 2010 he was in a position to “authorize[] . . . the acts complained of” in the complaint. 

(Id. ¶ 18.) Plaintiffs’ group pleading does not satisfy Rule 9(b). 

Finally, Plaintiffs’ fraud-by-omission theory also falls short of the Rule 9(b) standard. For 

fraud by omission, Plaintiffs must establish that Defendants had a duty to disclose the information 

that was omitted. See LiMandri v. Judkins, 52 Cal. App. 4th 326, 336 (1997). In their complaint, 

the only duty that Plaintiffs identify is the duty to disclose information that is necessary to avoid 

making partial representations misleading. (See Compl. ¶ 107 (“Volkswagen had a duty to be 

truthful and to disclose that these Defective Vehicles were defective, non-EPA compliant and 

unreliable . . . , because Plaintiffs . . . relied on Volkswagen’s material representations that the

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Defective Vehicles they were selling for commission were environmentally clean, efficient and 

free from defects.”).) Plaintiffs have not identified “the who, what, when, where, and how” of 

these partial representations. Kearns, 567 F.3d at 1126. As a result, the partial representations do 

not give rise to a duty to disclose. See Espineli v. Toyota Motor Sales, U.S.A., Inc., No. 2:17-CV0698-KJM-CKD, 2019 WL 2249605, at *4–5 (E.D. Cal. May 24, 2019) (explaining that 

allegations of partial representations by the defendant must satisfy Rule 9(b) if they are to support 

that the defendant had a duty to disclose additional facts).3

Plaintiffs’ fraud cause of action is not adequately pled. Defendants’ motions to dismiss the 

fraud claim are GRANTED and the claim is dismissed with leave to amend. 

VI. RICO

Plaintiffs’ final cause of action is for violation of RICO, 18 U.S.C. § 1962(c), (d). They 

bring this claim against each defendant except VWGoA, referring to Defendants minus VWGoA 

as the “RICO Defendants.” (See Compl. ¶ 114.) In moving to dismiss the RICO claim, 

Defendants argue that the allegations fail to satisfy Rule 9(b), do not meet RICO’s proximate 

cause standard, and do not support an injury to “business or property,” as needed for RICO 

standing. 

A. The RICO Allegations and Rule 9(b)

Rule 9(b) applies to the RICO claim because it is predicated on allegations of wire fraud. 

See Odom, 486 F.3d at 553–54. In some respects the wire fraud allegations are more detailed than 

the allegations supporting the common law fraud count. The theory of fraud is also somewhat 

different. While Plaintiffs’ common law fraud claim is based on the theory that Defendants 

directly deceived VW salespersons, their wire fraud claim is based on a broader fraudulent 

scheme: that the RICO Defendants committed wire fraud by making material misrepresentations

(and by failing to disclose material facts) to “government regulators, consumers, and Plaintiffs[.]” 

(Compl. ¶ 149.) 

 

3 Plaintiffs have used their opposition brief to argue that a duty to disclose is supported on other 

grounds. (See Opp’n to VW, Dkt. No. 6441 at 28.) The Court will not consider those grounds 

unless they are included in an amended complaint. 

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While not overlapping entirely with the common law fraud claim, the wire fraud claim also 

does not satisfy Rule 9(b). To the extent that Plaintiffs seek to base the claim on representations 

that were made to them, those representations are not described with any specificity. At no point 

in the complaint do Plaintiffs identify any particular representations that the RICO Defendants 

made to them or to other VW salespersons. The pleading of this theory falls far short Rule 9(b), 

which requires Plaintiffs to identify “the time, place, and specific content of the false 

representations as well as the identities of the parties to the misrepresentation.” Odom, 486 F.3d at 

553 (citation omitted).

To the extent that Plaintiffs seek to base their wire fraud claim on representations that were 

made to regulators, the allegations are more precise but are still lacking required detail. Plaintiffs 

allege that the RICO Defendants used the wires to send fraudulent applications for certificates of 

conformity to the EPA. (See Compl. ¶ 141.) Elsewhere, they allege that the RICO Defendants 

used VWGoA and Porsche Cars North America to make these submissions to the EPA. (See id.

¶ 122.) These allegations identify the “who,” “where,” and “how” of the representations, but they 

do not cover “when” the representations were made, or “what” the submissions stated that was 

false or misleading. See Kearns, 567 F.3d at 1124. Other complaints in this MDL have answered 

those questions, but the same level of detail is missing here. 

To the extent that Plaintiffs seek to base their wire fraud claim on representations to 

consumers, the allegations come the closest to satisfying Rule 9(b), but are still lacking. Plaintiffs 

generally allege that “Volkswagen made misrepresentations about the Defective Vehicles on their 

websites, YouTube, and through advertisements made on various platforms, including on the 

internet and on television, all of which were intended to mislead regulators4and the public about 

the [vehicles’] fuel efficiency, emissions standards, and other performance metrics.” (Compl.

