FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
IN RE VOLKSWAGEN “CLEAN DIESEL” No. 19-16361
MARKETING, SALES PRACTICES, AND
PRODUCTS LIABILITY LITIGATION, D.C. No.
3:15-md-02672-
CRB
NICHOLAS BENIPAYO,
Plaintiff,
and
FARCHIONE MOTORS, INC.,
Claimant-Appellant,
v.
VOLKSWAGEN GROUP OF AMERICA,
INC.,
Defendant-Appellee.
2 IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION
IN RE VOLKSWAGEN “CLEAN DIESEL” No. 19-16362
MARKETING, SALES PRACTICES, AND
PRODUCTS LIABILITY LITIGATION, D.C. No.
3:15-md-02672-
CRB
NICHOLAS BENIPAYO,
Plaintiff,
and
AUTOVID, LLC,
Claimant-Appellant,
v.
VOLKSWAGEN GROUP OF AMERICA,
INC.,
Defendant-Appellee.
IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION 3
IN RE VOLKSWAGEN “CLEAN DIESEL” No. 19-16363
MARKETING, SALES PRACTICES, AND
PRODUCTS LIABILITY LITIGATION, D.C. No.
3:15-md-02672-
CRB
NICHOLAS BENIPAYO,
Plaintiff,
and
KENNEDY’S AUTOS, LLC,
Claimant-Appellant,
v.
VOLKSWAGEN GROUP OF AMERICA,
INC.,
Defendant-Appellee.
4 IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION
IN RE VOLKSWAGEN “CLEAN DIESEL” No. 19-16376
MARKETING, SALES PRACTICES, AND
PRODUCTS LIABILITY LITIGATION, D.C. No.
3:15-md-02672-
CRB
NICHOLAS BENIPAYO,
Plaintiff,
OPINION
and
HADDAD CLAIMANTS,
Claimant-Appellant,
v.
VOLKSWAGEN GROUP OF AMERICA,
INC.,
Defendant-Appellee.
Appeal from the United States District Court
for the Northern District of California
Charles R. Breyer, District Judge, Presiding
Argued and Submitted June 11, 2020
San Francisco, California
Filed September 10, 2020
IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION 5
Before: Mary M. Schroeder and Patrick J. Bumatay,
Circuit Judges, and Brian M. Morris, * District Judge.
Opinion by Judge Bumatay
SUMMARY **
Settlement Agreement
The panel affirmed the district court’s denial of
claimants’ motions to enforce a settlement agreement that
the district court approved between Volkswagen Group of
America, Inc. and owners and lessees of diesel cars that had
defeat devices, which altered emissions profiles of the cars.
Under the settlement agreement, certain vehicles
purchased from junkyards or salvage yards, known as
“branded title” vehicles, were ineligible for compensation.
In February 2018, the Claims Supervisor announced that the
Claims Review Committee had adopted a general
Framework to expand the types of vehicles ineligible for
compensation by revising the exclusion for “branded title”
vehicles to also include those acquired from the “equivalent”
of a junkyard or salvage yard, i.e., an insurance auction.
Claimants all purchased a Volkswagen “branded title”
vehicle from an insurance auction in the months following
*
The Honorable Brian M. Morris, United States District Judge for
the District of Montana, sitting by designation.
**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
6 IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION
the approval of the settlement agreement and sought
compensation from Volkswagen. Their claims were denied.
The panel held that the district court had the authority to
review claimants’ motions to enforce the settlement
agreement. Because the district court expressly retained
authority to “ensure compliance” with the settlement
agreement’s terms, the district court was well within its
jurisdiction to determine whether the new Framework
breached the agreement. The panel held further that the
district court did not err in reaching the merits of claimants’
motions without resolving their status as third-party
beneficiaries.
The panel held that the district court had the authority to,
and did, approve the amendment to the settlement
agreement. Accordingly, the Framework was an enforceable
part of the settlement agreement. The panel held further that
the district court did not abuse its discretion in finding the
Framework as a manifestation of the parties’ assent to
modify the settlement. The panel rejected claimants’
argument that any modification to the agreement required a
substantial change of circumstances and a notice to the class.
The panel also rejected claimants’ contention that
Volkswagen should be estopped from denying their claims
based on claimant’s reliance on Volkswagen’s course of
performance and pre-Framework agreement in purchasing
“branded title” cars.
