Toyota in U.S. Court Over Possible Class Action Suit

March 24, 2010
The case could cost Toyota $40 billion or more and does not take into account motorists who have been injured.

Toyota goes to court for the first time here on March 24 when a panel will decide whether thousands of angry owners can bring one multi-billion-dollar suit against the Japanese giant.

A group of law firms across 20 states, dubbed the Toyota Action Consortium, is suing to recoup losses in the resale value of Toyota vehicles due to deaths and injuries caused by accelerator pedal malfunctions.

The case could cost Toyota $40 billion or more and does not take into account motorists who have been injured, said Tim Howard, a Northeastern University law professor who is leading the charge.

It is expected to be the largest legal battle of its kind against a single automaker.

"This is the worst malfeasance in the car industry since its inception in the 1890s," Howard said. "This is like Tiger Woods destroying his reputation."

The automaker once enjoyed a stellar reputation as the world's top global auto seller and ranked among Forbes' leading companies. But in recent months, Toyota has had to recall more than eight million vehicles worldwide due to problems with sudden acceleration, which have led to 58 deaths.

"This is a problem everywhere for Toyota," Howard said. "People have lost thousands in value for doing nothing that was their fault."

In addition to a myriad of class action lawsuits over plummeting car values, the attorneys' consortium has added new charges of racketeering under a federal law that was enacted in 1970 to bring down the mafia.

In civil litigation, the law can be used against an organization that knowingly conspired to commit fraud, and the consortium is alleging that Toyota knew their cars were faulty, but sold them anyway.

"Since 2002, Toyota has made more than $600 billion in revenues and $25 billion in operating profits from North American operations," the lawsuit states.

"Unlike any other automobile manufacturers operating in the United States, these sales and profits were built on a reputation for quality, reliability and resale value. But this reputation was an illusion: in reality, Toyota sales in recent years were actually based on a willful pattern of deceptive trade practices, fraud, breach of express and implied warranty, and racketeering."

The panel of federal judges hearing the case will make no determination about merit. Instead, their role will be to decide whether the mushrooming cases can be heard in one specific courthouse. The judges will not render their decision until about a week later, said Jeffrey Luthi, clerk of the panel.

The attorneys claim the faulty pedal design was initiated in 2002 and to date, Toyota has done nothing to fix the problem. Toyota first blamed the problem on faulty floor mats, then added shims to the accelerator pedal as a solution. Attorneys claim the problem still persists.

"We will get to the bottom of what the problem is and how to fix it," said Dennis Canty, a California attorney who is part of the consortium. "Neither Toyota or the National Highway Traffic Safety Administration has been able to do that."

Copyright Agence France-Presse, 2010

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