Two dealers filed a class-action lawsuit against Scout Motors, Scout Motors Sales LLC, Volkswagen Group of America, and Volkswagen AG on March 3 in the U.S. District Court for the Eastern District of Virginia.
The details: The filing automatically covers every Volkswagen dealer in the U.S., with no action needed on their part, as well as the two lead plaintiffs.
Both plaintiffs are legally referred to as the class representatives, according to attorney Leonard Bellavia, of Bellavia Cohen P.C., one of the plaintiffs’ attorneys.
Sunrise Imports, which does business as Volkswagen of West Islip in New York, and Curran Volkswagen, a Connecticut dealership, are the main plaintiffs.
A Scout Motors spokesperson told CDG News via email that the company does not comment on pending or active litigation.
Volkswagen did not yet respond to the emailed request for comment.
The plaintiffs say in the court filing that the Scout model violates the automaker’s dealer agreements and lists these complaints in the suit:
Breach of contract (Against all four defendants.)
Conspiracy to injure a business relationship (Against all four defendants.)
And interfering with a contract (Against only the Scout defendants.)
Between the lines: The class-action lawsuit also notes that Volkswagen “has a statutory and contractual obligation to sell its automobiles directly to VW-authorized dealerships, who in turn sell the vehicles to consumers.”
“...VW is trying to skirt its legal obligations by selling its new electric vehicles, known as Scout vehicles, directly to consumers,” the filing states.
Additionally, it points out that Scout has already collected $15 million in “reservation” fees from customers wanting to buy a Scout vehicle, all bypassing the dealer network. (That’s $100 from about 150,000 customers).
As written in the filing: “Not only are the dealers losing their opportunity to collect $100 from every purchaser and make a profit from the vehicle’s sale, they are also injured by lost opportunities to finance, service, and repair the vehicles, and to cross-sale these and other VW vehicles, both now and in the future.”
Those related damages are called cascading damages, Bellavia explained.
Because of this: Plaintiffs are seeking a jury trial, monetary damages, legal fees, as well as an injunction against Scout to stop it from selling vehicles directly to consumers.
Bellavia said it’s too early in the case to name a specific monetary figure, but estimates it could add up to billions of dollars.
Hagens Berman Sobol Shapiro LLP, a prominent class-action law firm that successfully sued Volkswagen before, securing a nearly $15 billion settlement for consumers, is also representing the plaintiffs.
For context: Back in October 2024, Volkswagen relaunched Scout Motors as an independent company to produce Terra, an electric pickup truck, and Traveler, an electric SUV, with the intention of selling directly to consumers.
Since then, at least two other lawsuits have been filed against some or all of the defendants, including in Florida and California.
The California case was filed by the state’s dealer association and does not include specific dealers. It does, however, seek a ruling stopping Scout from bypassing the dealer network.
In Florida, meanwhile, the case is backed by about 30 dealers, including some that sell Audi, and seeks similar remedies to the class-action suit.
“It's very difficult to get dealers to sue their manufacturers,” Attorney Leonard Bellavia told CDG News. “Even though they know they're being wronged, they don't want to go out front and center and incur a lot of legal fees and fight the factory.”
Leonard Bellavia
In fact, he said the manufacturers know and count on that.
“I think that's why Volkswagen went down this road,” Bellavia said. “I think they just feel that they can violate the law with impunity, because they know that dealers are reluctant to sue them.”
From Scout: Although Scout Motors couldn’t speak on the suit, the spokesman sent a collection of past statements about the group:
“...While Scout Motors and Volkswagen Group of America, Inc. are both members of the Volkswagen Group, the two companies share no connection with respect to management and business decisions.
…Since its inception, Scout Motors and Volkswagen Group of America have both clearly and publicly stated that Scout Motors exists and operates independently of Volkswagen Group of America and its dealers, just as Scout Motors exists independently of all other manufacturers and their respective dealers.
…Scout Motors does not have franchised dealers, now or in the past. Scout vehicles have never been sold through any brand, including the Volkswagen and Audi brands. In the future, Scout Motors will operate an independent and exclusive network of retail locations…”
Strength in numbers: A class action lawsuit is “just what the doctor ordered” for this case, Bellavia said, because it allows the dealers to act as one body, mostly unnamed, and costs nothing for the dealers, the usual speed bumps that may stall a dealer from taking legal action.
Bellavia noted that attorney fees will be included in the damages sought, meaning they’ll be paid by the defendants if the plaintiffs win.
He also said that he may seek a few more named dealers to join the suit to bolster their numbers, along with Fred Ippolito, who owns Sunrise Imports, and Chris Curran, who owns Curran VW.
Dealers can opt-out if they wish, but would need to contact the attorneys.
Until then, no action is needed. If the plaintiffs succeed, correspondence will be sent to dealers to share their information.
The case was filed in Virginia, where the three American-based defendants have offices.
Bottom line: Bellavia said a case like this ultimately affects all dealers, and that other manufacturers will be watching to see what happens.
“It's to kind of set the bar and let manufacturers know,” Bellavia said. “...It will let manufacturers know that dealers are not helpless anymore…”
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