The panel concluded that, given the settlement
agreement’s express modification procedures, the district
court did not abuse its discretion in construing the
Framework as such a modification and approving it in
response to claimants’ motions.
IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION 7
COUNSEL
John H. Cigavic III (argued), Basic Legal Services, San
Francisco, California, for Claimants-Appellants Farchione
Motors Inc., Autovid LLC, and Kennedy’s Autos LLC.
Murray B. Silverstein (argued) and Jacob L. Boehner,
Greenspoon Marder LLP, Tampa, Florida; Anthony A.B.
Dogali (argued) and Barbara U. Uberoi, Dogali Law Group
P.A., Tampa, Florida; for Claimants-Appellants the Haddad
Claimants.
Diane L. McGimsey (argued), Sullivan & Cromwell LLP,
Los Angeles, California; Robert J. Giuffra Jr., Sharon L.
Nelles, William B. Monahan, Sullivan & Cromwell LLP,
New York, New York; for Defendant-Appellee.
OPINION
BUMATAY, Circuit Judge:
It doesn’t take a mechanic to understand this case. While
ostensibly it involves whether certain vehicles meet specific
criteria of operability and title to recover funds from a
complex class action settlement, the heart of the dispute is
simpler than that. Farchione Motors, Autovid Inc.,
Kennedy’s Auto LLC, and the Haddad Claimants all argue
that they are entitled to payouts under a settlement
agreement between Volkswagen Group of America and
many owners and lessees of its vehicles. But Volkswagen
counters that the settlement bars their claims, and even if it
didn’t, their claims were properly denied after the district
court approved an amendment to the settlement’s eligibility
criteria. Reading the plain terms of the settlement
8 IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION
agreement, we are convinced that the district court got it
right.
I.
In September 2015, the Environmental Protection
Agency accused Volkswagen of violating the Clean Air Act.
According to the EPA, Volkswagen installed a software
device known as a “defeat device” in its 2.0-liter and 3.0-
liter diesel cars, which altered the emissions profiles of the
cars during emissions tests. With the defeat devices, these
cars could emit up to 40 times more pollution than standards
allowed.
Volkswagen and the government eventually entered into
settlement, which involved criminal penalties, restitution
payments, and injunctive relief to prevent future violations.1
Parallel to the law enforcement proceedings, Volkswagen
faced a slew of private lawsuits from owners and lessees of
the diesel cars fitted with the defeat devices. All federal
court cases were consolidated in the Northern District of
California.
In June 2016, Volkswagen and some of its affiliates
entered into a nationwide class-action settlement agreement
involving approximately 500,000 cars. Under the
agreement, Volkswagen would (1) reimburse the owners or
lessees of qualifying vehicles for the harm suffered because
of the emissions cheating and (2) remove the offending
vehicles from the road. The district court approved the
settlement agreement in October 2016, but retained the
1
U.S. Dep’t of Justice, Volkswagen AG Agrees to Plead Guilty and
Pay $4.3 Billion in Criminal and Civil Penalties (Jan. 11, 2017),
https://www.justice.gov/opa/pr/volkswagen-ag-agrees-plead-guilty-and
-pay-43-billion-criminal-and-civil-penalties-six.
IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION 9
jurisdiction to “enforce, administer, and ensure compliance”
with its terms. This court affirmed the district court’s
approval of the settlement. See In re Volkswagen “Clean
Diesel” Mktg., 895 F.3d 597, 619 (9th Cir. 2018).
The agreement provides for multiple levels of review for
each claim for compensation. First, Volkswagen makes the
initial eligibility determination. Second, a court-appointed,
third-party Claims Supervisor reviews and validates the
eligibility of each claim. Finally, a Claims Review
Committee (or “CRC”) conducts a third level of review for
any claimant who appeals an eligibility decision. The
Claims Review Committee consists of a representative from
Volkswagen, a representative from the Class Counsel, and a
court-appointed third party. 2 The agreement provides that
the Claims Review Committee’s decisions are “final
determinations.”
