Toyota's still not off the hook
Next come the wrongful-death suits
Toyota’s Reynolds: Tough decision
Toyota Motor Corp. eliminated a substantial part of the legal hangover from its unintended-acceleration recalls by reaching a settlement worth as much as $1.4 billion to pay for presumed loss of value in some used models. But the company still faces hundreds of wrongful-death and product-liability cases that it must fight individually.
Those suits, the first of which is scheduled to go to trial in February, could force Toyota to pay hundreds of millions or even billions of dollars more.
"It's going to be very important to watch what the outcomes will be in those cases to assess whether Toyota is really going to be quickly able to put all of its litigation difficulties behind it," said Nicholas Wittner, a law professor at Michigan State University and former lawyer for Nissan North America and General Motors. "They're not out of the water yet."
The settlement, pending a U.S. district court judge's approval, calls for the company to compensate some former customers for lost resale value, gives current owners free brake-override systems or checks of as much as $125, and offers warranties of as long as 10 years on some parts.
It gives as much as $227 million in fees and expenses to the 85 lawyers at 25 firms involved in the cases. Toyota, which has attributed incidents of unintended acceleration to ill-fitting floor mats, sticky accelerator pedals and drivers who pressed the wrong pedal, also would pay $30 million toward more driver-education programs and research into advanced safety technologies.
Toyota said it would take a one-time charge of $1.1 billion before taxes in the quarter that ends Monday, Dec. 31, to pay for the settlement, plus undisclosed deals it has reached in two other cases. The plaintiffs' lawyers valued the settlement at $1.2 billion to $1.4 billion and said it was "a landmark, if not a record, settlement in automobile defect class action litigation in the United States."
The settlement covers the current and former owners of some 16 million Toyota, Lexus and Scion vehicles, most of whom will receive no money directly.
Anyone who owns a Toyota Prius, for example, will get nothing beyond an extended warranty on some components, while 3.2 million gasoline-powered vehicles will be eligible to have a brake-override system installed for free.
An owner whose vehicle cannot be retrofitted with brake override is eligible for a check of as much as $125, which is the cost to install such a system. In certain states, payouts are capped at $37.50 or $87.50 unless owners had previously reported experiencing unintended acceleration to Toyota, their dealer or safety regulators.
Toyota is paying $250 million into a fund to compensate former owners for lost resale value. The money will be distributed to people who sold their vehicles, turned in leased vehicles early or totaled their vehicles from September 2009 through December 2010. The payouts will range from "hundreds of dollars to over a thousand dollars," the plaintiffs' lawyers said in a memo filed Wednesday, Dec. 26, with the court.
According to data from Kelley Blue Book, resale values of Toyota brand vehicles suddenly declined more than usual in late 2009, after the recalls began, but returned to normal levels by the end of 2010.
The plaintiffs' lawyers, in explaining why they are settling, suggested that evidence of problems in Toyota vehicles was weaker than previously indicated.
"Like experts at NASA, plaintiffs have been unable to reproduce [unintended acceleration] in a subject vehicle under driving conditions," the lawyers wrote in the Dec. 26 memo.
Toyota already settled a few other related cases. In 2010, it agreed to pay $10 million to the family of Mark Saylor, an off-duty California Highway Patrol officer whose dramatic crash near San Diego put the unintended-acceleration issue in the national spotlight. Toyota recalled 3.8 million vehicles a month after Saylor and three passengers died in 2009.
Ultimately, Toyota recalled more than 8 million vehicles in the United States but denied electronic flaws.
"This was a difficult decision -- especially since reliable scientific evidence and multiple independent evaluations have confirmed the safety of Toyota's electronic throttle control systems," Christopher Reynolds, Toyota's U.S. general counsel, said in a statement last week. "However, we concluded that turning the page on this legacy legal issue through the positive steps we are taking is in the best interests of the company, our employees, our dealers and, most of all, our customers."
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