Toyota Pays $1.2B for Misleading U.S.; Civil Claims Remain

Toyota Pays $1.2B for Misleading U.S.; Civil Claims Remain Photo: Diego M. Radzinschi / NLJ U.S. Attorney for the Southern District of New York Preet Bharara

A $1.2 billion settlement between Toyota Motor Corp. and the U.S. Department of Justice will have little direct effect on negotiations to settle remaining lawsuits over deaths and injuries associated with sudden acceleration, but could sway jurors should those cases go to trial, according to attorneys involved in those actions.

In a deferred-prosecution agreement announced on Wednesday, Toyota admitted that it made misleading statements to the National Highway Traffic and Safety Administration (NHTSA) and Congress regarding its knowledge of defects associated with floor mats and sticky gas pedals—the subjects of two recalls in 2009 and 2010. The deal made no mention of any defects in its electronic throttle systems, the core allegation in lawsuits filed against Toyota.

“If they paid $1.2 billion for that, they owe the government a whole lot more for the rest of it,” said Jere Beasley, founding shareholder of Montgomery, Ala.’s Beasley, Allen, Crow, Methvin, Portis & Miles. His firm obtained a $3 million verdict against Toyota in a case blaming electronic defects for the fatal crash of a 2005 Camry in Oklahoma. “Their biggest problem—95 percent of their problems—have nothing to do with mats or sticky pedals. It’s strictly a bad computer, and they know this.”

Donald Slavik, senior counsel to Robinson Calcagnie Robinson Shapiro Davis in Newport Beach, Calif., whose firm plays a lead role in the civil matters, agreed that the deal wouldn’t directly affect settlement negotiations. But it could provide perspective about their overall value, which he estimated Toyota could resolve “for a sum certainly much less than the $1.2 billion they’re paying here.”

Even Preet Bharara, the U.S. attorney for the Southern District of New York, said during a Wednesday news conference that the $1.2 billion, which will go to the Justice Department’s asset forfeiture fund, could have limited value for civil litigants.

“It is possible for individuals who were victimized or who believe they were victims to get recompensed through the asset forfeiture program, although it’s my understanding that many of them have already settled or found recompense through civil litigation,” he said.

Still, the payment is the largest criminal penalty imposed on a car company in U.S. history.

Specifically, Toyota assured consumers and the NHTSA that it had addressed the “root cause” of sudden acceleration in 2009, when it recalled eight models over floor mats it said became entrapped against gas pedals. But internally, Toyota knew of many other models with floor-mat problems and, more significantly, was aware that stuck gas pedals could be causing sudden acceleration, the company conceded.

“Entering this agreement, while difficult, is a major step toward putting this unfortunate chapter behind us,” Christopher Reynolds, chief legal officer of Toyota Motor North America Inc., said in a prepared statement.

In the civil matters, Toyota has reached “agreements in principle” to settle 131 of the remaining cases, according to a status report filed on Monday with U.S. District Judge James Selna. The litigation—hundreds of wrongful death and personal injury cases—represents the last of the lawsuits filed against Toyota following its recalls. In 2012, Toyota agreed to a $1.6 billion deal to resolve hundreds of cases claiming that it misled consumers about the safety of its vehicles.

Toyota has scheduled a settlement conference for March 26 in Chicago, with another one planned in Houston, according to the status report. At least one case is scheduled for trial on May 2, Slavik said. And that’s where the $1.2 billion agreement could be most helpful.

“Certainly, if a case ends up going to trial, the publicity about Toyota is renewed with regards to issues on unwanted acceleration,” he said. “It can cut both ways. Toyota may say that was only related to pedals and floor mats. But yet, if one looks deeply into these documents, it’s the pattern of conduct—Toyota’s responses to inquiries about problems—that would be the issues that plaintiffs attorneys might raise at trial later.”

Contact Amanda Bronstad at abronstad@alm.com.

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