The terms and provisions of the settlement may “be
amended, modified, or expanded by written agreement of the
Parties and approval of the Court.” This provision also
allows for amendments, modifications, or expansions, by
written agreement, “without further notice to the Class or
approval by the Court if such changes are consistent with the
Court’s Final Approval Order and do not limit the rights of
Class Members under” the settlement agreement. The
agreement defines “Parties” as Volkswagen and the Class
Representatives. 3 A “Party” to the agreement may seek to
2
The district court appointed the Honorable Fern Smith, a retired
district judge of the Northern District of California, to serve as the third-
party CRC member.
3
According to the agreement, a “Class Representative” is a named
plaintiff in the underlying class action who agreed to represent the class
for purposes of obtaining approval of the settlement.
10 IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION
enforce the agreement for a “breach” after providing notice
to the “breaching Party.” California law governs the
settlement agreement.
Under the settlement agreement, certain vehicles
purchased from junkyards or salvage yards were ineligible
for compensation. These vehicles, known as “branded title”
vehicles, had titles such as “Junk,” “Rebuilt,” or “Salvaged”
and were deemed damaged or unsafe to drive. In February
2018, the Claims Supervisor announced that the Claims
Review Committee expanded the types of vehicles ineligible
for compensation. According to the Claims Supervisor, the
Claims Review Committee adopted a general framework
(the “Framework”) to process “branded title” claims based
on a “holistic review” of the agreement. As relevant here,
the Framework determined that the exclusion for “branded
title” vehicles would also include those acquired from the
“equivalent” of a junkyard or salvage yard, i.e., an
“insurance auction.” The new Framework applied to all
pending “branded title” claims.
Farchione Motors, Inc., Autovid, LLC, Kennedy’s
Autos, LLC, and the Haddad Claimants (collectively, the
“Claimants”) all purchased a Volkswagen “branded title”
vehicle from an insurance auction in the months following
the approval of the agreement and sought compensation
from Volkswagen. After the adoption of the new
Framework, their requests were denied.
Claimants filed motions to enforce the agreement,
arguing that their “branded title” claims should have been
approved under the pre-Framework settlement and that the
Framework improperly extinguished their claims. After
establishing that it retained jurisdiction to enforce
compliance with the agreement, the district court concluded
that Claimants’ “branded title” claims did not further the
IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION 11
goals of the settlement agreement. The district court found
that Claimants purchased the cars after Volkswagen’s fraud
became public, so they didn’t unknowingly suffer harm from
the auto manufacturer’s actions. Moreover, the district court
noted that Claimants purchased the vast majority of the cars
after they were already taken off the road (since they were
damaged or unsafe to drive) and, therefore, they were not
polluting roads. The district court adduced that Claimants
bought the cars to profit from the settlement.
The district court characterized the Framework as
“clos[ing] loopholes” in the agreement and concluded that it
was consistent with the goals of the settlement. The district
court then construed the Framework as an amendment to the
agreement and approved it as such. As Claimants were then
ineligible for compensation under the amended agreement,
the district court denied their motions to enforce. Claimants
now appeal that decision.
We review the district court’s denial of a motion to
enforce a settlement agreement for abuse of discretion.
Wilcox v. Arpaio, 753 F.3d 872, 875 (9th Cir. 2014). Under
this deferential standard, we must affirm the district court
absent “an error of law or clearly erroneous findings of fact.”
Id. at 875. We review questions of law, including the
interpretation of a settlement agreement, de novo. Parsons
v. Ryan, 949 F.3d 443, 453 (9th Cir. 2020). Under California
law, we look to the plain meaning of the settlement’s terms.
See Navarro v. Mukasey, 518 F.3d 729, 734 (9th Cir. 2008).
II.
There are two core questions in this case. The threshold
question is whether the district court had the authority to
review Claimants’ motions to enforce the settlement
agreement. The second is whether the district court was
12 IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION
right to deny the motions and instead treat the Framework as
an amendment to the agreement. We believe the district
court properly handled these questions.
A.
Volkswagen advances the somewhat odd position that
we should affirm the district court even though it believes
the district court shouldn’t have considered Claimants’
motions to enforce the settlement agreement in the first
place. Volkswagen asserts that the settlement precluded
judicial review of claims since it establishes the Claim
Review Committee as the final arbiter of eligibility for
compensation. And even if not, it asserts that Claimants are
not a party to the agreement, and, therefore, can’t bring a
motion to enforce it. Instead of resolving these questions,
the district court assumed the motions were properly before
the court and reached their merits. We see nothing wrong
with that.
