U.S. judge rejects Wyoming's environmental lawsuit against Volkswagen

By David Shepardson

(Reuters) - A federal judge in California on Thursday rejected a lawsuit by Wyoming potentially seeking more than $1 billion in additional penalties for environmental damages linked by the state to Volkswagen AG's excess diesel emissions scandal.

The ruling is a victory for the world's largest automaker by sales and could help prevent environmental claims from about a dozen other states and some counties in Texas from going forward.

VW said in a statement it was pleased with the ruling.

U.S. District Judge Charles Breyer said Wyoming's environmental claims were prohibited by the Clean Air Act.

"Volkswagen has indeed been held responsible. But because Volkswagen's conduct took place during manufacturing, Congress determined that EPA, not the 50 States, was best situated to regulate it," Breyer wrote, referring to settlements VW has already reached with the U.S. Environmental Protection Agency.

The German automaker said the court recognised that "Wyoming and the other states should not be allowed to hold Volkswagen responsible for the same conduct" for which it had already faced federal sanctions.

VW previously agreed to spend $2.9 billion to offset excess pollution from diesel vehicles. "Volkswagen now intends to seek dismissal of all nine similar state actions, and anticipates filing dismissal motions against the states of Illinois, Minnesota and Ohio today," the company said.

Volkswagen has agreed to spend up to $25 billion to address claims from U.S. owners, environmental regulators, states and dealers, and offered to buy back about 500,000 polluting U.S. vehicles. The company pleaded guilty in March to having intentionally cheated on emissions tests for vehicles it sold since 2009.

VW lawyer Robert Giuffra told Breyer in a court hearing earlier this month that Wyoming could have sought more than $1.45 billion in penalties alone.

Volkswagen previously settled with Wyoming and most other states over consumer claims for more than $600 million but not over environmental matters.

Giuffra said earlier that allowing Wyoming to bring its own lawsuit would be "unprecedented" and if the state won "it would make it impossible in the future for auto manufacturers to actually enter into the kinds of global settlements that Volkswagen did."

In July, U.S. regulators approved a fix for 326,000 older 2.0-liter Volkswagen diesel cars. The fix includes hardware and software upgrades, including replacing an emissions catalyst.

(Reporting by David Shepardson; Editing by Tom Brown)