Toyota Seeks Final Approval of $1.1B Settlement for Reduced Car Value
Toyota Motor Corp. and lawyers suing the company are set to ask a judge today to approve a $1.1 billion settlement of claims that recalls related to unintended acceleration hurt the value of U.S. customers’ vehicles.
U.S. Judge James V. Selna in Santa Ana, California, gave preliminary approval to the accord in December. Yesterday he issued a tentative ruling that would delay a final sign-off to consider whether class members are sufficiently compensated.
The settlement would resolve the economic-loss portion of the Toyota sudden-acceleration litigation. Class, or group, actions were filed on behalf of Toyota owners who contended the company drove down the value of their vehicles by failing to disclose or fix defects. Toyota and plaintiffs lawyers urged Selna in court papers to approve the agreement.
“The settlement is fair, reasonable and adequate,” plaintiffs lawyers said in their April 23 filing seeking approval. The total settlement “constitutes a high percentage of recoverable damages,” they told the court.
Selna agreed that the accord was “fair, adequate and reasonable” in a tentative order issued yesterday.
“Certain difficulties in the plan of allocation of the settlement funds preclude the court’s final approval of the proposed settlement at this time,” Selna said. “The court needs to ensure that class members are compensated to the maximum degree possible.”
While Selna agreed that the settlement was fair, he said yesterday the final agreement didn’t appear to precisely address the cost of administrating it. He also questioned whether more funds should be allocated to class members and Toyota owners who haven’t filed claims.
Toyota agreed last year to the settlement, taking a $1.1 billion pre-tax charge against earnings without specifying the amount going to economic-loss plaintiffs in the cases before Selna.
The value of the settlement is more than $1.6 billion, including non-cash benefits, plaintiffs’ lawyers said in an April 23 filing seeking approval. The agreement includes $757 million in cash and $875 million in “non-monetary benefits,” including installation of brake overrides in eligible vehicles, the lawyers said.
The economic loss cases were combined in a multidistrict litigation before Selna, who is also handling federal personal injury and death suits related to sudden acceleration claims. The personal injuries and death cases remain pending, with the first federal trial set for November in Santa Ana.
Toyota is facing two other trials in state court later this year, one next month in Los Angeles over the death of a 66-year- old woman, the other in Oklahoma in October over the death of one woman and injuries to another. Toyota in January settled the first federal case that had been set for trial before Selna.
The company, based in Toyota City, Japan, recalled more than 10 million vehicles for problems related to unintended acceleration in 2009 and 2010, starting with a September 2009 announcement that it was recalling 3.8 million Toyota and Lexus vehicles because of a defect that may cause floor mats to jam accelerator pedals. The company later recalled vehicles over defects involving the pedals themselves.
Toyota paid $66.2 million in fines to the U.S. National Highway Traffic Safety Administration for how some of the recalls were conducted. The company last year agreed to pay $25.5 million to settle an investor lawsuit claiming Toyota’s alleged failure to disclose information on unintended acceleration problems caused the stock to plunge in 2010.
Toyota didn’t admit any wrongdoing in settling the economic loss claims.
The plaintiffs took into consideration the risk of continued litigation when settling, Toyota said in court papers urging approval. “Toyota had powerful defenses with respect to both the merits of the claims and with regard to class certification,” company lawyers said in a June 3 filing.
Settlement notices were mailed to more than 22.6 million potential class members, Steve Berman, co-lead attorney for the plaintiffs, said in an e-mail June 12.
“We have received only 76 objections on behalf of 90 individual objectors,” he said. By June 7, the administrator for the settlement had received requests from 1,949 plaintiffs to opt out of the agreement, Berman said.
Selna’s tentative ruling won’t scuttle the settlement, Berman said yesterday in an e-mail.
The judge is “overwhelmingly” in favor of the settlement and “overruled all objections,” Berman said. “We just need to formally present the amended distribution plan so as to get as much to class members as possible.”
The proposed settlement includes $200 million in attorneys’ fees and $27 million in expenses, according to court papers.
Objections to the settlement filed with the court protested the amounts available to individual plaintiffs and the size of the potential award for attorneys’ fees. Selna said yesterday the objections were without merit and wouldn’t block final approval.
Under the settlement, Toyota will install a brake override system in more than 3 million vehicles that were subject to floor mat recalls, provide a fund of $250 million for former Toyota owners who sold their cars from Sept. 2, 2009, to Dec. 31, 2010, and provide an additional $250 million for current Toyota owners whose vehicles aren’t eligible for brake- overrides, according to court filings.
The federal cases are combined as In re Toyota Motor Corp. Unintended Acceleration Marketing, Sales Practices and Products Liability Litigation, 8:10-ml-02151, U.S. District Court, Central District of California (Santa Ana).
(Editors: Peter Blumberg, Michael Hytha)