As the district court expressly retained authority to
“ensure compliance” with the settlement agreement’s terms,
the district court was well within its jurisdiction to determine
whether the new Framework breached the agreement. See
Arata v. Nu Skin Int’l, Inc., 96 F.3d 1265, 1268–69 (9th Cir.
1996) (“[I]f the district court explicitly retains jurisdiction
over the settlement agreement, or incorporates the terms of
the agreement in its dismissal order (as is common in class
action settlements), then ‘a breach of the agreement would
be a violation of the order, and ancillary jurisdiction to
enforce the agreement would therefore exist.’”) (quoting
Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375,
381 (1994)). Indeed, a district court must have “power to
enforce” its order approving a settlement “to protect the
integrity of a complex class settlement over which it retained
jurisdiction.” In re Prudential Ins. Co. of Am. Sales Practice
IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION 13
Litig., 261 F.3d 355, 367–68 (3d Cir. 2001). Since
Claimants alleged a breach of the Volkswagen settlement,
the district court properly exercised its ancillary jurisdiction
over their motions. See Alvarado v. Table Mountain
Rancheria, 509 F.3d 1008, 1017 (9th Cir. 2007) (“[T]he
party seeking enforcement of the settlement agreement must
allege a violation of the settlement agreement in order to
establish ancillary jurisdiction.”).
Although the district court didn’t decide these questions,
Claimants brought their motions as class members and third-
party beneficiaries to the settlement agreement. California
law recognizes that third-party beneficiaries may seek to
enforce an agreement if they are within the class of persons
intended to be benefited by that agreement. Gen. Motors
Corp. v. Superior Court, 15 Cal. Rptr. 2d 622, 628 (Ct. App.
1993); cf. Hook v. State of Ariz., Dep’t of Corr., 972 F.2d
1012, 1014 (9th Cir. 1992) (recognizing as blackletter
contract law that an intended third-party beneficiary may
bring an action to enforce an agreement). In turn, we have
permitted judges to assume, without deciding, that a plaintiff
is a third-party beneficiary under a contract or agreement.
See, e.g., Barnes-Wallace v. City of San Diego, 704 F.3d
1067, 1086 (9th Cir. 2012) (assuming plaintiffs can qualify
as third-party beneficiaries of leases); Lucas v. Bechtel
Corp., 800 F.2d 839, 848 (9th Cir. 1986) (assuming a third
party was the intended beneficiary of a contract governed by
the Labor-Management Relations Act). The practice under
California law is no different. See, e.g., Los Angeles Cnty.
Metro. Transp. Auth. v. Shea-Kiewit-Kenny, 69 Cal. Rptr. 2d
431 n.1 (Ct. App. 1997) (assuming company could sue the
transit authority for breach of contractual covenants).
Accordingly, the district court did not err in reaching the
14 IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION
merits of Claimants’ motions without resolving their status
as third-party beneficiaries. 4
B.
We next turn to the merits of Claimants’ motions to
enforce the agreement. In denying Claimants’ motions, the
district court construed the Framework as an effort by the
Parties to amend the agreement and so ratified it. With the
new Framework in place, the district court then agreed that
Claimants were ineligible for compensation under the
agreement. The district court didn’t abuse its discretion in
ruling in this manner.
By its plain language, “[t]he terms and provisions of
th[e] Class Action Agreement may be amended, modified,
or expanded by written agreement of the Parties and
4
To be clear, courts can’t assume Article III jurisdiction to reach the
merits of a case. See Steel Co. v. Citizens for a Better Env’t, 523 U.S.
83, 94 (1998); see also Righthaven LLC v. Hoehn, 716 F.3d 1166, 1172
(9th Cir. 2013) (observing that the Court rejected the “doctrine of
hypothetical jurisdiction” to reach the merits when a court lacked Article
III jurisdiction on account of standing). Here, the district court retained
subject matter jurisdiction over the settlement agreement and the
Claimants undoubtedly satisfy the three elements of Article III standing.
See Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61 (1992)
(establishing injury in fact, causation, and redressability as the
“irreducible constitutional minimum” of standing). In this case, whether
Claimants possess legally enforceable rights under the settlement
agreement is a question of the merits rather than one of constitutional
standing. Lindsey v. Starwood Hotels & Resorts Worldwide Inc., 409 F.
