Toyota Billion-Dollar Class Action Settlement and Probation

In a huge victory for car safety advocates, a US federal judge in New York has accepted an offer by Toyota Motor Company to pay $1.2 billion to settle criminal charges that the carmaker deliberately concealed serious safety flaws in some of its vehicles. The Toyota settlement is the largest ever penalty assessed against a carmaker and settles a slew of claims that have been filed against the company over the past several years. Under the agreement, Toyota’s business practices, its safety communication practices and its handling of accident reports will be subject to close scrutiny by U.S. regulators over the next three years. If regulators uncover any other irregularities during the three-year Toyota probation period, all criminal charges and claims against the company will be reopened.

Criminal Charges

The Toyota settlement payout stems from criminal charges filed against the company by the US government. Regulators had charged the company with deliberately misleading consumers over two safety problems in Toyota vehicles that caused the vehicles to suddenly accelerate even when drivers attempted to stop them. The issue has dogged Toyota for close to seven years, and is believed to have contributed to the deaths of at least five Toyota owners. Hundreds of class action lawsuits have been filed against Toyota over the issue. Toyota has already paid close to $17 million in fines to the federal government over a safety defect on its floor mats that caused gas pedals to stick, and an additional $17.5 million in fines over accelerator pedal defects.

Landmark Settlement

Safety advocates have hailed the Toyota class action settlement as a landmark victory for consumers. This is the first time that an automaker has been hit with a substantial penalty over a safety issue. Federal regulators had charged Toyota with deliberately failing to communicate details of the safety defects to the National Highway Traffic Safety Administration. They accused the company of knowing about the problem internally for months but choosing not to recall vehicles until being forced to do so after a slew of runaway car reports from dozens of Toyota owners. One of the incidents resulted in a fatal accident that killed four people. As part of the settlement agreement, Toyota admitted to deliberately deceiving regulators about the problem and keeping them in the dark about it. The settlement puts an end to the carmaker’s legal problems with regulators. But the company still faces numerous other consumer lawsuits and wrongful death lawsuits as well.

Benchmark for the Future

Many predict that the settlement will become a benchmark for future cases involving automobile safety. One immediate impact could be on a similar case between government regulators and General Motors. The Detroit automaker is currently battling charges that it knew about an ignition switch problem for at least a decade but did not inform regulators or consumers about the issue. GM has so far recalled close to 2 million cars over the fault that causes power to care safety systems to be abruptly switched off when the car is on the road. The problem is believed to have caused at least 31 accidents and 12 fatalities so far.