Unintended Acceleration Will Cost Toyota up to $1.4 Billion

Do you remember the sudden acceleration issue concerning Toyota vehicles a couple of years back? It looks like a settlement has been reached.

The attorneys representing Toyota owners who claim that their vehicles are prone to sudden, unexplained acceleration announced Dec. 26 that Toyota has agreed to a settlement valued between $1.2 and $1.4 billion.

This settlement includes direct payments to consumers as well as the installation of a brake-override system in an estimated 3.25 million vehicles.

The case was filed in 2010 after drivers across the U.S. began reporting that Toyota vehicles suddenly and unintentionally accelerated. Toyota has long maintained that the vehicles were free from electronic flaws causing the acceleration.

Neither the National Highway Traffic Safety Administration (NHTSA), nor the National Aeronautics and Space Administration (NASA) was able to find any defects in Toyota’s source code that could cause these events.

After a flurry of lawsuits were filed against Toyota, Judge James Selna consolidated the cases in U.S. District Court in California and appointed attorney Steve Berman, managing partner of Hagens Berman Sobol Shapiro as co-lead counsel on May 14, 2010, placing Berman in charge of directing the class litigation and leading settlement discussions with the Japanese auto manufacturer.

“After two years of intense work, including deposing hundreds of engineers, pouring over thousands of documents and examining millions of lines of software code, we are pleased that Toyota has agreed to a settlement that was both extraordinarily hard-fought and is exceptionally far-reaching,” said Berman.

Under the terms of the proposed settlement, Toyota will install a brake-override system in vehicles subject to floor mat entrapment recalls.

Brake-override systems cut power to the throttle under certain circumstances when the car receives simultaneous signals to accelerate and to stop.

In addition, the settlement establishes a fund of $250 million to be paid to former Toyota owners who sold their cars during the period from Sept. 1, 2009, through Dec. 31, 2010, to compensate those owners for an alleged reduced value as a result of publicity concerning unintended acceleration.

Concurrently, a separate fund of $250 million will be established to compensate current owners whose vehicles are not eligible for a brake-override system. The amount consumers receive depends on the model and year of their Toyota, and the state in which the car was purchased.

The settlement also provides that all 16 million current owners will be eligible for a customer care plan that will warranty certain parts that plaintiffs allege are tied to unintended acceleration for between three and 10 years.

The agreement also provides $30 million in education grants to independent academic institutions to further the study of auto safety and to enhance driver education. “We hope that this research can aid in finding out the causes of unintended acceleration, and the solutions to fixing those issues,” said Berman.

The total value of the settlement is estimated to be between $1.2 and $1.4 billion.

This estimate amounts to the largest settlement of this type in US history in terms of dollars paid out and number of vehicles involved.

“This agreement marks a significant step forward for our company, one that will enable us to put more of our energy, time and resources into Toyota’s central focus: making the best vehicles we can for our customers and doing everything we can to meet their needs,” said Christopher P. Reynolds, group vice president and general counsel, Toyota Motor Sales, U.S.A, and chief legal officer, Toyota Motor North America. “In keeping with our core principles, we have structured this agreement in ways that work to put our customers first and demonstrate that they can count on Toyota to stand behind our vehicles.”

Reynolds continued: “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. 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.”

Judge Selna is expected to review the proposed settlement on Dec. 28, 2012, and if he agrees with its fairness, will grant preliminary approval.

Current and former Toyota owners will receive information about the settlement and instructions on filing a claim in the coming months.

If this settlement is approved by the judge supervising multidistrict litigation (MDL) pending in the U.S. District Court for the Central District of California, Toyota will launch a new customer-support program that will provide prospective supplemental coverage for certain vehicle components and will retrofit additional non-hybrid vehicle models subject to the floor mat recall with a free brake override system (BOS) to provide an added measure of confidence.

“From the very start, this was a challenging case,” Berman added. “We brought in automotive experts, physicists and some of the world’s leading theoreticians in electrical engineering to help us understand what happened to drivers experiencing sudden acceleration. We are extraordinarily proud of how we were able to represent the interests of Toyota owners, and believe this settlement is both comprehensive in its scope and fair in compensation.”

Limited details of the settlement are available at www.hbsslaw.com/toyota, www.ToyotaELsettlement.com or by calling 1-877 283-0507.

More information will be available once the court gives preliminary approval to the settlement.