Law360, New York (November 10, 2016, 12:50 PM EST) — Toyota Motor Co. on Wednesday agreed to pay approximately $3.4 billion to compensate owners of certain truck models with frames that are prone to rust corrosion and perforation in order to settle a proposed class action lawsuit in California federal court.
The owners of certain Tacoma, Tundra and Sequoia trucks asked U.S. District Judge Fernando M. Olguin to preliminarily approve the deal, which provides inspections for the approximately 1.5 million vehicles possibly affected by the defect, as well as the replacement of frames for an estimated 225,000 trucks.
“These settlement benefits are substantial and, in large part, encompass or exceed the relief that could be obtained through a jury verdict in favor of the class,” the owners said.
The settlement seeks to end a proposed class action complaint launched in March 2015 by owners from nine states, including New York, California and Florida, alleging that the frames of model year 2005 to 2009 Tacoma vehicles were not properly protected from rust corrosion, and that Toyota knew about the defect but failed to do anything about it.
The owners said Toyota took certain steps to remedy the situation, such as warranty extensions, recalls and “limited service campaigns,” but argued that they fell short because all of these actions only covered an isolated percentage of all allegedly affected trucks. For example, the service campaign only covered Tacomas in certain cold weather states, such as Pennsylvania, Massachusetts and Illinois.
The complaint claimed that Toyota violated the Unfair Competition Law, and that the automaker also breached the owners’ warranties, among other claims.
Settlement negotiations began in March 2016 after months of litigation, including multiple motions to dismiss and an amended complaint filed in June 2015. The settlement reached is based off of a second amended complaint, filed with the court on Nov. 8. This complaint, for the first time, incorporated not only Tacoma owners, but Tundra and Sequoia owners as well.
The settlement covers 2005 to 2010 Tacomas, 2007 to 2008 Tundras, and 2005 to 2008 Sequoias. According to Tuesday’s motion, Toyota believes that an inspection for each of the 1.5 million vehicles will cost approximately $60, totaling $90 million, and the replacement frames for the 225,000 vehicles will cost $15,000 each, for a total of $3.375 billion.
Toyota has promised that the inspection and replacement campaign is at no cost to the vehicle owners. Additionally, the program will last 12 years from the date the vehicle was sold or leased, meaning any future perforations will be covered as well. The replacement and inspection policy remains valid if an owner sells the vehicle to another party.
The owners also asked Judge Olguin to certify a class of Tacoma, Tundra and Sequoia owners or lessees from the 50 states, Puerto Rico, Washington D.C. and all U.S. territories.
The proposed settlement allows class counsel to apply for a $9.75 million award of attorneys’ fees, as well as up to $150,000 in reimbursement costs and expenses and incentive awards of $2,500 for each class representative.
In a statement to Law360, a spokesperson for Toyota said the automaker was glad to resolve the matter.
“We want our customers to have a great ownership experience, so we are pleased to resolve this litigation in a way that benefits them and demonstrates that we stand behind the quality and reliability of our vehicles,” the spokesperson said.
Counsel for the owners did not respond Thursday to requests for comment.
The owners are represented by Timothy G. Blood and Paula R. Hearst of Blood Hurst & O’Reardon LLP, Ben Barnow and Erich P. Schork of Barnow & Associates PC, Philip J. Milligan of Milligan Law Offices, Michael L. Roberts of Roberts Law Firm PA, and Jeffrey S. Hurst of Monteleone & Mccory LLP.
Toyota is represented by Peter W. Herzog III and Galen D. Bellamy of Wheeler Trigg & O’Donnell LLP, and David L. Schrader and Esther K. Ro of Morgan Lewis & Bockius LLP.
The case is Brian Warner et al v. Toyota Motor Sales USA Inc., case number 2:15-cv-02171 in the U.S. District Court for the Central District of California.
–Editing by Emily Kokoll.