Can Dallas County Cash In on the Volkswagen Scandal?

The Volkswagen emissions scandal is not quite two weeks old, and it's already spurred lawsuits from dozens of angry car buyers. The first such suit in Dallas was filed Monday, though it surely won't be the last. All or most of these early cases revolve around a straightforward allegation of fraud. Customers bought Volkswagens based on certain representations the company made about the cars. Only later, after the scandal surfaced, did they discover that their cars were belching out as much as 35 times the allowable levels of smog-forming nitrogen oxides, which will undoubtedly harm the cars' resale values.

But what of all that extra smog, which doesn't harm car values but does damage human lungs, cause asthma attacks and kill people? Volkswagen has admitted to equipping many of its "clean diesel" models with "defeat devices," which are basically lines of code in the car's on-board computer that sense when the vehicles are undergoing emissions tests and temporarily lower NOx production by an order of magnitude. Researchers who discovered the trick found that the Volkswagen Jetta was actually emitting 15 to 35 times the NOx allowed by U.S. regulations. For the Passat, the range was five to 20 times the U.S. standard. About 11 million vehicles worldwide have the defeat devices, with about 482,000 in the U.S. The resulting smog has likely resulted in 100 or more deaths, scientists predict.

The Environmental Protection Agency has taken the lead on punishing VW for the smog. With a maximum federal penalty of $37,500 for each of the 482,000 offending cars, VW could be on the hook for as much as $18 billion in penalties for violating federal clean air rules, though the actual figure will probably be substantially lower. But the EPA isn't the only governmental entity with an interest in protecting air quality, nor is it the only governmental entity with an interest in wringing eye-popping penalties from a major international corporation that's already copped to breaking the law. There's also Harris County, which this week sued VW seeking $100 million in damages.

Unlike the claims being filed by consumers, Harris County's hinges on pollution. The Houston area, like Dallas-Fort Worth, has lousy air and is in perennial "nonattainment" of federal ozone standards. According to the suit:

Volkswagen violated Texas environmental laws in Harris County, Texas when it sold vehicles with fraudulently manipulated vehicle emissions control devices in an effort to circumvent emissions testing requirements. As a result, Volkswagen vehicles released Nitrogen Oxide (NOx) at levels that far exceed allowable standards. NOx is a contributor to ozone formation, for which Harris County is currently designated as non-attainment. Ozone — even at low levels — can cause health impacts, including chest pain, coughing, throat irritation and congestion. It can worsen bronchitis, emphysema and asthma, and particularly impacts children and older adults — the most sensitive of our society. Volkswagen's deceptive acts have undermined Harris County's efforts to improve air quality, reach attainment status and protect our citizens.

That's not to say that the VWs in question are a massive contributor to air-quality problems in the Houston area. According to the suit, there are somewhere north of 6,000 of the offending VWs driving around Harris County out of 3.5 million registered vehicles. Say the average VW in Harris County was punching 20 times above its weight in terms of NOx emissions. That would raise the share of on-road NOx emissions those VWs were responsible for from about 0.2 percent to about 4 percent. Vehicles in the Houston area are responsible for about a third of total NOx emissions. So, according to some very rough back-of-envelope math, the VWs in question would cause around a 1 percent increase in total NOx emissions. Hardly enough to turn air quality from good to bad, but not insignificant either. Their contribution to the air quality problems would be somewhat greater in DFW, since vehicles here account for a higher share — about half — of all NOx emissions.

But the magnitude of the VWs' contribution to air quality problems isn't really the point, says Terry O'Rourke, an attorney with the Harris County Attorney's Office. "Literally every contaminant counts," he says. "Literally. In this system because it is completely dependent on self-reporting by companies, it is impossible for the entire system to work without honest and fair reporting by the companies." To ensure honest and fair reporting, companies caught violating environmental laws must be seriously punished to deter similar behavior by others, O'Rourke says. The exact level of VW emissions is also irrelevant from a legal standpoint. The state law under which Harris County filed the suit — an anti-tampering statute in the Texas Administrative Code — considers only whether emission-control systems were altered or removed from a vehicle operated or sold in Texas.
Not that the suit against VW is completely high-minded. County Judge Ed Emmett told the Houston Chronicle that the county moved quickly to take legal action so they could get their noses in the trough early: "Volkswagen and everybody's already said this is going to be a big settlement. We do know that we have thousands of those vehicles here. Everybody knows there's going to be a whole lot of people — every county, every state, everybody's going to get involved. This just puts us in the line." By beating the Texas Attorney General's Office to the punch, Harris County will get to keep half the proceeds from the case rather than watching it all disappear into state coffers.

Dallas County has not moved to follow Harris County's lead as yet, though its case for damages would be equally strong. In large part, though, Dallas lacks the bureaucratic infrastructure that Houston has for going after major polluters. Harris County has a Pollution Control Services Department, which mostly keeps an eye on the petrochemical industry. And unlike in Dallas, where the district attorney's office handles both civil and criminal matters, Harris County has a standalone county attorney's office that often sues polluters. It's a point the office takes pride in. When I spoke to O'Rourke on Wednesday, he gave a 10-minute briefing on the history of the county's anti-pollution efforts and the philosophy behind it before he got to Volkswagen. "We are the sheriff; we are the marshal; it is our job. We enforce the law through civil process," he says.

"Historically, Harris County has been a really good environmental enforcer in that area," says Jim Schermbeck, founder of DFW environmental watchdog Downwinders at Risk. He likens the role of the Harris County Attorney's Office to that of an aggressive, environment-minded attorney general of a progressive state. Neil Carman, director of the Lone Star Sierra Club's clean air program, is less enthusiastic about the county attorney's anti-pollution efforts, lamenting that its lawsuits typically end in settlements with polluters, but he appreciates the effort to crack down on VW. "Any extra NOx ... is too much," he says, echoing O'Rourke.

Carman, though, is less concerned with the sins of a single car manufacturer than weaknesses in air-quality regulations and the emissions-testing regime. "I'm shocked this wasn't found 10 years ago," he says. "It shows how sloppy the system is." To calculate total NOx emissions, officials rely on car manufacturers' claims with little or no independent verification. Citing reports that other diesel cars are gaming emissions tests, he says that, at the very least, Texas and other states should begin tailpipe testing of diesel vehicles to see what's actually coming out, to say nothing of targeting emissions from dirty East Texas coal plants (a major factor in DFW's air-quality problems) and Houston-area chemical plants (a large component of Harris County's smog).

A court victory over VW, or a large settlement, won't fix air any quality problems, but the cash windfall certainly could help Harris County — and whatever state or local jurisdictions enter the legal fray behind it — offset VW's excess emissions.

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