Toyota's towering defense task
Unintended acceleration suits could last decades
 | Chris Reynolds, Toyota Motor North America's chief legal officer: "It goes to the integrity of the company and the people who make the product as much as the product itself. There's not much room for negotiation on that point." |
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LOS ANGELES -- Stack eight Empire State Buildings on top of one another. That would represent the height of the tower of documents Toyota expects to produce in response to hundreds of lawsuits claiming that its vehicles suffered from unintended acceleration.
Therein lies the daily slog of Toyota's defense counsel, parrying the endless assault of motions and queries by plaintiff lawyers seeking a multibillion-dollar payout for their clients -- and themselves.
The legal battle will be lengthy. The first "bellwether" trial arising from Toyota's problems related to unintended acceleration in 2009 and 2010 will not begin until early 2013. Discovery depositions will plod on for at least six more months.
And if the similar unintended acceleration legal actions against Audi of America that began in the late 1980s are any indication, Toyota's defense of the trustworthiness of its vehicles could drag on for decades.
Toyota seems unwilling to bend or settle the case quickly.
Chris Reynolds, Toyota's chief North American legal officer, says the trials call into question Toyota's reputation for engineering and vehicle quality: "I'm not exactly in the position to compromise with anybody over that issue. ... We're just not going to do it."
Small victories
In a series of interviews, Toyota provided Automotive News with exclusive access to the normally secretive world of the corporate legal defense.
Toyota's defense team is actually two teams. The in-house team, led by Reynolds, is internally known as the State Department. It lays out the overall strategy. If there's a settlement to be had, the in-house team will negotiate it.
Meanwhile, Toyota's outside counsel -- led by Joel Smith and Lisa Gilford -- is the harsh antagonist to plaintiff attorneys, the so-called War Department that aggressively counters plaintiff filings.
Lined up against them are plaintiffs who believe Toyota vehicles have engineering or software faults or that Toyotas are susceptible to outside electrical interference. Somewhere, plaintiff lawyers contend, there is a glitch, and Toyota did nothing to fix it.
Smith, managing partner of Bowman and Brooke in Columbia, S.C., leads a group fighting allegations that unintended acceleration resulted in bodily injury. The hundreds of personal-injury suits have been combined into the Santa Ana, Calif., courtroom of U.S. District Judge James Selna under a so-called multidistrict litigation.
The key personal-injury trial involves the deaths of Paul Van Alfen and passenger Charlene Lloyd, who were killed when Van Alfen's 2008 Toyota Camry crashed on a freeway offramp.
The case is considered a bellwether because it will be viewed as an indicator for future Toyota unintended acceleration injury cases, which Selna will release back to their original jurisdictions after the Van Alfen case is decided. The personal-injury cases will not be combined into a class action, Toyota says.
If a jury finds in favor of Toyota in the Van Alfen case, other personal-injury cases could vanish as plaintiff lawyers see little hope of victory. But if the Van Alfen plaintiffs win, other such cases could gain momentum.
Meanwhile, Gilford's group responds to consumers who claim they have suffered diminished value to their Toyota vehicles. This is the group of filings that has the possibility of becoming a class action.
There is daily communication between Smith's and Gilford's groups and Toyota, but each has a distinct mission. So far, their union has resulted in a string of Toyota triumphs in a California courtroom, whittling away plaintiffs' accusations and motions one by one.
The defense could be costing Toyota well more than $1 million per month in manhours alone. That would take into account the typical cost of 10 external lawyers and support staff working full time on the cases. Toyota and outside counsel declined to comment on the weekly tab they are running.
But that is chump change compared with what plaintiffs are seeking. One plaintiff's attorney told The National Law Journal that damages sought from Toyota could range between $5 billion and $7.3 billion.
Of course, a guilty verdict in a jury trial could have far-reaching ramifications for an automaker whose reputation is grounded in quality. That reputation is the reason Toyota says it is willing to fight the suits to the bitter end.
Photo credit: UTAH DEPARTMENT OF PUBLIC SAFETY
Strong defense
After the Van Alfen case likely begins in February, Selna has scheduled the first trial over claims of economic loss for July 2013 and a second wrongful death case for November 2013.
