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STRATFORD, CT – Volkswagen-owned electric vehicle startup Scout Motors has been hit with a class action lawsuit that claims its direct-to-consumer sales approach is “a blatant breach of its contract with the dealers” that sell VWs.
The lawsuit was filed Tuesday on behalf of Curran Volkswagen of Stratford and Sunrise Imports LLC of New York (which does business as Volkswagen of West Islip) in the U.S. District Court for the Eastern District of Virginia.
It accuses the automaker of “attempting to skirt its legal obligations by selling its new Scout-brand electric vehicles directly to consumers,” according to a press release issued by the Hagens Berman law firm which represents to the two dealers.
“To avoid these obligations, VW formed separate companies (defendants Scout Motors, Inc. and Scout Motor Sales LLC) to effectively act as shell corporations for distribution. In truth, Scout is simply an offshoot of Volkswagen, and Volkswagen’s decision to sell the Scout EVs is a blatant breach of its contract with the dealers,” the lawsuit states.
Reservations Already Top 150,000
Scout Motors plans to begin producing vehicles in 2027. It will offer a Traveler SUV model and a Terra pickup model starting at less than $60,000. The company website enables visitors to reserve vehicles and the lawsuit reports that more than 150,000 reservations have already been placed online, effectively bypassing dealers.
“VW dealerships are accordingly being deprived of their right and ability to sell these cutting-edge vehicles, at significant financial cost to the dealers,” the lawsuit states.
“We believe Volkswagen was fully aware of its legal responsibilities to dealership owners when it chose to sell Scout vehicles directly to consumers online,” said Steve W. Berman, managing partner and co-founder of Hagens Berman.
“It appears that VW has violated its own contract with its dealerships, the very businesses that serve its brand, and we intend to uphold the contractual rights of these small businesses.”
Curran Volkswagen’s participation is noteworthy as under Connecticut law, vehicle manufacturers are prevented from selling their products directly to customers. The law requires that new vehicles must be sold through franchised and licensed dealers.
(Photos courtesy of Scout Motors.)
