Toyota Recall Lawsuits Result in $1.4B Settlement Over Acceleration

Toyota has reached an agreement to pay $1.4 billion to settle lawsuits claiming that recalls issued for millions of vehicles, due to problems with sudden unintended acceleration, lowered the value of consumers’ Toyota and Lexus vehicles. 

In a quarterly report issued this week, the Japanese automaker noted that it was taking a $1.1 billion charge for the recall settlement, which must be approved by a California judge. According to a report by Bloomberg News, the total costs of the settlement may reach $1.4 billion to resolve the lawsuits.

Sudden acceleration problems with Toyota vehicles led to the recall of millions of Toyota and Lexus vehicles in 2009 and early 2010. Those recalls were issued in several waves, starting with 3.8 million vehicles recalled for floor mat problems in September 2009, followed by other recalls that eventually affected a total of more than 13 million Toyota and Lexus vehicles.

Following the recalls, Toyota faced a number of lawsuits filed on behalf of individuals involved in accidents caused by unintended acceleration of vehicles. However, a number of class action complaints and individual lawsuits were also filed on behalf of owners of Toyota vehicles who claimed that their vehicles lost value due to the recall problems.

According to allegations raised in the lawsuits, much of the appeal of owning a Toyota for many was the belief that the vehicles lose less value over time when compared to other cars, due to the prior safety record. Plaintiffs claimed that the Toyota recalls, and a government investigation that revealed that the company dragged its feet after it knew there was a problem, hurt the value of their cars.

Recalls, Government Investigations, Damaged Toyota Image

In December, 2011 the U.S. Department of Transportation announced that Toyota was being fined $32.4 million following two federal investigations into how it handled unintended acceleration recalls and steering rod defects.

Government investigators say the company stalled on the recalls and failed to notify federal safety officials about the problems in a timely manner. The fines were the maximum allowed by law.

The Toyota recall settlement includes $250 million in cash for former owners who sold vehicles affected by the recalls, and another $250 million for those who still own an affected vehicle. It also covers any Toyota that had an electronic throttle control system, which many lawsuits alleged was defective and caused the acceleration problems.

Also included in the settlement is the cost of installing brake override systems in 3.25 million vehicles, to prevent out-of-control acceleration problems in the future. Another $200 million will be paid in attorney fees.

The settlement does not include Toyota personal injury and wrongful death lawsuits filed by people who were hurt or by the families of those killed when their Toyota vehicles raced out of control and crashed.

Hundreds of those cases have been centralized and consolidated under Judge James V. Selna for pretrial proceedings in the U.S. District Court for the Central District of California in Santa Ana as part of a multidistrict litigation (MDL). The first trial is slated to begin in February 2013.

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