If the economic-loss suits are to warrant a class action, plaintiffs must prove that a recurring condition repeats for all of their claimants.
At the heart of Toyota's defense is "Supplemental Report No. 10" from the National Highway Traffic Safety Administration, which evaluated complaints about unintended acceleration in Toyotas.
In the 52 crashes in which Toyota vehicles had electronic data recorders, or black boxes, registering throttle, brake and vehicle voltage settings, 12 crashes were disallowed because the vehicles ran off the road as a result of driver error. Of the remaining 40 claims, one case involved the floor mat trapping the gas pedal. The other 39 claims showed pedal misapplication by the driver, according to Toyota's interpretation of the report.
"It's a tremendous study that is very good for our case," Smith said.
That's Toyota's first defense volley. Extensive reports by NHTSA, NASA and the National Academy of Sciences also exonerate Toyota vehicles from any source of unstoppable acceleration other than floor mat entrapment or a sticky gas pedal, the automaker says. Toyota has recalled and repaired 8 million potentially affected vehicles to deal with those problems.
"Factually, I don't see too many issues we can't get by," Reynolds said. "If a bunch of rocket scientists couldn't find anything wrong with our cars, I'm not too worried about plaintiff lawyers."
Initially, plaintiff lawyers sought damages largely on grounds of unintended acceleration. But after other cases were struck down for lacking clear evidence of a defect, the plaintiffs' attack has refocused on whether Toyota knew of a possible speed-control problem and failed to install a brake-override system in response.
As far as the accusations of diminished value of Toyota vehicles, Gilford is adamant that Toyota is blameless.
"Not only is this a case where plaintiffs have no science, they have no injury," said Gilford, a partner in the Alston + Bird law firm's Los Angeles office.
It helps Toyota that used-car values have soared in recent years and that Toyotas traditionally have been near the top of residual value rankings.
Requests for comment from Steve Berman, an attorney representing economic-loss plaintiffs, went unanswered. But in a blog on the Web site for the Hagens Berman law firm in Seattle, Berman described Selna's rulings to date as a Catch-22, requiring plaintiffs to have suffered an acceleration incident to be part of the class action.
Given that the accidents typically have had tragic consequences, waiting for violent injury or death to occur is unacceptable, Berman wrote.
Lost in translation
In the meantime, the trials are moving through the discovery phase of collecting evidence. By May, 60 depositions of Toyota representatives had been taken, with scores more on the docket.
Each deposition of a Toyota engineer or executive takes several days as questions are volleyed from plaintiff attorneys to Toyota and witnesses are prepped. If the person interviewed is Japanese, the deposition takes as long as 10 days because a translator must be found who understands arcane business and engineering terms in English and Japanese.
In many cases, documents cited in the depositions are in Japanese; just getting an English translation that all sides can agree upon can take weeks.
This year, CNN was leaked a Japanese engineering document that plaintiffs said showed Toyota knew its vehicles could accelerate blindly. It turned out, under revised translation, that the document outlined a routine quality check Toyota conducts during vehicle development that deliberately tries to make prototype vehicles perform incorrectly.
Once the depositions of Toyota employees are complete, Toyota's attorneys will get to depose the plaintiffs' panels of experts. But Selna has dismissed Toyota's request to depose upward of 250 crash victims as too ponderous an undertaking.
Said Smith: "It is a simple task now for the plaintiff to make broad statements of defect, but they will have to back that up with reliable scientific proof. We look forward to our turn, when plaintiffs finally have to prove something."
Don't ask, don't tell
Despite the frequent communication between in-house and outside counsel, the topic of settlement is never discussed. That's typical: A company usually wants the outside counsel to be its legal pit bull, not having to wonder or worry about business considerations and other milestones affecting the client.
Selna has denied Toyota's requests for dismissing the trials outright. But the legal winds have, for the most part, blown in Toyota's favor.
Still, these early defeats haven't dimmed plaintiff attorneys' contention that their claims have merit.
Todd Walburg, an attorney representing Toyota personal-injury plaintiffs, says plaintiffs traditionally try to settle early, "before we've spent large sums of money on expert and other costs, before the amount of costs are so overwhelming that we have to take the case to trial."
