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AToyota dealership sign glows over a car lot in Tustin, Calif.

Chris Carlson, Associated Press

Toyota’s recalls over safety defects will cost it more than $1B

  • Article by: BILL VLASIC
  • New York Times
  • December 26, 2012 - 10:55 PM

DETROIT, MICH - Toyota Motor agreed on Wednesday to pay more than $1 billion to settle a class-action lawsuit related to issues of unintended acceleration in its vehicles.

The proposed settlement, filed in U.S. District Court in California, would be one of the largest of its type in automotive history.

If the agreement is approved by Judge James Selna, Toyota would make cash payments for the loss of value on vehicles affected by multiple recalls and would install special safety features on up to 3.2 million cars.

While there are still individual personal injury and wrongful death lawsuits pending against Toyota, in addition to an unfair business practice case brought by the attorneys general of 28 states, the class-action case was the largest legal action related to economic losses by vehicle owners.

The suit was filed in 2010 after numerous complaints to federal regulators that Toyota vehicles were accelerating suddenly without warning and causing accidents and injuries.

Toyota has recalled more than 8 million vehicles in the United States for problems related to floor mats that could become entangled with accelerator pedals or pedals that could stick with the throttle open.

But the class-action case contended that Toyota's electronics systems were at fault. After a long investigation, government officials concluded last year that there was no evidence that faulty electronics contributed to the acceleration issues. But a subsequent review of that inquiry by a branch of the National Academy of Sciences found that federal regulators had lacked the expertise to monitor electronic controls in automobiles.

The company has been fined more than $60 million by the National Highway Traffic Safety Administration for failing to inform regulators of internal information about the sudden acceleration, which the company has largely attributed to driver error.

Making a comeback

The recalls mushroomed into broader problems for Toyota, which had long enjoyed a pristine reputation for quality, safety and reliability, and the class-action suit was a lingering obstacle to its steady comeback from the acceleration issues.

"This agreement marks a significant step forward for our company, one that will enable us to put more of our energy, time and resources into Toyota's central focus: making the best vehicles we can for our customers," said Christopher Reynolds, Toyota's chief legal officer in the United States.

Under the proposed settlement, Toyota agreed to create a fund of $250 million to pay claims to former owners of cars affected by the acceleration recalls. The company also agreed to install so-called brake override systems on cars whose pedals could stick or become trapped in floor mats. The company said it had already installed the systems on 2.6 million vehicles but that an additional 550,000 cars had not received the equipment.

In addition, the settlement provides a customer-support program for more than 16 million current Toyota owners.

Toyota has also agreed to contribute $30 million to finance automotive safety research.

Moving beyond scandal

The lead law firm for the plaintiffs estimated that the overall settlement could total $1.2 billion to $1.4 billion.

"We are pleased that Toyota has agreed to a settlement that was both extraordinarily hard-fought and is exceptionally far-reaching," said Steve Berman, the lawyer who led the settlement talks for the plaintiffs.

The amount a Toyota owner may receive for economic loss will be determined by a settlement administrator.

In its statement, Toyota said it would take a one-time charge of $1.1 billion against earnings to cover the costs of the class-action case as well as possible costs to resolve a consumer-protection lawsuit filed in California and the unfair-business-practices case.

One legal expert said the settlement appeared large but may be part of Toyota's longer-term strategy to move beyond the acceleration scandal.

"The class is very large, so each plaintiff will not receive very much," said Carl Tobias, a law professor at the University of Richmond. "The timing of this and the huge fine Toyota recently agreed to pay suggest Toyota may be concerned about the personal injury cases, in which several trials are set for this spring."

Koua Fong Lee, the St. Paul man who was imprisoned for more than two years after a 2006 fatal crash involving his Toyota Camry, won't be affected by the settlement, his attorney, Brent Schafer, said.

Lee's car accelerated instead of slowing down as he got off a highway exit ramp and slammed into the back of another vehicle stopped at a red light. Three people died. Lee was convicted of criminal vehicular homicide and sentenced to prison, but after a massive Toyota recall and a dozen people testified that they had experienced runaway engines or sudden acceleration in their Toyotas, he was freed and his charges were dismissed. Lee sued Toyota and that case is still pending, Schafer said.

The consumer group Safety Research & Strategies has said that 20 cases of sudden unintended acceleration have happened in Minnesota, resulting in six crashes and several injuries.

Star Tribune staff writer Nicole Norfleet contributed to this article.

SETTLEMENT DETAILS

• Toyota, which had long enjoyed a pristine safety reputation, will make cash payments for the loss of value on vehicles affected by multiple recalls.

• It also will install special safety features on up to 3.2 million cars.

© 2014 Star Tribune