Toyota faces a major courtroom challenge on Thursday when federal judges will decide whether angry car owners can bring a multibillion-dollar suit against the Japanese car-maker.
A group of law firms from 20 US states, dubbed the Toyota Action Consortium, is suing to recoup losses in the resale value of Toyota vehicles due to deaths and injuries blamed on accelerator pedal malfunctions.
Tim Howard, a North-eastern University law professor who is leading the charge against the world’s biggest car-maker, said the case could cost Toyota $40-billion or more.
The suit does not take into account motorists who have been injured and is expected to be the largest legal battle of its kind against a single car-maker.
“This is the worst malfeasance in the car industry since its inception in the 1890s,” Howard said. “This is like Tiger Woods destroying his reputation.”
The car-maker has enjoyed a stellar reputation as the world’s top global auto-seller and ranked among Forbes‘s leading companies.
But in recent months, Toyota has had to recall more than eight million vehicles worldwide due to problems with sudden acceleration, which have led to 58 deaths.
“This is a problem everywhere for Toyota,” Howard said. “People have lost thousands in value for doing nothing that was their fault.”
‘This reputation was an illusion’
In addition to myriad class-action lawsuits over plummeting car values, the consortium of lawyers has added new charges of racketeering under a federal law that was enacted in 1970 to bring down the mafia.
In civil litigation, the law can be used against an organisation that knowingly conspired to commit fraud, and the consortium is alleging that Toyota knew their cars were faulty, but sold them anyway.
“Since 2002, Toyota has made more than $600-billion in revenues and $25-billion in operating profits from North American operations,” the lawsuit states.
“Unlike any other automobile manufacturers operating in the United States, these sales and profits were built on a reputation for quality, reliability and resale value.
“But this reputation was an illusion: in reality, Toyota sales in recent years were actually based on a wilful pattern of deceptive trade practices, fraud, breach of express and implied warranty, and racketeering.”
A spokesperson from Toyota’s US headquarters in Torrance, California, said: “We refuse to comment on pending litigation.”
The panel of federal judges hearing the case on Thursday will make no determination about the merit of the claims.
Instead, their role will be to decide whether the mushrooming cases can be heard in one specific courthouse. The judges will not deliver their decision until about a week later, according to Jeffrey Luthi, clerk of the panel.
The attorneys claim the faulty pedal design was initiated in 2002 and to date, Toyota has done nothing to fix the problem.
Toyota first blamed the problems on faulty floor mats, adding shims to the accelerator pedal as a solution. But attorneys argue the problem still persists.
“We will get to the bottom of what the problem is and how to fix it,” said Dennis Canty, a California attorney who is part of the consortium.
“Neither Toyota nor the National Highway Traffic Safety Administration has been able to do that.”
Toyota had fought claims that electronics problems are to blame for unintended acceleration problems and says that mechanical fixes it has developed are sufficient to make its vehicles safe. — AFP