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Toyota defective product probe leads to $1.2 billion settlement

“Toyota’s conduct was shameful.” Those were the words of U.S. Lawyer General Eric Holder on March 19 when he announced the $1.2 billion settlement with the automaker. The settlement follows a lengthy criminal investigation of the sudden acceleration problem that we have discussed previously. The settlement is unique but not just because it is among the highest ever for an automaker. Unlike corporate defendants in many cases, Toyota admitted wrongdoing.

Toyota has already spent billions of dollars dealing with the consequences of the defective product in over nine million vehicles. The problem was blamed on stuck accelerator pedals as well as floor mats. Automakers are not generally held criminally liable for product defects. However, the Federal Bureau of Investigation reportedly found that, contrary to its public statements, Toyota knew about the problem. According to Holder, Toyota “intentionally concealed information and misled the public” about the acceleration problem linked to numerous accidents and deaths.

Toyota’s chief legal officer in North America said the automaker takes “full responsibility” for its actions and hopes that this settlement after the four-year criminal investigation is “a major step toward putting this unfortunate chapter behind us.” However, the company is still facing other federal and state lawsuits.

With General Motors in the news recently in Florida and worldwide over its alleged failure to take action on a problem that caused vehicles to shut off suddenly, federal officials limited their press conference to discussing Toyota. However, several comments may have been telling. Holder cautioned that “other car companies should not repeat Toyota’s mistake,” and the U.S. lawyer in charge of the Toyota investigation said, “The entire auto industry should take notice.”

Some legal analysts speculated that Toyota may have been motivated to settle with the Justice Department after a jury ruled against it last fall in one of the individual suits. Toyota had prevailed in several other cases. However, in this one, the automaker was ordered by a jury to pay a total of $3 million to the families of two people, one of whom was killed. These lawsuits have been a costly experience for the automaker, and one that has continued to bring unwanted negative publicity. The fact that plaintiffs and their lawyers have kept up the pressure to hold Toyota accountable for its actions likely played some role in its decision to admit its accountability.

Source: The New York Times, “Toyota Reaches $1.2 Billion Settlement in Criminal Inquiry” David S. Joachim and Matt Apuzzo, Mar. 19, 2014

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