S&C Prevails for Volkswagen in Ninth Circuit Ruling on Sales Commissions

December 20, 2021

Volkswagen and its affiliates prevailed before the U.S. Court of Appeals for the Ninth Circuit when the court affirmed the dismissal with prejudice of all claims brought by a putative class of current and former Volkswagen dealer salespeople related to Volkswagen's diesel issues. The December 6 ruling followed oral arguments on November 18.
Plaintiffs sought to recover allegedly lost commissions and other income from reduced demand at Volkswagen dealerships following the 2015 public disclosure of Volkswagen's diesel issue. In their appeal, the plaintiffs claimed that Volkswagen should be responsible for purported California wage and hour law violations based on a theory that Volkswagen should be deemed their joint employers with the dealers. This unprecedented joint employment theory, if adopted, would have created a harmful precedent for auto manufacturers and franchisors more generally.
Judge Charles Breyer of the U.S. District Court for the Northern District of California previously dismissed plaintiffs' complaint three times for failure to state any plausible claim. In the earlier dismissals, the judge also held that the plaintiffs had failed to allege sufficient facts to support claims that Volkswagen negligently interfered with their prospective economic advantage, breached terms of a sales incentive program and violated RICO.
In ruling on the California wage and hour law claims, the Ninth Circuit held that plaintiffs did not plausibly allege that Volkswagen AG or Volkswagen Group of America was their joint employer. Among other things, the Ninth Circuit held that the plaintiffs failed to adequately allege that Volkswagen exercised control over their wages, hours, or working conditions or controlled how they sold cars.
The team representing Volkswagen includes Bob Giuffra, Sharon Nelles, Bill Monahan, Andrew Finn (who argued the appeal), Sverker Högberg, Lauren Goldsmith and Jonathan Blevins.