Toyota Wins Preliminary Approval of $1.1 Billion Recall Accord

Toyota Motor Corp. (7203) and lawyers suing the company persuaded a judge to give preliminary approval to a $1.1 billion settlement of claims that recalls for unintended acceleration hurt the value of U.S. customers’ vehicles.

The terms of the settlement filed Dec. 26 are “fair, reasonable and adequate,” U.S. District Judge James V. Selna in Santa Ana, California, said yesterday in granting preliminary approval. Final approval will be determined following a fairness hearing set for June 14, Selna said.

The settlement resolves the economic-loss portion of the Toyota sudden-acceleration litigation. Class, or group, actions were filed on behalf of Toyota owners who contended the company drove down the value of their vehicles by failing to disclose or fix defects.

Selna yesterday granted preliminary certification of the Toyota owners as a class action, for settlement purposes only and contingent on final approval of the agreement.

The cases were combined in a multidistrict litigation before Selna, who is also handling the federal personal injury and death suits. Lawsuits claiming personal injuries and deaths caused by such incidents remain pending, with the first federal trial set for February in Santa Ana.

10 Million

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.

Toyota has 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 month 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.

“We are gratified that Judge Selna has granted his preliminary approval of the settlement, which will provide value to Toyota customers and provides an added measure of confidence in our vehicles,” Julie Hamp, Toyota’s U.S. chief communications officer, said yesterday by e-mail.

‘Swift’ Approval

The “swift preliminary approval” will allow notices about how to participate in the settlement to be mailed in March to current and former Toyota owners, Steve Berman, co-lead plaintiffs’ lawyer, said in a statement issued yesterday by his law firm Seattle-based Hagens Berman Sobol Shapiro LLP.

Toyota announced Dec. 26 it would take a writedown of $1.1 million to cover the cost of the settlement. The total value of the settlement may reach $1.4 billion, including as much as $200 million in attorneys’ fees, lawyers for the plaintiffs said.

Under the settlement, Toyota will install a brake override system in more than 3 million vehicles that were subject to floor mat entrapment recalls, provide a fund of $250 million for former Toyota owners who sold their cars from Sept. 2, 2009, to Dec. 31, 2010, and provide an additional $250 million to current Toyota owners whose vehicles aren’t eligible for brake- overrides, according to yesterday’s Hagens Berman statement.

Court Approval

Toyota will pay as much as $200 million in fees and $27 million in costs to plaintiffs’ lawyers, pending final court approval, according to the Dec. 26 settlement filing.

Toyota didn’t admit to any defects in its vehicles or any wrongdoing in the settlement.

Toyota’s $1.1 billion writedown also covers an agreement in principle to resolve a lawsuit brought by the district attorney of Orange County, California, against Toyota, Hamp said Dec. 26. The Orange County suit claimed violations of consumer-protection laws through the sale of allegedly defective vehicles.

The writedown includes an agreement to settle a multistate investigation by attorneys general in the U.S., Hamp said.

The case is 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).

To contact the reporter on this story: Margaret Cronin Fisk in Detroit at mcfisk@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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