VW Settlement: Proposed Environmental Mitigation Trust Agreement Filed with Court

September 11, 2017

On September 6th, the U.S. Department of Justice submitted a proposed Volkswagen (VW) Settlement Environmental Mitigation Trust Agreement to the U.S. District Court in Northern California. The proposed agreement includes revisions to the Environmental Mitigation Trust portion of the First and Second Partial Consent Decrees of the VW Settlement. The Trust Effective Date has not yet been set, and no substantive changes were made to the Beneficiary Allocations or Eligible Mitigation Actions outlined in the Environmental Mitigation Trust; however, several important procedural changes were made.

Below is a summary of relevant changes to the proposed State Environmental Mitigation Trust, as well as additional details on the pending Trust Effective Date.

Trust Effective Date: The proposed agreement was filed with the court on September 6, 2017. The Court has an opportunity to review and approve the proposed agreement. Within two weeks following the date that the proposed agreement (the “Order”) is entered by the Court, the Trustee and Settling Defendants shall execute and deliver to the United States the executed State Mitigation Trust Agreement and Indian Tribe Mitigation Trust Agreement, and the United States shall file the fully executed Trust Agreements with the Court. The Trust Effective Date for each Trust Agreement shall be the date that the fully executed Trust Agreements are filed with the Court.

Two Trust Agreements: the original Partial Consent Decree contemplated the formation of one trust to provide funds to Beneficiaries, which include the 50 States, Puerto Rico, the District of Columbia, and the federally-recognized Indian Tribes. The proposed agreement will create two separate trusts: (1) a State Mitigation Trust to serve the States, Puerto Rico, and the District of Columbia, and (2) an Indian Tribe Mitigation Trust to serve the Indian Tribe Beneficiaries.

Certification for Beneficiary Status Under Environmental Mitigation Trust Agreement: The proposed agreement includes several revisions to the Certification for Beneficiary Status. In addition, at the time of filing the Beneficiary Certification Form with the Court, the revised agreement requires Beneficiaries to provide a copy of the Certification Form to the Trustee in electronic format and by mail.

Beneficiary Mitigation Plan Timeline: The original Partial Consent Decree required Beneficiaries to submit a Beneficiary Mitigation Plan with the Trustee no later than 90 days after being deemed a Beneficiary. The proposed agreement requires Beneficiaries to submit a Beneficiary Mitigation Plan to the Trustee no later than 30 days prior to submitting its first funding request. Although the Beneficiaries must provide the Trustee with any updates to their Beneficiary Mitigation Plan, the Trustee has no duty to monitor or supervise any Beneficiary’s compliance with its Beneficiary Mitigation Plan.

Beneficiary Eligible Mitigation Action Certification Form: The proposed agreement includes a Beneficiary Eligible Mitigation Action Certification form, which Beneficiaries must submit when requesting funding for an Eligible Mitigation Action. Each Beneficiary must prepare a detailed budget, certify that all vendors are selected in accordance with law, identify the governmental entity responsible to audit expenditures, and commit to making all supporting documentation publicly available.

Discretionary Trust vs. Directed Trust: The original Partial Consent Decree provided for the establishment of a discretionary trust in which a trustee would hire outside experts to review the Beneficiaries’ funding requests and to evaluate whether the requests constituted an approvable Environmental Mitigation Action. The proposed agreement will structure the State Mitigation Trust and Indian Tribe Mitigation Trust as a directed trust in which each Beneficiary submits a funding request certifying that its request meets the requirements regarding Eligible Mitigation Actions. The Trustee is permitted to rely on a Beneficiary’s certification with no further duty of inquiry.

Secure Method of Internet-Based Communication: In addition to establishing a public-facing website, the revised agreement requires the Trustee to establish and maintain a secure method of internet-based communications for the use of the Trustee and the Beneficiaries that will: enable each Beneficiary to deliver the required documentation under the State Trust Agreement in an electronic format; enable secure communications between the Trustee and each Beneficiary; and provide each Beneficiary with access to its own document base.

Source: NASEO