Settlement offers proof of the need for tort reform
Toyota Motor Corp. has bungled many aspects of the unintended-acceleration mess. But the proposed settlement of lawsuits involving a presumed loss of value in some used Toyota and Lexus models is outrageous and amounts to legalized extortion, which could total as much as $1.4 billion.
It is another egregious example of profiteering plaintiffs' attorneys who aggregate small, insignificant claims to ensnarl a company in litigation and legal paperwork, leaving a business, usually with deep pockets, little choice but to pay off and move on.
The claim for lost value is absurd. Projected residual or resale values, as calculated by ALG, Kelley Blue Book and others, are guidelines, not hard and fast pricing tables. When selling or trading a used vehicle, it is up to the owner to negotiate the best price possible.
Automobile owners ought to realize that panic selling, whether on Wall Street or at a used-car lot, won't bring the best price.
Most plaintiffs suffered little or no loss of value, and most won't see much if any cash. The proposed settlement calls for Toyota to compensate some former customers for lost resale value, gives current owners free brake-override systems or checks of as much as $125, and offers warranties of as long as 10 years on some parts.
By comparison, the 85 lawyers at 25 firms who concocted the litigation will get a payday of as much as $227 million in fees and expenses.
It is hard to blame Toyota for settling. The plaintiffs are current or former Toyota and Lexus owners whom the company would like to satisfy and keep as customers. The nuisance litigation also distracted the company and its lawyers from hundreds of serious lawsuits involving wrongful-death and product-liability claims.
Toyota may have been able to head off some of its problems. The company, which blames the reports of unintended acceleration on sticky accelerator pedals, improperly fitted floor mats or driver error, ended up recalling more than 8 million vehicles in the United States.
But initially, the company failed to act on consumer complaints. Then it was tardy in reporting potential safety defects to the National Highway Traffic Safety Administration and initiating the recalls.
In the wake of the ugly publicity surrounding the claims of unintended acceleration, Toyota acknowledged that parts of the company needed fixing, including its product development process and corporate culture.
Plaintiffs' attorneys gleefully called the settlement "a landmark, if not a record." Predictably, it will prompt more trumped-up class-action lawsuits. Sadly, it's more evidence that there must be tort reform.