¶ 142.) Plaintiffs then offer specific examples of these misrepresentations: 

For example: (1) Volkswagen caused a commercial to be aired during 

the Super Bowl, and thereafter over the internet, on February 7, 2010 

 

4 Plaintiffs do not explain why regulators would have been relying on website and YouTube 

advertisements, so the Court construes these allegations as focused on the consumer-based fraud. 

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touting the “Audi A3 TDI clean diesel” as the “Green Car of the 

Year”; and (2) Volkswagen caused a commercial to be aired via 

television and/or the internet in or around early 2015 advertising the 

Volkswagen Golf TDI clean diesel to disprove the “old wives tale” 

that “diesel is dirty” by holding a white scarf to the exhaust pipe.

(Id.)

These allegations include the “time, place, and specific content of the false 

representations,” as required by Rule 9(b). See Odom, 486 F.3d at 553. But the allegations still 

fall short because they do not identify “the parties to the misrepresentation.” Id. Plaintiffs allege 

that “Volkswagen” made these representations, which is the umbrella term used to refer to all 

Defendants. As noted above, this type of group pleading is not permitted; especially here when 

there is no reason to believe that certain defendants (e.g., Bosch and Volkmar Denner) were 

responsible for a Super Bowl advertisement about the Audi A3. For fraud-based claims, “there is 

no absolute requirement that . . . the complaint must identify false statements made by each and 

every defendant.” Swartz, 476 F.3d at 764 (emphasis omitted). But if Plaintiffs are going to 

claim—as they currently do—that all Defendants made these statements, more specifics are 

needed.

The above discussion focuses on the misrepresentations that are alleged. Plaintiffs also 

seek to base their wire fraud claim on allegations that Defendants failed to disclose material facts 

to regulators, consumers, and VW salespersons. (See Compl. ¶ 139.) To prevail on this theory, 

Plaintiffs need to identify a duty to disclose. They have not done so. No duty to disclose is 

identified under their RICO count. 

The RICO cause of action does not satisfy Rule 9(b). 

B. RICO Proximate Cause

Defendants argue that Plaintiffs’ RICO claim also falls short on proximate cause grounds. 

Below, the Court reviews the relevant proximate cause standard and then considers whether the 

allegations satisfy that standard. 

1. Legal Standard

The requirement of proximate cause has taken “many shapes” at common law—e.g., 

foreseeability, directness, certainty of damages. Holmes v. Sec. Inv’r Prot. Corp., 503 U.S. 258, 

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268 (1992) (citing Associated Gen. Contractors of Cal., Inc. v. Carpenters, 459 U.S. 519, 532–33 

(1983)). For civil RICO claims, directness is the most important of these: “When a court 

evaluates a RICO claim for proximate causation, the central question it must ask is whether the 

alleged violation led directly to the plaintiff’s injuries.” Anza v. Ideal Steel Supply Corp., 547 

U.S. 451, 461 (2006); see also Hemi Grp., LLC v. City of N.Y., 559 U.S. 1, 12 (2010) (plurality) 

(“The concepts of direct relationship and foreseeability are of course two of the many shapes 

proximate cause took at common law. Our precedents make clear that in the RICO context, the 

focus is on the directness of the relationship between the conduct and the harm.”). 

The directness requirement reflects that while unlawful conduct may cause “ripples of 

harm,” the remediation of more distant ripples often poses administrative problems that can be 

avoided in suits by the directly injured. Bank of Am. Corp. v. City of Miami, 137 S. Ct. 1296, 

1306 (2017) (citation omitted). For example, “the less direct an injury is, the more difficult it 

becomes to ascertain the amount of a plaintiff’s damages attributable to the violation, as distinct 

from other, independent, factors.” Holmes, 503 U.S. at 269. Also, if the claims of the indirectly 

injured are recognized, courts may be forced “to adopt complicated rules apportioning damages 

among plaintiffs removed at different levels of injury from the violative acts, to obviate the risk of 

multiple recoveries.” Id. As Holmes explained: “The need to grapple with these problems is 

simply unjustified by the general interest in deterring injurious conduct, since directly injured 

victims can generally be counted on to vindicate the law as private attorneys general, without any 

of the problems attendant upon suits by plaintiffs injured more remotely.” Id. at 269-70; see also 

id. at 271 (noting that the “general tendency of the law, in regard to damages at least, is not to go 

beyond the first step” (quoting Associated General, 459 U.S. at 534)). 

