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A federal judge said Monday that she was inclined to dismiss some of the claims filed by shareholders who allege that the Toyota Motor Corp.’s sudden acceleration problems caused a drop in the stock price. U.S. District Judge Dale Fischer said that 24 of the 33 allegedly misleading and false statements cited in the consolidated complaint lacked sufficient information about the responsibilities of each executive at Toyota who is named as a defendant. It was unclear which statements the complaint attributed to each individual defendant, she added. Fischer offered no final ruling on Toyota’s motion to dismiss and suggested the plaintiffs could amend their complaint. Her ruling was not expected for at least two weeks. The suit, a consolidated proceeding in multidistrict litigation, asserts claims for shareholders of American depository shares — Toyota shares sold on the New York Stock Exchange — under the U.S. Securities Exchange Act of 1934; and for a class of shareholders who bought common stock on the Tokyo Stock Exchange under Japan’s Financial Instruments and Exchange Act. Lawyers for the shareholders added the Japanese law claims after the U.S. Supreme Court ruled last year in Morrison v. National Australia Bank that, under U.S. securities law, investors who purchase a foreign company’s stock on a foreign exchange lack standing to sue in U.S. courts. In support of those claims, the attorneys in the Toyota case attached the declarations of three experts in Japanese law. Fischer said she didn’t believe she had original jurisdiction to hear the Japan law claims. Co-lead plaintiffs’ counsel Blair Nicholas, a partner in the San Diego office of Bernstein Litowitz Berger & Grossmann, said that unlike in Morrison, no foreign entity has stepped forward to assert jurisdiction over the Japanese law claims against Toyota. Nicholas argued that there were “strong and compelling” reasons why Fischer should exercise supplemental, rather than original, jurisdiction over the claims — namely that they are related to those brought on behalf of holders of American depository shares. “These are claims that would be expected to be tried together,” he said. He noted that the relevant Japanese law is substantially similar to U.S. securities law and that U.S. courts have an interest in hearing claims alleging deceptive acts committed in the United States by a foreign company. There was “no question” that a judgment by a U.S. court would be enforceable in Japan, he said. Kay Kochenderfer, a partner at Los Angeles-based Gibson, Dunn & Crutcher, argued on Toyota’s behalf that the plaintiffs were attempting to make an “end run around Morrison.” Toyota sought to throw out the Japanese law claims, arguing that their inclusion would expand the size of the class by 3,400% and add more than 3 billion shares to the dispute. The complaint alleges that Toyota issued false and misleading statements during conference calls with investors, filings with the U.S. Securities and Exchange Commission and in interviews with the press — all of which artificially inflated its shares’ values. The class covers investors who owned shares from May 10, 2005, through Feb. 2, 2010. The suit names Toyota, its subsidiaries Toyota Motor North America Inc. and Toyota Motor Sales USA Inc., and several officers and directors. Toyota has argued that the statements were neither false nor misleading, but rather were mere “puffery” lauding their product, and denied that executives knew their statements were false or that they had any material effect on Toyota’s shares. The individual defendants include James Lentz, president and chief operating officer of Toyota USA; Yoshimi Inaba, president and chief operating officer of Toyota North America; Irving Miller, group vice president of environmental and public affairs at Toyota Motor Sales USA; Robert Carter, group vice president and general manager for the Toyota division of Toyota Motor Sales USA; and Robert Daly, senior vice president of Toyota Motor Sales USA. Fischer questioned whether certain individual defendants had the requisite knowledge to make false or misleading statements. For some of the defendants, she said, it wasn’t obvious they “were really high enough” in position at Toyota to have core knowledge of the issues. “Whatever survives here, you need to have something that ties them to that chain of knowledge,” she told David Stickney, another San Diego partner at Bernstein Litowitz. “Is there some real reason that all these individuals are in here?” Toyota has recalled about 10 million vehicles due to defects in accelerator pedals and floor mats that have been blamed for sudden acceleration. Toyota has agreed to pay $48.8 million in fines for failing to inform government regulators immediately of the problems. In court, Stickney argued that Toyota’s shares were trading at a premium when its executives were touting the safety and reliability of its vehicles to investors while, at the same time, they had been aware of undisclosed defects since 2000. “The point is that they had thousands of reports of unintended acceleration. They were taking affirmative steps to cover it up from NHTSA [the U.S. National Highway Traffic Safety Administration],” he said. While the stock dropped most significantly in February 2010, when the accelerator pedal recalls were announced, the cause of the disclosure wasn’t the issue, he said. At that time, he said, the scope of a bigger problem involving unintended acceleration became evident. Toyota attorney Stuart Baskin, a partner at New York’s Shearman & Sterling, said that the only statements at issue involve the accelerator pedal recall since that led to a stock drop. “The only recall that produced a substantial drop in the stock price was the recall having to do with the sticky pedals,” he said. And the complaint failed to identify individual defendants who had the requisite knowledge of the impending stock drop to have made false or misleading statements. Amanda Bronstad can be contacted at [email protected] .

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