App’x 77, 78 (9th Cir. 2010) (unpublished); see also Harris v. Amgen,
Inc., 573 F.3d 728, 732 n.3 (9th Cir. 2009); cf. Churchill Vill., L.L.C. v.
Gen. Elec., 361 F.3d 566, 572 (9th Cir. 2004) (explaining that “neither
Article III nor prudential standing is implicated by the efforts of non-
intervening objectors to appeal class-action settlements.”). Accordingly,
we see no Article III issue here.
IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION 15
approval of the Court[.]” Thus, after a “written agreement
of the Parties,” the district court need only ratify the change
to make it an enforceable part of the agreement. The district
court did so here. The district court treated the Framework
as the Parties’ written “agree[ment] to modify how certain
claims for benefits are handled to better reflect the goals of
the settlement[].” As the district court found, excluding
Claimants from the agreement was consistent with the
settlement’s goals since they purchased their vehicles after
the existence of the defeat devices became public and after
most of the vehicles were already off the road. The district
court’s justification for ratifying the amendment was, thus,
not “illogical, implausible, or without any support” in the
record. United States v. Hinkson, 585 F.3d 1247, 1264 (9th
Cir. 2009). Accordingly, the district court had the authority
to, and did, approve the amendment to the agreement. The
Framework is now an enforceable part of the settlement
agreement.
Claimants argue that the district court didn’t properly
follow the agreement’s modification procedures. They say
that the “Parties” didn’t agree to the Framework as required
by the agreement; instead, only the Claims Review
Committee did. But the district court found otherwise. The
district court considered Volkswagen and Class Counsel as
acting through the Claims Review Committee to reach this
agreement. Such a finding was not clearly erroneous. After
all, the Claims Supervisor reported that the “Parties have
been working with the court-appointed CRC” to address how
the “eligibility requirements” in the agreement applied to
“branded title” claims. The Claims Supervisor further
documented that “the Parties and the CRC undertook to
further scrutinize whether the [branded title] claims should
be deemed eligible.” Finally, the report indicated, in
response to that effort, the “CRC adopted a general
16 IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION
framework of processing branded title claims.”
Accordingly, the district court didn’t abuse its discretion in
finding the Framework as a manifestation of the Parties’
assent to modify the settlement.
Claimants also assert that any modification to the
agreement required a substantial change of circumstances
and a notice to the class. But the agreement’s modification
provision requires neither. Instead, the plain terms of the
agreement show no notice to the class is necessary if the
modification has court approval. Additionally, the cases
suggesting that a change of circumstances is necessary to
amend a class action settlement don’t involve the situation
here—where both Parties agreed to the amendment using the
agreement’s modification procedures. See, e.g., Flores v.
Lynch, 828 F.3d 898, 909–10 (9th Cir. 2016) (denying a Rule
60(b)(5) motion by one party to modify a consent decree in
light of a change in circumstances). Absent an express term
requiring notice or a change of circumstances to validate an
amendment, we will not read one into the agreement.
Claimants also argue that Volkswagen should be
estopped from denying their claims. It is true that
Volkswagen honored at least 84 of Claimants’ requests for
compensation prior to adopting the new Framework.
Consequently, Claimants contend that they relied on
Volkswagen’s course of performance and the pre-
Framework agreement in purchasing “branded title” cars.
But Claimants’ reliance arguments cannot override the
plain terms of the settlement agreement—which expressly
grant the Parties the authority to amend the agreement with
court approval. Carving out an exception to the modification
procedures based on a third party’s detrimental reliance
would constitute an impermissible judicial revision of the
agreement. Cf. Hanlon v. Chrysler Corp., 150 F.3d 1011,
IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION 17
1026 (9th Cir. 1998) (“Neither the district court nor this
court have the ability to delete, modify or substitute certain
provisions [of a settlement agreement].”) (simplified),
overruled on other grounds by Wal-Mart Stores, Inc. v.
Dukes, 564 U.S. 338 (2011). Plus, any reliance on
Volkswagen’s implementation of the agreement should have
been tempered by the possibility that Volkswagen and Class
Counsel would agree to change the settlement’s eligibility
criteria under the modification procedures.
III.
Given the settlement agreement’s express modification
procedures, we see no abuse of discretion in the district court
construing the Framework as such a modification and
approving it in response to Claimants’ motions.
AFFIRMED.