Judge questions Volkswagen's defence in landmark case over diesel damages

KARLSRUHE, Germany (Reuters) - A German federal court judge cast doubt on Volkswagen's <VOWG_p.DE> reasoning after the carmaker urged the court to dismiss a claim for damages brought by an owner of a diesel powered VW Sharan family van.

Tuesday's proceedings were the first time that Germany's Federal Court of Justice, or Bundesgerichtshof, heard arguments from a plaintiff seeking damages from VW because it had sold vehicles with manipulated diesel engines.

Any ruling in this landmark case will serve as a guideline for other cases.

In the United States, authorities banned VW cars from roads after the Environmental Protection Agency discovered that engine management software had been installed to mask excessive levels of pollution, triggering claims for compensation.

Volkswagen has argued that because European authorities stopped short of taking VW cars off the road, compensation claims from customers were without merit.

European authorities insisted that Volkswagen update its engine management software to ensure that anti-pollution filters are activated and fined Volkswagen for fraud and administrative lapses.

On Tuesday, presiding judge Stephan Seiters said several arguments brought forward by Volkswagen were not applicable and agreed that the sale of a vehicle with a manipulated diesel engine does provide sufficient grounds for a damages claim.

The Volkswagen customer who sued the company had already been awarded 26,000 euros in damages by a lower court. He sought even higher damages since he spent 31,500 euros on the car.

The court held that the car had lost in value since the customer was using it. VW has asked the court to dismiss the claim altogether.

"Unlike the preliminary views of the Federal Court, we do not share the view that the purchase of a vehicle gives grounds for damages," Volkswagen said in a statement.

Because cars in Europe never lost their road worthiness certification, Volkswagen asked for the damages claims to be dismissed.

Even before installing new engine management software, Volkswagen's cars had emitted lower levels of pollution than many competing products, VW said.

"Where the damages are supposed to have occurred is not apparent to Volkswagen," the carmaker said.

A ruling will be made at a later point in time, the judge said.

(Reporting by Hans Seidenstuecker; writing by Thomas Seythal and Edward Taylor; editing by Maria Sheahan)