Toyota to pay $1.1 bln to settle sudden acceleration suit

Toyota to pay $1.1 bln to settle sudden acceleration suit. December. 28, 2012 03:09. witness@donga.com.

Toyota Motor will pay 1.1 billion U.S. dollars to settle class-action litigation suit representing 16 million American drivers who claimed that their cars suddenly accelerated on their own. This is the biggest settlement in U.S. history for a car defect.

The law firm representing the plaintiffs has also taken on a class-action suit for 845 billion won (788 million dollars) against Hyundai Motor and Kia Motors.

Toyota’s U.S. subsidiary on Wednesday said it filed an agreement with the plaintiffs in the U.S. District Court of California to settle the class-action suit over the recall involving the accidental acceleration of vehicles. The case will be settled if the court accepts the agreement.

The Japanese carmaker said it will give cash to those who leased or bought new or used Lexus Scion or Camry Avalon vehicles, which were recalled due to accidental acceleration, between September 2009 and December 2012. More specifically, 250 million dollars will go to about eight million people with recalled vehicles, 250 million dollars to those having a car whose brake system was not fixed, about 200 million to 400 million dollars to 3.25 million people whose cars had gadgets that prevented unintended acceleration, and 400 million dollars for the extension of warranties for engine control systems. The Wall Street Journal said about 16 million drivers will benefit from the settlement.

The class-action suit was triggered by a car accident that occurred Aug. 28, 2009, when four people were killed in a Lexus ES 350 that crashed while going 190 kilometers per hour as a result of uncontrollable acceleration. Lawyers and civic groups raised questions about the engine control and the acceleration systems of Toyota vehicles.

The carmaker found that ill-fitting mats covering the gas pedal caused the problem and recalled 14 million cars across the globe. Toyota President Akio Toyoda apologized for the problem while attending a U.S. congressional hearing in February 2010.

The U.S. Highway Traffic Safety Administration imposed a fine of 66 million dollars on the Japanese carmaker on top of the compensation settlement, which was also the highest fine imposed on a car manufacturer in the U.S. After hundreds of drivers sued Toyota, a U.S. federal court in May 2010 appointed Hagens Berman, the most powerful law firm for class-action litigation cases, to represent Toyota owners in a class-action lawsuit.

Toyota chose this agreement to avoid legal responsibility in a time-consuming litigation. The company is known to have lost about 3.1 billion dollars due to recalls and slow sales stemming from this case.

The agreement, however, is not the end of the debacle. Another lawsuit has been filed in the Orange County Court of California over the violation of consumer protection law, and two lawsuits filed by 28 states over unfair trading practices are pending. Thus Toyota’s legal costs will likely grow.

For Korean car manufacturers, what Toyota has been going through is a wake-up call. Last month, Hagens Berman took on a class-action case against Hyundai Motor and Kia Motors in which the plaintiffs demanded 775 million dollars in compensation for exaggerated fuel efficiency, which resulted in car owners paying extra gas costs and losses in used car value. The lawsuit involves about 700,000 cars spanning 13 models sold last year such as the Hyundai Accent and Genesis. How big the case will grow is anybody`s guess because the law firm is still gathering more plaintiffs on its website.