Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_16-cv-02086/USCOURTS-cand-3_16-cv-02086-7/pdf.json

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

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United States District Court

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:

MDL Dkt. Nos. 6919, 6953

Napleton, No. 3:16-cv-02086-CRB

_____________________________________/

MDL No. 2672 CRB (JSC)

ORDER (I) GRANTING BOSCH’S

MOTION FOR SUMMARY 

JUDGMENT AND (II) DENYING 

BOSCH’S MOTION TO EXCLUDE

Volkswagen dealerships, in a proposed class action, allege that Robert Bosch GmbH and 

Robert Bosch LLC were knowing participants in Volkswagen’s “clean diesel” emissions fraud. 

The dealerships assert that they were harmed by the fraud and they seek to recover damages. 

The Bosch defendants have moved for summary judgment. They contend that judgment in 

their favor is warranted because the named plaintiff dealerships, after more than two years of 

discovery, have not identified any recoverable damages from the emissions fraud. In this Order, 

each category of damages claimed by the dealerships is reviewed. As will be seen, each category 

is either factually or legally unsupported. Summary judgment for the Bosch defendants is thus 

warranted.

I. THE RICO CLAIMS

A. Potential damages from the stop-sale orders

After Volkswagen admitted to regulators, in the fall of 2015, that it had been cheating on 

emissions tests for seven years, the company ordered its dealerships to stop selling new and 

certified pre-owned versions of the affected cars—the Volkswagen diesel-powered TDIs—at least 

temporarily. The named plaintiffs (referred to here as “the dealers” or “the dealerships”) at one 

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time alleged that they were harmed by those stop-sale orders, because the orders “rendered 

millions of dollars of inventory worthless” and forced them to incur “costs to store and maintain 

unsalable vehicles.” (Pls.’ Opp’n to Mot. to Dismiss, MDL Dkt. No. 2983 at 23.) Unrebutted 

evidence submitted by the Bosch defendants now shows that the dealers did not sustain any losses 

directly from the stop-sale orders. 

Volkswagen provided the dealers with support payments that were intended to—and did—

cover the costs of servicing, storing, and financing the TDIs that the dealers had in inventory when

the stop-sale orders were issued. (See MDL Dkt. No. 6954-56, Sheets Report ¶ 27(a)–(b).) And 

after the EPA approved modifications for the cars and the stop-sale orders were lifted, 

Volkswagen paid the dealers for the work required to modify the cars and to prepare them for sale. 

(See id. ¶ 86.) The dealers ultimately sold all of the TDIs they had in inventory, and they realized 

profits on almost all of those sales. In fact, on average their profit margins on those sales 

exceeded their margins on TDI sales prior to the stop-sale orders. (See id. ¶¶ 27(c), 46.) Only one 

of the dealers incurred a loss on the sale of certain TDIs that it had in inventory at the time of the 

stop-sale orders. But those losses were more than covered by Volkswagen’s support payments. 

(See id. ¶ 27(g).) 

The dealers have not meaningfully1challenged or rebutted this evidence. It follows that a 

reasonable fact finder could not find that the dealers suffered losses directly from the stop-sale 

orders. 

B. Potential damages from discontinuation of the TDI line 

Volkswagen stopped manufacturing TDIs after its emissions fraud was uncovered. 

Evidence offered by the dealers supports that if the company had not been caught, it planned to 

continue manufacturing TDIs, perhaps until 2027. The dealers insist that if Volkswagen had 

continued making the cars, the dealers would have continued to sell and profit from them. They 

 

1 The only challenge to the Bosch defendants’ evidence, if it can be construed that way, is the 

dealers’ expert’s assertion that the Bosch defendants’ calculations do not take into account that the 

dealers faced “uncertain prospects” after Volkswagen issued its stop-sale orders. (Stockton 

Report, MDL Dkt. No. 6840-9 at 5.) The dealers have made no attempt to calculate any damages

they sustained from this uncertainty. Nor have they cited to any authority supporting that damages 

from commercial uncertainty are recoverable under RICO. 

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also identify ancillary revenue streams that may have resulted from future TDI sales, including 

revenues from servicing new TDIs and from reacquiring TDIs through trade-ins and selling them 

as used TDIs. Detailed calculations of the dealers’ predicted profits from all of these sources are 

included in one of the reports of their expert. (See Stockton Report, MDL Dkt. No. 6406-6 at 29–

41, 56–68, 83–95.) 