Walburg, a partner with Lieff Cabraser Heimann & Bernstein in San Francisco, declined to comment on whether there have been settlement discussions with Toyota. That said, Selna has appointed a "settlement special master" to the trial to mediate any possible resolution.
There is significant economic outlay on the plaintiff side as well. Although no cost estimates are available, the economic-loss and personal-injury suits both have a lead law firm, supported by three other law firms as a committee -- all racking up costs of their own.
But Walburg insists he is seeking the truth as well as economic gain.
"We strongly believe in this case. I am looking forward to a trial as an opportunity to educate the American public as to what really happened," he said. "A lot of the story has not been publicized, and Toyota has done an excellent job through its advertising and PR. The truth needs to come out."
Pavlov's Camry
Some observers wonder why Toyota doesn't simply offer a quick settlement payout to make the lawsuits go away. They argue that paying a settlement without admitting fault will hurt, but the public soon will forget. And that would be preferable to the negative Pavlovian response each time sudden acceleration resurfaces in the media during a drawn-out legal battle.
But Toyota may not need to worry about consumer sentiment tied to the lawsuits.
One market researcher -- who insisted on anonymity because of client confidentiality -- said a competing automaker was seeking to exploit Toyota's supposed weakness resulting from the lawsuits. The rival was surprised to learn that consumers "were already willing to forgive Toyota," the source said.
Charlie Hughes, former boss of Mazda's North American Operations and Land Rover North America and now head of the Brand Rules consultancy, says Toyota needs to fight to the bitter end.
"The minute they pay the first person off, no matter what they sign, they admit guilt," Hughes said. "Forget what the law says. They have admitted in the court of public opinion that their cars were flawed. There is no win, just degrees of losing."
Cliff Stein, general manager of ReputationChanger.com, an online image management firm, disagrees.
"You take the hit on the front end. If you leave stuff like that out there that's visible, you are going to lose potential new business and some existing Toyota customers," Stein said. "You face the challenge head-on, address it once in an appropriate fashion and move on as a business. Time is a healer. People will forget."
But Reynolds says he isn't willing to take that chance.
"Class-action suits go to the core of what companies are about," he said. "It goes to the integrity of the company and the people who make the product as much as the product itself. There's not much room for negotiation on that point."
• Evidence tampering, 2012: Most recently, plaintiffs claimed Toyota could have tampered with data when mechanics pulled the black box from the crashed Van Alfen vehicle without attorneys present. The judge ruled no evidence of "Machiavellian conduct" took place but cautioned jurors that some Toyota witnesses could be unreliable.
• Sitafalwalla v. Toyota, 2011: Toyota won an early case involving a claim of unintended acceleration. A plaintiff expert withdrew his assertion that the vehicle's electronics could have caused the accident. Without scientific proof of an electrical or mechanical malfunction, the jury decided in favor of Toyota in just 45 minutes. Other unintended acceleration claims subsequently were withdrawn or dismissed with prejudice around the country.
• Choice of law, 2012, 2011: In the multidistrict case decided in 2011, Toyota defeated plaintiffs' attempts to apply California law to every economic-loss claim filed nationwide. Most cases combined into the California case came from states that would allow claims to proceed only if a defect was apparent or if owners sold their vehicles at a loss. Each claim must be argued state by state, typically not worth the effort for plaintiff lawyers. A similar ruling was applied in 2012 to Florida and New York plaintiffs.
• Foreign plaintiffs, 2011: Similarly, Toyota successfully argued that economic-loss claims brought by plaintiffs from 14 countries should not proceed in U.S. courts. The judge dismissed the claims.
• Securities litigation, 2011: Toyota successfully argued that attempts by shareholders to sue the company in U.S. court for violations of Japanese securities laws were improper and won the dismissal of about 97 percent of the lawsuit. Toyota also secured the dismissal of a proposed class action brought by bondholders. Toyota won a motion to dismiss 26 of 33 plaintiff statements that Toyota claimed to be false or misleading.
You can reach Mark Rechtin at mrechtin@crain.com. -- Follow Mark on 
