When the Volkwagen scandal about manipulated emissions readings first hit the headlines in September 2015, Jan-Eike Andresen and his partner Sven Bode thought: “Once again it’s the consumers who are the fall guys,” Mr. Andresen remembers. And their next thought was: “Can we do something about it?”
One year on, the two entrepreneurs had a plan in place. They launched Myright in the summer of 2016 together with a third partner, Jens Hopfer. This week, the legal start-up brought its second lawsuit for damages against Volkswagen.
“On their own, consumers have no chance against a company like VW,” Mr. Andresen, a lawyer, told Handelsblatt.
While VW will pay up to $10 billion to around 475,000 U.S. car owners affected by the scandal, it has yet to reach a deal with European consumers. That’s what Myright hopes to help change: The partners say they’re already representing more than 100,000 automobile owners and their vehicles in Germany.
There’s one major catch. In Germany, unlike the United States, there is no such thing as a class-action lawsuit in consumer law. So Myright is having to bring successive cases to court. It’s using the services of the renowned U.S. litigation specialist law firm Hausfeld, which has taken the lead in pushing for European compensation from VW, to do it. If VW doesn’t relent and agree to settle, Myright will have to bring every single case individually.
“We live in a utopia, in a democracy where all humans are equal. But it simply isn’t true that the law means justice for everyone.”
There likely won’t be any court decisions for a long time, but the very size of the startup’s adversary – VW became the world’s largest carmaker in 2016 – means that getting a large number of customers on its side is critical. That’s actually an important part of the business model of Myright.
It works like this: Anyone who believes they are driving a diesel automobile, which could have been manipulated by VW, can have that tested by Myright via an online search mask. If the person then wants to proceed against VW, he can commission the legal service provider – also online and assign all claims by signature to Myright.
For Myright, the more plaintiffs, the better for its budding business model. The larger the number of similar or even identical cases, the bigger the pressure on the defendant. In Germany alone, Myright can draw from a pool of some 2.8 million consumers that own VW diesel cars affected by the scandal, out of a total of some 11 million cars worldwide.
Myright’s team members each bring different skills to the game: 35-year-old Jan-Eike Andresen is the source of “the team‘s chaos and creativity,” in the lawyer’s own words. Jens Hopfer, 37 years old, is a computer scientist who does the programming.
“He is not a nerd, but writing huge volumes of data and programs is his passion,” according to his 43-year-old colleague Sven Bode.
Mr. Bode is the mediator between the two, an economist by trade and “quite at home in both worlds,” he says.
Mr. Bode and Mr. Andresen already have some business experience: Together they launched the start-up Flightright, a similar concept as their new firm. Flight passengers who want to sue for damages because of cancellations or delays can do so via the company’s portal, where they can also cede their rights. If the action is successful, Flightright receives a quarter of the sum won by litigation. According to Flightright, €100 million have been generated in litigation.
Now, with Myright, the partners want to earn good money by representing a broader cross-section of consumers. In the case of VW, their starting point has been the fact that the company has been unwilling to pay financial compensation to their customers in Europe, even as it reached two major settlements with customers in the United States.
“And VW will continue in that vein, hoping that sooner or later consumers will lose heart, or not even try,” Mr. Andresen said.
VW duly announced again on Monday that it considers the action by Myright to be unjustified, because no damage was caused. The company also argues that the software installed in diesel engines, which reduced pollution emissions of cars during testing but increased them while driving, was not actually illegal in Europe as it was in the United States.
Myright wants to take more cases to court with the help of Hausfeld’s lawyers. Its first lawsuit was brought to court in Braunschweig, the legal district in Lower Saxony that includes VW’s headquarters. Their argument: The VW diesel cars should never have been allowed on the road. Whether or not the software was legal, the operating permit for the cars was clearly not valid, since it was based on emissions levels that were false. Now the lawyers are demanding that Volkswagen take the vehicles back and reimburse the full purchase price. There is a similar case before a court in Munich.
According to Mr. Andresen, the practical side of consumer law today looks like this: Anyone who feels badly treated can take legal action by appointing a lawyer. But, again unlike in the United States, the lawyer will only become active if he is paid in advance. “So the financial risk lies with the consumer.” That’s reason enough for many consumers to not even go to a lawyer in the first place.
Mr. Andresen wants to change the law. And that is what made him leave a big law firm and get involved in creating legal startups, first with Flightright and then with Myright.
“I hadn’t realized how ineffective legal advice is,” he said. “We live in a utopia, in a democracy where all humans are equal.” But it “simply isn’t true that the law means justice for everyone.”
According to Mr. Andresen, the emissions scandal at Volkswagen is a good example, because the situation is so complicated for individual consumers. And that is exactly where Myright comes in. In the interview, Mr. Andresen was steadily talking himself into a rage – partly intentionally perhaps because it is about his business model. “The lack of justice is what drives me.”
Sven Bode calls the start-up a “legal protection insurance in reverse” that uses a lot of different tools than your typical law firm. It’s not just that much of it is online, the method of payment is also different: 35 percent of the plaintiff‘s money goes to Myright – but only if the carmaker Volkswagen pays up.
That’s similar to the typical model seen in the United States, and means the financial risk for consumers is low. It’s part of the reason lawsuits are more common in the United States – coupled with the fact that higher penalties for damages make individual lawsuits worthwhile. Myright’s model, by pooling claims, could make the approach worthwhile in Europe too.
Up to now, Myright has financed itself from the partners’ assets. Money won’t come in until they actually win a case. The partner‘s pass on the risks resulting from legal actions directly to the litigation funding specialists Burford Capital.
Germany’s consumer advice center wasn’t prepared to give a recommendation for Myright when contacted by Handelsblatt. But it’s fair to say that, in the case of VW, the only alternative for the moment is an individual legal action: And then the financial risk increases.
“Clients will have to decide whether 35 percent is too much,” said Mr. Bode. “We want to work cost-efficiently. Nobody should forget: We only get 29 percent, and the rest is Value Added Tax for the state.”
If things go well, Mr. Bode and Mr. Andresen believe that VW is just the beginning: They say there are many other situations where consumers don’t get what they are entitled to.
“What about energy, rent or saving for old age?” asked Mr. Bode. Perhaps one of those will be their next project. “After all, we have the recipe,” he added.
But for the time being, however, the partners have their hands full. Isn‘t Volkswagen just a bit too big to pick a fight with?
“Yes, just a bit,” said Mr. Anderson, grinning at his partners. “Nobody messes with VW,” he added. ”That makes it just the right thing for us.”
Maike Freund is an editor at Handelsblatt’s politics desk. To contact the author: firstname.lastname@example.org