International auto giant Toyota Motors Corp. continues to deal with accusations that it concealed its knowledge of problems that caused sudden unintended acceleration in certain vehicles and resulted in injuries and deaths. In the past year, Toyota paid a $1.2 billion fine following a federal criminal investigation, faced plaintiffs in multidistrict litigation, and begun making settlement payments to claimants.
The federal government and consumers allege Toyota defrauded car buyers when it didn’t disclose the problems with its Toyota, Lexus, and Scion vehicles behind incidents of sudden unintended acceleration. They say the problems stemmed from the installation of incompatible floor mats that trapped the vehicles’ gas pedals, as well as “sticky” gas pedals becoming stuck in a partially depressed position. Some drivers and passengers were injured or killed in the ensuing accidents.
U.S. Attorney General Eric H. Holder Jr. announced on March 19, 2014 that Toyota agreed to pay $1.2 billion to settle a four-year criminal investigation, which he described as “the largest penalty of its kind ever imposed on an automotive company.”
Holder pointed out that automobile manufacturers are obligated to promptly fix safety issues and tell the truth about the scope of the problems. A Reuters story published the same day speculated that the deal could be a model for how the federal government handles a similar investigation of General Motors Co.’s ignition switch safety problems.
While the Attorney General didn’t specifically mention GM, he did say: “Other car companies should not repeat Toyota’s mistake: a recall may damage a company’s reputation, but deceiving your customers makes that damage far more lasting.”
After a four-year investigation, the federal government filed criminal charges accusing Toyota of wire fraud in the U.S. District Court for the Southern District of New York on March 20, 2014. The action is styled United States of America v. Toyota Motor Corp. (No. 1:14-cr-00186) and is overseen by Judge William H. Pauley III. The parties entered a deferred prosecution agreement on the same day.
According to the agreement, Toyota admits it misled consumers “by concealing and making deceptive statements about two safety related issues affecting its vehicles, each of which caused a type of unintended acceleration.” The car manufacturer agreed to pay a fine of $1.2 billion.
While the fine is the largest of its kind against any U.S. auto maker, it’s worth noting that, according to the criminal charges, Toyota made $184 billion in the fiscal year ending March 31, 2010.
Toyota also agreed to ongoing scrutiny. It will hire a monitor approved by the federal government who will assess:
- The accuracy of Toyota’s public statements in the U.S. about the safety of its vehicles;
- The effectiveness of Toyota’s policies on making information related to accidents that have taken place in the U.S. available to its engineers and product safety personnel; and
- Toyota’s policies and practices on the generation of field technical reports in order to ensure compliance with federal law.
The agreement further requires Toyota to establish an independent, toll-free answering service to facilitate communication anonymously or otherwise with the monitor.
In return, the federal government will defer prosecution for three years. Also, as long as Toyota complies with the terms of the agreement, no information or testimony provided by the car manufacturer will be used against it in any criminal tax action, the agreement states.
Four years before the filing of the criminal charges, multidistrict litigation (MDL) was established in the U.S. District Court for the Central District of California captioned In Re: Toyota Motor Corp. Unintended Acceleration Marketing, Sales Practices, and Products Liability Litigation, (No. 8:10-ML-2151). MDL courts oversee discovery and rule on pre-trial motions for claims with similar backgrounds and issues in common to save time, effort and litigation costs.
On April 9, 2010, the U.S. Judicial Panel on Multidistrict Litigation initially transferred 11 actions pending against Toyota Motor Corp. and its U.S. sales and marketing division, Toyota Motor Sales U.S.A. Inc., pending in California, Louisiana, Florida, and West Virginia to the MDL court. Judge James V. Selna was named the presiding judge. The MDL includes both: (1) proposed classes of consumers who claim to have suffered economic losses due to the diminished value of the vehicles affected by the unintended acceleration issue; and (2) individual plaintiffs who claim to have suffered injury or death due to traffic crashes caused by a vehicle which unintendedly accelerated.
The 151-page amended master consolidated class action complaint filed on Aug. 2, 2010, alleges Toyota has received “at least 39,000 complaints, and possibly as many as 60,000 complaints” from consumers about the sudden unintended acceleration issue. The problem occurred more often in vehicles with electronic throttle control systems (ETCS) as opposed to those with mechanical controls, says the complaint.
Toyota failed to properly disclose, explain or fix the underlying problem with ETCS, alleges the complaint. “This leaves millions of Toyota owners with vehicles that potentially could race out of control. Until 2009, consumers were unaware of even the potential for such events,” the complaint states.
While Toyota has admitted to misleading the federal government and the public, it states on its corporate website that plaintiffs have produced no evidence that the ETCS is defective. “[E]ven after months of intense publicity and multiple scientific investigations, the plaintiffs have neither identified any specific defect in Toyota’s electronic throttle control system nor advanced any credible scientific theory or proof to support their allegations,” the company states. “We look forward to the time when the science and engineering behind the electronic throttle control system are given a full and fair evaluation by the court.”