For their lost profits from yet-to-be-manufactured TDIs to be recoverable under RICO, the

dealers must establish that these losses resulted from an injury to their “business or property” that 

was “by reason of” a pattern of racketeering activity. 18 U.S.C. § 1964(c). See generally Diaz v. 

Gates, 420 F.3d 897 (9th Cir. 2005) (en banc). 

The dealers do not suggest that they had a “property” interest in the sale of TDIs that they 

did not own or possess at the time of the stop-sale orders. For good reason: Volkswagen’s 

franchise agreements gave Volkswagen, not its dealers, discretion to choose the types of cars to 

manufacture and to make available for sale. (See MDL Dkt. No. 6954-43 at 21, 28, 42.) The 

dealers instead assert that they were injured in their “business” when Volkswagen stopped 

manufacturing TDIs. 

Assuming that the dealers’ lost profits from yet-to-be-manufactured TDIs can be 

characterized as an injury to their “business,” as that term is used in the RICO statute, these profits

were not lost “by reason of” a pattern of racketeering activity. The TDIs did not comply with 

emissions standards, and it was racketeering activity (or at least conduct that is alleged to have 

amounted to racketeering activity) that made the TDIs available for sale in spite of their 

noncompliance. Specifically, Volkswagen (allegedly with Bosch’s assistance) installed defeat 

devices in the cars, which allowed the cars to circumvent the EPA’s and the California Air 

Resources Board’s emissions tests, from 2009 to 2015. The dealers benefited from selling the 

TDIs during those years, and thus unknowingly benefited from the scheme. What the dealers

implicitly claim now is that they had a right to continue benefiting from racketeering activity—

that is, to keep selling noncompliant TDIs until 2027. They have not cited to any authority that 

supports this contention. Their losses from the TDI line’s discontinuation were not “by reason” of 

the emissions fraud; they were by reason of the fraud’s discovery. The needed causal connection 

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between the challenged conduct and the claimed injuries is therefore lacking. 

The Second Circuit reached a similar conclusion in affirming dismissal of a RICO claim in 

In re American Express Co. Shareholder Litigation, 39 F.3d 395 (2d Cir. 1994). In that derivative 

action, American Express shareholders alleged that the company’s officers and directors had 

conspired with foreign operatives to defame a rival by falsely linking him to organized crime. 

When the conspiracy came to light, the shareholders asserted that American Express lost profits, 

suffered harm to its reputation, and was forced to incur significant legal costs. See id. at 396–98. 

The Second Circuit held that American Express could not recover for these damages under RICO. 

The court explained that the conspiracy “was not what injured American Express;” it was “the 

exposure of [the conspiracy] that caused the [company’s] harm.” Id. at 400. As the requisite 

chain of causation was not established, the RICO claim could not proceed. 

Here, too, it was not the predicate acts of racketeering activity—Volkswagen’s (and 

perhaps Bosch’s) misrepresentations to the EPA and to CARB and their falsifications of emissions 

tests—that prevented the dealers from selling TDIs until 2027; it was the discovery of those acts. 

Indeed, until those acts were discovered, the dealers benefited from them, profiting from the sale 

of noncompliant cars. The dealers’ losses from the cessation of the TDI line “arose as a result of 

the scandal, not the scheme itself.” Meng v. Schwartz, 116 F. Supp. 2d 92, 97 (D.D.C. 2000)

(dismissing RICO claim when the predicate acts of bribery were undertaken to benefit the 

plaintiffs and the plaintiffs’ injuries arose only after the bribery was discovered), aff’d, 48 F. 

App’x 1 (D.C. Cir. 2002). 

The dealers make an alternative causation argument. They maintain that their losses were 

caused by the defendants’ racketeering activity because if the defendants had not installed defeat 

devices in the TDIs, then they would have manufactured legal TDIs, and the dealers would have 

sold those cars until 2027. In other words, the dealers assert that but for the emissions fraud, they 

would have profited from selling the TDIs for the entire expected life cycle of the line, instead of 

only from 2009 to 2015. 

No evidence has been offered by the dealers to support this claim, and the evidence in the 

record is contrary to it. After admitting to using defeat devices in the TDIs, Volkswagen

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confessed that years earlier it had determined that it “could not design a diesel engine that would 

both meet the stricter U.S. NOx emissions standards . . . and attract sufficient customer demand in 

the U.S. market.” (MDL Dkt. No. 5862, Ex. A, Rule 11 Plea Agreement, Statement of Facts ¶ 33, 

United States v. Volkswagen AG, No. 16-CR-20394 (E.D. Mich. Mar. 10, 2017).) The EPA 

effectively confirmed Volkswagen’s admission, concluding after the fraud that there were “no 

practical engineering solutions” that could bring the cars into compliance with governing 

emissions standards “without [a] negative impact to vehicle functions and unacceptable delay.” 

