A federal appeals court has refused to approve a class action lawsuit settlement alleging Volkswagen concealed defective sunroofs in some VW and Audi models, but has proposed a fix that could provide equal benefits to all Class Members.

According to the Volkswagen leaky sunroof class action lawsuit, roughly 3 million Volkswagen and Audi vehicles from the 1997 to 2009 model years had defective sunroofs that allowed rainwater to leak inside when they were clogged by plant debris and pollen.

Among the vehicles affected by the class action settlement were the Volkswagen Golf, Jetta, New Beetle, Passat and Touareg, and the Audi A4, A6 and A8.

The class action lawsuit also accused Volkswagen of failing to disclose that regular cleaning and maintenance could prevent the problem, because doing so would acknowledge a design defect.

On August 3, 2010, a federal court certified the owner class and approved the class action lawsuit settlement, which provided for repairs and improved disclosures. The judge also created an $8 million fund that would have reimbursed one owner subgroup for repairs, but required another subgroup to wait.

On May 31, 2012, the 3rd U.S. Circuit Court of Appeals in Philadelphia rejected the class action settlement and certification, ruling that allowing the Plaintiffs to sue together was improper because the settlement treated the second owner subgroup differently from the first subgroup. The appeals court also noted in its decision that the class representatives came from the first subgroup, causing a conflict of interest.

"There is a fundamental intra-class conflict," Judge D. Brooks Smith wrote for a three-judge panel of the 3rd Circuit. "Representative Plaintiffs simply cannot adequately represent the interests of the entire class."

Smith proposed two solutions: 1) allowing all Plaintiffs to submit claims for reimbursement; or 2) dividing the Plaintiffs into two subclasses that could be certified separately, to address the problem

A lawyer for the Plaintiffs said the proposal was an easy fix and “in all likelihood will be addressed promptly,” adding that the class action settlement is expected to go forward.

The claims filing period for the Volkswagen sunroof class action lawsuit settlement has passed. You can find more information on the proposed settlement and the case at www.WaterIngressSettlement.com.