2. Application

Defendants’ conduct was several steps removed from Plaintiffs’ lost income. As alleged, 

Defendants initially duped regulators into certifying—and consumers into buying—Volkswagen’s 

diesel cars (step one). When the veil was lifted on Volkswagen’s defeat device scheme, 

consumers who had bought the cars—and the public at large—became less inclined to buy other 

Volkswagen cars that were still available for sale (step two). This meant that VW dealers’ 

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revenues and profits declined as they sold fewer cars (step three). In turn, VW salespersons made 

less money because their income was commission based and thus tied to the number of cars that 

they sold (step four). 

The just laid out effects of Volkswagen’s diesel scandal are illustrative of the ripples of 

harm that fraudulent conduct may cause. But as noted above, the “general tendency” of the law 

with respect to damages under RICO is “not to go beyond the first step.” Holmes, 503 U.S. at 

271; see also Pillsbury, Madison & Sutro v. Lerner, 31 F.3d 924, 929–31 (9th Cir. 1994) (holding 

that sublessee lacked RICO standing when the alleged injury was derivative of the master tenant’s 

direct injury).

Moving several steps down the causal chain would cause the same problems here that 

Holmes identified. First, it would be necessary to isolate the decline in Plaintiffs’ commissions 

that was due to Defendants’ conduct as opposed to other causes. Plaintiffs’ commissions could 

have dropped for a variety of reasons (e.g., economic downturn, dealership-specific changes, 

salesperson-specific personal circumstances) and only the decline due to the diesel scandal would 

potentially be recoverable. 

Second, it would likely be necessary to apportion damages among VW dealers (who have 

already sued and settled with Volkswagen) and VW salespersons. As alleged, the salespersons 

received a percentage of the dealers’ profits on each car sale. To the extent that VW dealers have 

already recovered their lost profits due to the diesel scandal, a recovery by VW salespersons could 

amount to a double recovery. 

Third, as Bosch notes, if VW salespersons could recover for their injuries under these 

circumstances, it would be difficult to find a limiting principle. Any third party who claimed that 

their income turned on the sale of cars at a VW dealership, “ranging from automobile workers to 

advertising employees to the food truck parked outside the dealership,” could bring RICO claims

for lost income, and those claims would be hard to distinguish from Plaintiffs’. (Bosch Mot., Dkt. 

No. 6333 at 15.) 

The doctrine of proximate cause is designed to avoid these types of cascading claims of 

injury. See Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 132 (2014) 

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(explaining that proximate cause “reflects the reality that ‘the judicial remedy cannot encompass 

every conceivable harm that can be traced to alleged wrongdoing’” (quoting Associated General, 

459 U.S. at 536)). And given that more direct victims of Volkswagen’s conduct have already sued 

and recovered from the company, “[t]he need to grapple with the[] problems” generated by

Plaintiffs’ more remote RICO claim is “simply unjustified.” Holmes, 503 U.S. at 269.

Plaintiffs, in arguing that they have sufficiently alleged proximate cause, rely heavily on 

Diaz v. Gates, 420 F.3d 897 (9th Cir. 2005) (en banc). The court held there that a man who 

claimed that he was falsely imprisoned had sufficiently alleged a RICO injury to “business or 

property” based on his assertion that the imprisonment caused him to lose employment and 

employment opportunities. See id. at 898, 901. Much of Diaz focused on what qualifies as an 

injury to “business or property” under RICO, but the court also touched on proximate cause. In 

doing so the court rejected an argument that, because the lost wages were not the “direct target” of 

the false imprisonment, but were merely a “secondary effect,” the plaintiff’s loss of wages was not 

proximately caused by his false imprisonment. Id. at 901. The court explained that RICO does 

not impose a “direct target” limitation, and that proximate cause is “generous enough to include 

the unintended, though foreseeable, consequences of RICO predicate acts.” Id. (citing Holmes, 

503 U.S. at 265–68; Palsgraf v. Long Island R.R. Co., 248 N.Y. 339 (1928)). 

Plaintiffs argue that Diaz endorsed a foreseeability standard for RICO proximate cause. 

And they contend that under that standard, their lost commissions are recoverable. (See Opp’n to 

VW, Dkt. No. 6441 at 21 (“Volkswagen cannot seriously argue that a substantial impact on 

Plaintiffs’ employment and economic opportunities, even if unintended, was [not] a foreseeable 

consequence of the RICO predicate acts.”) (internal quotation marks omitted).) 

As noted above, the Supreme Court has stated that the “central question” in analyzing 

proximate cause under RICO is not foreseeability, but whether the violation “led directly to the 

plaintiff’s injuries.” Anza, 547 U.S. at 461; see also Hemi, 559 U.S. at 12. Diaz, although 

focusing on foreseeability, did not hold otherwise. Diaz rejected a “direct target” standard, but 

that is not the same as the directness standard that was endorsed in Anza. “Direct target” suggests 

intentionality. If the plaintiff in Diaz had needed to satisfy a “direct target” standard, he likely 

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would have needed to show that the police falsely arrested him with the intent that he would lose 

employment as a result. Diaz held that RICO did not impose such a requirement. Under Anza’s 

directness standard, in contrast, the same intentionality is not needed. Anza requires a showing 

that the violation “led directly to the plaintiff’s injuries.” 547 U.S. at 461. That standard was 

satisfied in Diaz: the plaintiff obviously could not pursue employment if he was in jail; his false 

imprisonment led directly to his loss of employment and employment opportunities. See Diaz, 

420 F.3d at 900 (“[Plaintiff’s] claimed financial loss? He could not fulfill his employment 

contract or pursue valuable employment opportunities because he was in jail.”).