(Partial Consent Decree, MDL Dkt. No. 2103-1 at 5.) The TDIs that were promised, in other 

words, were illusory.2 

The dealers’ suggestion that Volkswagen could have manufactured legal TDIs that would 

have attracted a similar level of consumer demand as the illegal TDIs is unsupported and

speculative. More is needed to support their claim. See Canyon Cty. v. Syngenta Seeds, Inc., 519 

F.3d 969, 983 (9th Cir. 2008) (affirming dismissal of a RICO claim that would have required the 

court “to construct the alternative scenario” of what would have occurred had the defendants 

operated legally). 

The dealers’ lost profits from yet-to-be-manufactured TDIs did not result from an injury to 

their “business or property” that was “by reason of” a pattern of racketeering activity. 18 U.S.C. 

§ 1964(c). The dealers accordingly cannot recover these lost profits under RICO. 

C. Potential damages from the buyback 

Following Volkswagen’s class settlements with the owners and lessors of its TDIs, the 

company bought back more than 385,000 in-use TDIs. (See Claims Supervisor’s 2.0-Liter Report,

November 26, 2018, MDL Dkt. No. 5585 at 11; Claims Supervisor’s 3.0-Liter Report, June 13, 

2019, MDL Dkt. No. 6384 at 12.) The dealers insist that the buyback reduced their profits. If not 

for the buyback, they contend that they would have profited from servicing the returned cars and 

 

2 After the fraud was revealed, Volkswagen did develop modifications for the TDIs that reduced 

the cars’ emissions. But with few exceptions, the modifications did not bring the cars into 

compliance with their originally certified emissions standards. (See EPA’s Motions for Entry of 

Partial Consent Decrees, MDL Dkt. Nos. 1973 at 19; 3083 at 16–18.) The modifications, then, do 

not support that Volkswagen could have manufactured an entire line of legal TDIs.

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from selling replacement parts for the returned cars. 

Like the dealers’ lost profits from the TDI line’s discontinuation, their buyback-related 

losses were not caused by the challenged racketeering activity. Until the emissions fraud came to 

light, the dealers benefited from servicing noncompliant TDIs. They did not lose that revenue 

stream until the fraud was revealed and Volkswagen was forced to buy back many of the cars. As 

it was the emissions fraud’s discovery, not the fraud itself, that caused the dealers’ buybackrelated losses, the chain of causation between the challenged conduct and the dealers’ damages is 

again lacking. As a result, this category of damages is also not recoverable against the Bosch 

defendants under RICO.3

D. Potential damages from harm to goodwill

In a prior Order, the Court held that the dealers could not recover under RICO for a decline 

in goodwill following the emissions fraud. The Court explained that damage to goodwill is an 

intangible injury and that RICO requires “more than ‘mere injury to a valuable intangible property 

interest.’” In re Volkswagen “Clean Diesel” Mktg., Sales Practices, & Prod. Liab. Litig., No. 

MDL 2672 CRB (JSC), 2017 WL 4890594, at *6 (N.D. Cal. Oct. 30, 2017) (quoting Oscar v. 

Univ. Students Co-op Ass’n, 965 F.2d 783, 785 (9th Cir. 1992), abrogated on other grounds by 

Diaz, 420 F.3d 897).

The dealers have asked the Court to reconsider this holding, but they have not identified 

any controlling authority that supports their request. They rely on Harmoni International Spice, 

Inc. v. Hume, 914 F.3d 648, 653 (9th Cir. 2019), but the panel there expressly declined to resolve 

whether harm to business reputation is recoverable under RICO, leaving the issue “for the district 

court to take up on remand.” On remand, the plaintiffs abandoned their reputation-based theory of 

injury, so the district court never considered the issue that was reserved. See Harmoni Int’l Spice, 

Inc. v. Wenxuan Bai, No. 2:16-cv-00614-AB (ASx), 2019 WL 4194306, at *8 (C.D. Cal. July 2, 

 

3 The Bosch defendants have moved to exclude as unreliable the dealers’ expert’s estimates of the 

dealers’ lost profits from yet-to-be-manufactured TDIs and from the TDI buyback. (See MDL 

Dkt. No. 6919.) The Court will not consider the merits of the motion to exclude, because even if 

the expert’s estimates are reliable, they are estimates of damages that are not recoverable under 

RICO. For this reason, the motion to exclude is DENIED without prejudice. 

