Toyota has agreed to a settlement valued between $1.2 and $1.4 billion in a class action suit by Toyota vehicle owners who claim that their vehicles are prone to sudden, unexplained acceleration. The estimated settlement is the largest of this type in US history in terms of dollars paid out and number of vehicles involved. The settlement includes direct payments to consumers as well as the installation of a brake-override system in an estimated 3.25 million vehicles.
The case was filed in 2010 after drivers across the country began reporting that Toyota vehicles suddenly and unintentionally accelerated. Toyota has long maintained that the vehicles were free from electronic flaws causing the acceleration.
Neither the National Highway Traffic Safety Administration (NHTSA), nor the National Aeronautics and Space Administration (NASA) was able to find any defects in Toyota’s source code that could cause these events.
After a flurry of lawsuits were filed against Toyota, Judge James Selna consolidated the cases (Case Nº 8:10-ml-02151-JVS-FMO) in US District Court in California and appointed attorney Steve Berman, managing partner of Hagens Berman Sobol Shapiro as co-lead counsel on 14 May 2010, placing Berman in charge of directing the class litigation and leading settlement discussions with the Japanese auto manufacturer.
After two years of intense work, including deposing hundreds of engineers, pouring over thousands of documents and examining millions of lines of software code, we are pleased that Toyota has agreed to a settlement that was both extraordinarily hard-fought and is exceptionally far-reaching.—Steve Berman
Terms of the proposed settlement include:
Toyota will install a brake-override system in vehicles subject to floor mat entrapment recalls. Brake-override systems cut power to the throttle under certain circumstances when the car receives simultaneous signals to accelerate and to stop.
The settlement establishes a fund of $250 million to be paid to former Toyota owners who sold their cars during the period from 1 Sept. 2009 through 31 Dec. 2010, to compensate those owners for an alleged reduced value as a result of publicity concerning unintended acceleration.
A separate fund of $250 million will be established to compensate current owners whose vehicles are not eligible for a brake-override system (BOS). The amount consumers receive depends on the model and year of their Toyota, and the state in which the car was purchased.
The settlement also provides that all 16 million current owners will be eligible for a customer care plan that will warranty certain parts that plaintiffs allege are tied to unintended acceleration for between three and 10 years.
The agreement also provides $30 million in education grants to independent academic institutions to further the study of auto safety and to enhance driver education.
Judge Selna is expected to review the proposed settlement on 28 December 2012, and if he agrees with its fairness, will grant preliminary approval. More information on the details will be available if the court gives preliminary approval to the settlement.
Current and former Toyota owners will receive information about the settlement and instructions on filing a claim in the coming months.
In a statement, Christopher P. Reynolds, Group Vice President and General Counsel, Toyota Motor Sales, U.S.A, and Chief Legal Officer, Toyota Motor North America, said:
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 and doing everything we can to meet their needs.
This was a difficult decision—especially since reliable scientific evidence and multiple independent evaluations have confirmed the safety of Toyota’s electronic throttle control systems. However, we concluded that turning the page on this legacy legal issue through the positive steps we are taking is in the best interests of the company, our employees, our dealers and, most of all, our customers.
Toyota will take a one-time, $1.1 billion pre-tax charge against earnings to cover the estimated costs of the economic loss settlement and possible resolution costs of civil litigation brought in California by the District Attorney of Orange County and an investigation by a multi-state group of Attorneys General stemming from previous recalls.