U.S. Lawyers Seek Billions from Toyota for Vehicle Value Loss

March 11, 2010
Lawyers hope to prove that Toyota deliberately misled its customers about the safety of its vehicles and should be convicted of racketeering and fraud charges

To compensate the millions of people who saw the value of their vehicles drop in the wake of a series of mass safety recalls, U.S. lawyers are seeking billions of dollars from Toyota.

"This will be the largest automobile class action in history," said attorney Tim Howard, who hopes to gain court approval to include the owners of eight to ten million Toyotas in a nationwide class action lawsuit.

Individual payouts to Toyota owners could potentially come in at around $500 to $1,000, Howard said. He hopes to triple that award by proving that Toyota deliberately misled its customers about the safety of its vehicles and should be convicted of racketeering and fraud charges.

"Toyota sacrificed innocent, trusting lives for profit and hubris," he wrote in an amended civil complaint filed on March 10 in a Florida court. The complaint accuses Toyota of concealing information about problems with sudden, unintended acceleration it has known about since 2002 and lying to the public about the true cause in order to "minimize the effects on future sales and leases and to minimize the recalls' effects on their profits."

The final tab could potentially top $30 billion, said Howard, who teaches law at Northeastern University and has taken on tobacco companies and soft drink makers in high-profile lawsuits.

Howard said he is aware of 88 other class action suits that have been filed seeking compensation for economic damages. He is working with around 30 law firms in 24 states and hopes to consolidate those suits into a single, nationwide suit handled at the federal level. A key hearing is set for March 25 in San Diego where a panel of judges will hear arguments as to whether these cases should be consolidated.

The dozens of personal injury lawsuits also filed in U.S. courts will likely be handled individually and payouts in such cases usually come in at less than a million dollars, although they can occasionally top $20 million.

Toyota, which declined several requests for comments about the case, has insisted that rigorous testing found no defects with its electrical controls and that the mechanical repairs being made to six million vehicles recalled in the United States are sufficient.

The economic damages "will be easy to prove" given that resale values have dropped significantly in the wake of the recall, said Tom Baker, a law professor at the University of Pennsylvania who is not involved in the case. "One wrinkle that I can see that would reduce damages dramatically would be if Toyota figures out what the problem is and is able to isolate it to particular models/years, then the number of vehicles will be much less."

Getting the case certified as a nationwide class action could also be difficult, said Catherine Sharkey, a professor at the New York University School of Law.

But ultimately, the highest cost to Toyota could come in the court of public opinion where the standard of proof is substantially lower. "The reputational hit that Toyota is facing now in terms of what's happening to its prospects for future sales, that's giving it an enormous incentive to try to solve this problem as expeditiously as possible more than any threat of any litigation combined," Sharkey said.

Toyota's sales took a significant hit from the recall mess but they shot up this month after it launched series of incentives, including zero percent financing. "There's an awful lot of consumers that seem to be willing to give them the benefit of the doubt because the cars are on sale," said Jeremy Anwyl, president of automotive website Edmunds.com

Toyota's reputation may not be able to sustain months or years of bad headlines, however, especially if they include major payouts in product liability cases, he said. "It's hard to say what the medium term impact is going to be because I don't know when we can get to the point where you can say yes they're on the mend," he said. "Can we say a year from now we're not going to be talking about this?"

Copyright Agence France-Presse, 2010

See Also
What Went Wrong at Toyota?
Experts: Don't Blame Lean Manufacturing for Toyota's Problems
All Toyota Brake Recall Articles

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