The court has approved a settlement agreement in a class action lawsuit against Mercedes-Benz and Colmobil, the Israeli importer, regarding allegations of installing a component that falsifies pollution emission data during tests. The settlement agreement has received the force of a court ruling, and under its terms, the companies will provide free software updates for eligible vehicles, aimed at improving emission control systems.

The lawsuit, filed in February 2019 (Case No. 56447-02-19), alleged that Mercedes and the importer installed a component in vehicles that falsifies pollution emission data in official tests. According to the claims, the alleged falsification led to increased air pollution, higher fuel consumption, reduced vehicle value, and distress for vehicle owners.

In its decision, the court determined that despite the case suffering from significant weaknesses, the settlement agreement is fair and reasonable under the circumstances. Among the weaknesses cited by the court: reliance primarily on newspaper articles and sources inadmissible as evidence, the absence of technical expert opinions in the field of automotive engineering, and the lack of direct evidence for the existence of the falsifying component in Mercedes models imported to Israel.

A significant fact that apparently influenced the court's decision is that Mercedes and Colmobil began providing the software updates as early as September 2018, approximately five months before the lawsuit was filed. In light of this, the court determined that the main contribution of the lawsuit and settlement agreement was in establishing a notification mechanism for consumers through SMS messages, rather than in the actual provision of the benefit.

The benefit to be awarded under the settlement agreement includes free software updates for eligible vehicles, similar to those offered in Germany, to improve emission control systems. The court recognized the value of the settlement agreement, which ensures that software updates will continue to be provided at no cost for a defined period and regulates the manner in which notifications are given to consumers.

In an exceptional decision, the court decided to significantly reduce the attorneys' fees from 780,000 NIS to 500,000 NIS, and the reward to the petitioner from 20,000 NIS to 10,000 NIS. The central reason for the reduction, according to the court, is the weakness of the cause of action and the fact that the benefit was actually granted even before the lawsuit was filed. The difference of 290,000 NIS was transferred to a fund for distributing monies awarded as relief in class actions.

The court emphasized that this is a "balance of powers" – on one hand, a cause of action suffering from significant weaknesses, and on the other hand, a benefit of high value that is difficult to assess. Given these circumstances, the court preferred to end the dispute with a settlement agreement but expressed the weakness of the lawsuit by reducing the fees and reward.

There are complex and multifaceted issues regarding the interactions between class action proceedings and voluntary initiatives taken by corporations prior to filing legal proceedings. In the circumstances of this case, the fact that Mercedes and Colmobil had already begun implementing software updates before the lawsuit was filed was a decisive factor in the court's considerations and significantly affected the determination of the reward rate awarded to the representative plaintiff and their representatives.

According to the agreement, eligible vehicle owners will receive SMS messages inviting them to visit authorized service centers to perform the software update at no cost. The update is intended to improve the vehicle's emission control systems, thereby reducing pollutant emissions and improving vehicle performance.

The court's decision to approve the settlement agreement, despite the significant weaknesses in the lawsuit, reflects a delicate balance between the interest in protecting the public from allegedly improper practices by car manufacturers and the recognition that when companies take steps to rectify the problem on their own initiative, this should be taken into account.

Nevertheless, the decision to approve the agreement despite these weaknesses suggests a recognition of the importance of the issue and the potential positive impact of the agreement on environmental quality and the welfare of vehicle owners, even if the legal cause of action was not strong enough.

Mercedes vehicle owners eligible for the benefit are expected to soon receive messages inviting them to perform the software update. Given that this is an update that has already been implemented since September 2018, it can be assumed that some vehicle owners have already performed it. However, the agreement ensures that all eligible vehicle owners will receive an organized notification and the opportunity to perform the update at no cost.

In general, the case highlights the importance of class actions as a tool for consumer protection, even when the lawsuit itself suffers from evidentiary weaknesses. The approved agreement, despite its limitations, provides a clear framework for informing consumers and providing the benefit, and as such, it achieves at least some of the objectives of the class action.

In its decision, the court also emphasized the importance of balancing between different interests: on one hand, ensuring that consumers receive a significant benefit, and on the other hand, avoiding a situation where evidentially weak claims receive too high a reward, which could encourage the filing of frivolous lawsuits.

In a broader view, the case highlights the necessity of full transparency from vehicle manufacturers regarding the environmental performance of their products and the importance of effective regulatory oversight in this area. The issue raises questions about the need to strengthen mechanisms for proving such claims in the Israeli legal landscape, particularly in making technical expertise accessible to potential plaintiffs.

The settlement agreement in the lawsuit filed against Mercedes and Colmobil provides a significant benefit to eligible vehicle owners, despite the evidentiary weaknesses inherent in the lawsuit itself.

The decision to approve the agreement, while reducing the fees and reward, reflects a delicate balance between conflicting interests and the complexity inherent in class actions in the transportation sector. Mercedes vehicle owners who are eligible for the benefit will soon receive a notification inviting them to implement the software update at no charge, within an arrangement that ensures transparency and enhanced accessibility for improving vehicle performance and reducing its ecological footprint.

This is a ruling given by the District Court in Israel.

Photo of Mercedes-Benz