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2019).

The dealers also rely on Xcentric Ventures, LLC v. Borodkin, 798 F.3d 1201, 1203 (9th 

Cir. 2015), but the relevant holding there was that damages from the loss of “specific business 

opportunities and contracts” are recoverable under RICO. A loss of goodwill is not the same as a 

loss of specific business opportunities and contracts. Goodwill, which is the probability that old 

customers will return and that the business “will continue in the future as in the past,” is 

intangible. Rise Basketball Skill Dev., LLC v. K Mart Corp., No. 16-CV-04895-WHO, 2017 WL 

2775030, at *5 (N.D. Cal. June 27, 2017) (citation omitted); see also Rent-A-Center, Inc. v. 

Canyon Television and Appliance Rental, Inc., 944 F.2d 597, 603 (9th Cir. 1991) (recognizing that 

“intangible injuries, such as damage to . . . goodwill, qualify as irreparable harm”). Specific 

business opportunities and contracts are not. 

Finally, the dealers rely on Diaz, 420 F.3d at 898, where the Ninth Circuit held that “false 

imprisonment that caused the victim to lose employment and employment opportunities [was] an 

injury to ‘business or property’ within the meaning of RICO.” This Court considered Diaz in its 

prior Order and did not find the decision inconsistent with its conclusion that harm to goodwill is 

not recoverable under RICO.

The Court reaffirms that the dealers cannot recover under RICO for losses resulting from a 

decline in goodwill. The Court also notes that the dealers have not offered any evidence 

supporting such losses. 

No damages that are recoverable under RICO have been identified. As a result, the 

dealers’ RICO claims cannot proceed. 

II. THE STATE LAW CLAIMS

In addition to their RICO claims, the dealers also bring state law civil-conspiracy claims 

against the Bosch defendants. (See TAC ¶¶ 444–50 (Bertolet VW’s civil conspiracy claim under 

Pennsylvania law); id. ¶¶ 451–57 (Brandon VW’s civil conspiracy claim under Florida law); id.

¶¶ 458–64 (Bozzani VW’s civil conspiracy claim under California law).) The damages that the 

dealers seek to recover under these state laws are materially the same as the damages they seek to 

recover under RICO. As with their RICO claims, the dealers have not submitted proof that these

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damages are recoverable.

• Potential damages from the stop-sale orders: The Bosch defendants’ unrebutted

evidence again supports that the dealers did not sustain any damages directly from the 

stop-sale orders. 

• Potential damages from discontinuation of the TDI line: As with RICO, each of the 

relevant civil conspiracy laws requires proof that the damages claimed were caused by

the conspiracy. See Chicago Title Ins. Co. v. Great W. Fin. Corp., 444 P.2d 481, 488 

(Cal. 1968); Charles v. Fla. Foreclosure Placement Ctr., LLC, 988 So. 2d 1157, 1159–

60 (Fla. Dist. Ct. App. 2008); Viguers v. Philip Morris USA, Inc., 837 A.2d 534, 540 

(Pa. Super. Ct. 2003), aff’d, 881 A.2d 1262 (Pa. 2005). As explained above, the 

dealers have not satisfied this causation requirement, because their losses from yet-tobe-manufactured TDIs were not caused by the emissions fraud, but instead by the 

fraud’s discovery.

• Potential damages from the buyback: Causation is also lacking for this category of 

damages. To the extent that the dealers lost servicing and replacement-parts revenues 

as a result of the buyback, those losses were caused by the emissions fraud’s discovery, 

not by the fraud itself. 

• Potential damages from harm to goodwill: The dealers have not citied to any authority 

supporting that harm to goodwill is recoverable under the relevant civil conspiracy 

laws. Also, there is no evidence in the record of damages sustained by the dealers due 

to a decline in goodwill.

* * *

The dealers have not submitted proof of any damages that are recoverable under their 

causes of action against the Bosch defendants. The Court accordingly GRANTS the Bosch 

defendants’ motion for summary judgment.

IT IS SO ORDERED.

Dated: December 6, 2019 _____________________________

CHARLES R. BREYER

United States District Judge

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