Saturday, December 29, 2012

Toyota Agrees to $1.3 Billion Settlement of Unintended Acceleration Litigation

This posting was written by John W. Arden.

Toyota Motor Corp. has agreed to pay more than $1.3 billion to settle a class action alleging unlawful marketing and sales practices, as well as product liability, relating to the unintended acceleration of its vehicles (In re: Toyota Motor Corp. Unintended Acceleration Marketing, Sales Practices, and Product Liability Litigation).

The settlement agreement and plaintiff’s memorandum in support of the class action settlement were filed December 26 in the federal district court in Los Angeles. The parties will seek a preliminary approval order from the district court within 14 days of the execution of the agreement.

The class action complaint alleged that Toyota designed, manufactured, distributed, advertised, and sold automobiles containing defects that would allow sudden, unintended acceleration to occur and that caused economic losses to class members.

In order to avoid burden, expense, risk, and uncertainty of continuing to litigate the claims, Toyota agreed to:

(1) deposit $250 million into an escrow account to compensate class members for the alleged diminished value of their vehicles;

(2) install brake override systems (BOS) on approximately 2.7 million eligible vehicles at no cost;

(3) deposit $250 million in the escrow account for payment in lieu of BOS installation;

(4) offer class members a customer support program, providing prospective coverage for repairs and adjustments needed to correct defects in the engine control modules, accelerator pedal assembly, stop lamp switch, and throttle body assembly of eligible vehicles; and

(5) contribute $30 million to fund automobile safety research and education related to the issues in the litigation. In addition, Toyota has agreed to fund the cost of the settlement notice and claims administration.
In addition, Toyota has agreed to fund the cost of the settlement notice and claims administration.

Class Notice, Exclusions, Objections

Under the agreement, class notice will be accomplished through a combination of short form notices, summary settlement notices, notices posted on a settlement website, long form notices, and other applicable notices. Class members wishing to be excluded from the class must mail a written request to the class action administrator. Those class members wishing to object to the fairness, reasonableness, or adequacy of the agreement or to the award of attorney fees and expenses must file a written notice. They may appear and argue at a fairness hearing.

The class action settlement administrator will use best efforts to begin to pay timely, valid, and approved claims, starting 180 days following the close of the claim period or the occurrence of the final effective date, whichever is later.

The parties agree to a release and waiver, which will fully and finally release, relinquish, discharge, and hold harmless the released parties from all claims, demands, suits, petitions, and liabilities.

Attorney Fees and Expenses

Toyota agreed to pay $200 million in attorney fees and $27 million in expenses. If the court awards less than that amount, Toyota will pay the remainder to the Automobile Safety and Education Program Fund. The fees and expenses will be allocated among the 25 law firms and 85 attorneys who worked on this litigation, as approved by the court.

“Landmark” Settlement

In the Plaintiffs’ memorandum in support of their application for certification of the settlement, the class members estimated the settlement as a whole at more than $1.3 million—“a landmark, if not a record, settlement in automobile defect class action litigation in the United States.”

Arguing for certification of the proposed class, the plaintiffs asserted the typicality of the claims arising from a common course of conduct and legal theory. “They have asserted during this litigation that Toyota engaged in false advertising in violation of consumer protection laws and breached express and implied warranties to Class Members by selling vehicles with defects, failing to inform consumers of the defects, and failing to properly repair the defects pursuant to its warranties.”

The case is No. 8:10ML2151 JVS (FMOx).

Steve W. Berman (Hagens Berman Sobol Shapiro LLP); Frank M. Pitre (Cotchett, Pitre & McCarthy, LLP); and Marc M. Seltzer (Susman Godfrey LLP) for the Plaintiffs’ Class. Christopher P. Reynolds, Chief Legal Officer, for Toyota North America.

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