Toyota points out on its website that the floor mat entrapment and “sticky pedal” problems are two separate issues, and are being addressed by the company. “We are addressing both of these issues with our recalls, and have performed more than 80% of the remedies for the sticking pedal recall and more than 60% of the remedies for potential floor mat entrapment,” states Toyota.
Fatal Lexus Accident
The sudden unintended acceleration issue made dramatic, national headlines in the second half of 2009.
An accident in San Diego on Aug. 28, 2009, killed California Highway Patrolman Mark Saylor, his wife, their thirteen-year-old daughter, and his wife’s brother. Saylor was driving a 2009 Lexus ES350 loaner while a dealership repaired his Lexus, according to the MDL complaint.
Witnesses reported the Lexus accelerating to more than 100 mph, the complaint states. “The Lexus then crashed into the back of an SUV and continue
d through a fence, crashing head first into an embankment, becoming airborne, rolling over, bursting into flames and coming to rest in a dry riverbed. All four members of the Saylor family were killed by extensive blunt force injuries,” the complaint says.
As reported by Reuters and other media outlets, the 911 call made by Saylor’s brother-in-law just before the accident actually identified the cause of the crash: “We’re in a Lexus … and we’re going north on 125 and our accelerator is stuck … there’s no brakes … hold on and pray …”
An investigation determined the Lexus ES350 loaned to the Saylor family had been equipped with an incompatible all-weather floor mat, and the accelerator pedal could easily become stuck under the edge of the mat, the complaint states. Toyota then recalled certain 2007-2010 Camry and Lexus brand vehicles, including the ES350, to fix the floor mat problem, according to the complaint.
When issuing the 2009 recall, the complaint maintains Toyota knew and failed to disclose that a second problem could also cause unintended acceleration. This is the problem known as the “sticky pedal,” in which the accelerators in some vehicles could become stuck at partially depressed positions.
Classes and Claims
The amended master consolidated class action complaint proposes two classes of plaintiffs, the consumer class and the non-consumer economic loss class, also known as the commercial class. The complaint asserts violations of the Consumer Legal Remedies Act, California Unfair Competition Law, California False Advertising Law, and the Magnuson-Moss Warranty Act, as well as breach of express warranty, breach of the implied warranty of merchantability, revocation of acceptance, breach of contract/common law warranty, fraud by concealment, and unjust enrichment.
Plaintiffs seek, among other things, injunctive relief, restitution, statutory and punitive damages, and an injunction ordering Toyota to install an “effective fail-safe mechanism” on all vehicles with ETCS, says the complaint.
The vehicles at issue include certain model years of the 4Runner, Avalon, Camry, Celica, Corolla, FJ Cruiser, Highlander, Land Cruiser, Matrix, Prius, Rav4, Sequoia, Sienna, Solara, Tacoma, Tundra, Venza, and Yaris; certain model years of the Lexus ES300, ES330, ES350, GS300, GS350, GS400, GS430, GS450h, GS460, GX470, HS250h; IS F, IS250, IS250c, IS300, IS350, IS350c, IS400, LS400, LS430, LS460, LS600h, LX470, LX570, RX330, RX350, RX400h, RX450h, SC300, SC400, SC430; and certain model years of the Scion tC, xB, and xD.
Plaintiffs outside the United States are also represented in the MDL litigation. A second master complaint, known as the Foreign Economic Loss Master Consolidated Complaint, alleges claims against Toyota on behalf of North American consumers and on behalf of consumers around the world. International plaintiffs reside in countries including Australia, China, Egypt, Germany, Guatemala, Indonesia, Malaysia, Peru, Philippines, Russia, South Africa, and Turkey.
The 221-page second-amended complaint was filed on June 10, 2011. It seeks class certification of two sub-classes, one for North American plaintiffs and one for plaintiffs from other parts of the world.
The parties in the Toyota Economic Loss Class Action reached a settlement which was approved by the Court on July 24, 2013. The settlement provides for monetary awards to the Class Members, as well as for the free installation of brake override systems on certain vehicles.
Toyota has also begun settling with individual plaintiffs seeking recovery for personal injury or wrongful death in the MDL as well as those with claims filed in other courts.
On Nov. 20, 2014, the parties filed a Joint Status Report Regarding the Intensive Settlement Process (ISP). The ISP involves personal injury, wrongful death and/or property damage cases pending in the MDL court as well as actions pending in the Los Angeles Superior Court captioned Toyota Motor Cases, Joint Council Coordination Proceeding (JCCP) (No. 4261) and those in the 152nd Judicial District Court in Harris County, Texas, captioned In re: Toyota Unintended Acceleration Litigation (No. 2010-46354).
As of Nov. 11, 2014, of the 246 cases pending in the MDL, the JCCP and elsewhere, plaintiffs in only 18 actions have not yet asked to participate in the ISP, the parties reported. According to the report, the parties have held 12 official ISP settlement conferences and seven official ISP mediations, “in addition to numerous face-to-face informal meetings,” around the country.
The next ISP status conference is scheduled for March 17, 2015.