That proximate cause was found in Diaz also carriers little weight in analyzing proximate 

cause here. Unlike here, Diaz did not involve multiple ripples of injury from a RICO violation. A 

man asserted that he was falsely imprisoned by the defendants and that he lost employment as a 

result. The injury was direct and there were no intervening parties in the causal chain. The Diaz

plaintiff’s RICO claim, then, did not pose the kinds of difficulties that arise when the indirectly 

injured seek recovery. 

Plaintiffs’ alleged injuries from the diesel scandal are well beyond the first step in the 

causal chain. As a result, the Court concludes that proximate cause is lacking. 

Having identified two reasons for dismissal of Plaintiffs’ RICO claim, the Court declines 

to consider if there are any others. Defendants’ motions to dismiss the RICO claim are

GRANTED. Like the other claims in the complaint, the RICO claim is dismissed with leave to 

amend. To cure the identified deficiencies, Plaintiffs need to plead their RICO claim with more 

particularity and identify a more direct theory of causation. 

VII. SERVICE OF PROCESS

Stadler has also moved to dismiss the claims against him under Rule 12(b)(5), based on 

insufficient service of process. There is no dispute that Plaintiffs did not serve Stadler with the 

operative, consolidated complaint. The Court therefore GRANTS Stadler’s motion. 

VIII. PERSONAL JURISDICTION

Stadler and Winterkorn have also moved to dismiss the claims against them under Rule 

12(b)(2) for lack of personal jurisdiction. As explained above, the allegations are insufficient to 

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support any specific conduct by either of these individual defendants. As a result, it cannot be 

determined if either of them “(1) committed an intentional act, (2) expressly aimed at the forum 

state, (3) causing harm that the defendant knows is likely to be suffered in the forum state.” Dole 

Food Co. v. Watts, 303 F.3d 1104, 1111 (9th Cir. 2002). Specific personal jurisdiction is therefore 

lacking. Also, because Stadler and Winterkorn are German residents, and because Plaintiffs have 

not demonstrated that either of them have “continuous and systematic” contacts with the forum 

state (whether that be California or the United States), general personal jurisdiction also has not 

been established. See Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 

(2011). As neither form of personal jurisdiction has been demonstrated, the Court GRANTS

Stadler’s and Winterkorn’s Rule 12(b)(2) motions to dismiss for lack of personal jurisdiction.

Contemplating that the Court might grant the Rule 12(b)(2) motions, Plaintiffs have asked 

for leave to conduct jurisdictional discovery. Prior to discovery, other plaintiffs in this MDL have 

managed to provide more detail about Winterkorn’s involvement in the diesel scandal. And 

indeed, on more than one occasion the Court has held that it has personal jurisdiction over 

Winterkorn. (See Dkt. No. 2636 at 33–40 (ADR securities action); Dkt. No. 3470 at 29–30 

(bondholder’s action).) Because other plaintiffs were able to establish personal jurisdiction over 

Winterkorn without jurisdictional discovery, Plaintiffs should be able to do so too. 

As for Stadler, Plaintiffs’ claims against him are based only on generalities. More is 

needed to support jurisdictional discovery. See, e.g., Miller v. Peter Thomas Roth, LLC, No. C 19-

0698 WHA, 2019 WL 1507767, at *5 (N.D. Cal. Apr. 5, 2019) (denying request for jurisdictional 

discovery because plaintiffs’ “[c]onclusory allegations [were] unsupported and fail[ed] to make a 

prima facie showing that the exercise of jurisdiction [was] proper”); Karabu Corp. v. Gitner, 16 F. 

Supp. 2d 319, 325 (S.D.N.Y. 1998) (Sotomayor, J.) (explaining that “it would . . . raise grave due 

process concerns” if plaintiffs could sue corporate officers based only on their title and “subject 

[them] to depositions and discovery” without identifying a good faith basis for the claims against 

them).

Plaintiffs’ request for jurisdictional discovery is DENIED.

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IX. CONCLUSION

Defendants’ motions to dismiss the complaint are GRANTED. If Plaintiffs choose to amend 

their complaint, they must do so within 45 days of this Order.

IT IS SO ORDERED.

Dated: September 20, 2019

CHARLES R. BREYER

United States District Judge

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