Toyota Gets More Time to Win Approval of $1.1 Billion Pact

By Margaret Cronin Fisk and Bill Callahan | June 17, 2013

Toyota Motor Corp. and lawyers suing the company were given more time to win final approval of a $1.1 billion settlement of claims that recalls related to unintended acceleration hurt the value of U.S. customers’ vehicles.

U.S. District Judge James V. Selna, after a hearing Friday in Santa Ana, California, granted requests from attorneys for both sides to provide updated figures about how the money will be allocated to beneficiaries in the settlement. The judge scheduled a July 19 hearing for final approval.

“A lot of hard work has gone into this and it’s been a remarkable effort on the part of everyone,” said Selna, after attorneys for both sides said they will give financial details to overcome concerns the judge expressed about the disbursement of the settlement funds.

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.

Final Figures

“This agreement is structured in ways that we believe provide significant value to our customers and demonstrate that they can count on Toyota to stand behind our vehicles,” Celeste Migliore, Toyota spokeswoman, said in an e-mailed statement after the hearing. “We believe that approval of this settlement, as amended, is in the best interests of all affected parties.”

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 said the company drove down their vehicles’ value by failing to disclose or fix defects.

“This was a remarkable settlement,” plaintiffs’ attorney Steve Berman said at the hearing today. “I believe this is the largest settlement in a U.S. automobile case in terms of the amounts of dollars and the number of class members.”

Intense Negotiations

The accord “represents two years of intense negotiations and hard work,” J. Gordon Cooney Jr., a Toyota attorney, told the judge. Toyota “had very strong defenses to the case” and was confident of winning if the case went to trial, he said.

“However, we would have faced years of litigation ahead of us, and the settlement will provide real value to Toyota customers who are the members of this class,” Cooney said.

Selna agreed in a tentative order yesterday that the accord was “fair, adequate and reasonable,” while delaying final approval.

“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.”

Selna said yesterday that the settlement 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.

Judge’s Concerns

Lawyers for both sides said today that they had agreed on changes to the allocation of funds to address the judge’s concerns.

Toyota agreed last year to the accord, taking a $1.1 billion pretax 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 noncash 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 attorneys 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-injury and death cases remain pending, with the first federal trial set for November in Santa Ana.

Other Trials

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.

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.

Settlement notices were mailed to more than 22.6 million potential class members, Berman, co-lead attorney for the plaintiffs, said in an e-mail June 12.

Objections Received

“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.

The proposed accord includes $200 million in attorneys’ fees and $27 million in expenses, according to court papers.

Objections 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 $250 million for former Toyota owners who sold their cars from Sept. 2, 2009, to Dec. 31, 2010, and provide another $250 million for current owners whose vehicles are ineligible 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).

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