Toyota ordered to pay auto dealer $15.8 million in trial over Prius defects
An Orange County jury Monday morning ordered Toyota to pay $15.8 million to one of its largest dealers in Southern California, who alleged that the company’s recalls to fix the electric power system of its popular Prius models did not remedy safety defects.
Roger Hogan, who operates dealerships in Claremont and San Juan Capistrano, contended in a two-month trial in Orange County Superior Court in Santa Ana that the automaker retaliated against him after he began raising concerns about the safety of the Prius’ electric power system in 2017 and for his effort to promote a safety recall software system in 2011.
The jury decided that Toyota had breached “good faith and fair dealing” in its contracts with Hogan. That decision related specifically to Hogan’s allegations that the Prius recall in 2014 did not remedy safety defects, Hogan’s attorney, Amnon Siegel, said. (Siegel later clarified that statement, saying the defect allegations are implied in the verdict, though the jury form and the jury verdict did not make clear that its decision was based on that issue, as opposed to other matters alleged in the case.)
Toyota spokesman Eric Booth said, “Despite claims by plaintiffs’ counsel, neither the verdict form nor the jury’s decision indicated that the finding on breach of good faith and fair dealing was in any way related to vehicle safety issues.”
Hogan had alleged in the trial that Toyota damaged his dealership by not providing enough top-selling truck and sport utility models. An academic expert analyzed the vehicles Toyota provided to Hogan and his sales, concluding that the allocations cost him millions of dollars in lost profits.
Hogan also alleged that Toyota began mistreating his dealership after he unveiled a software program in 2011 that was intended to raise awareness of recalls among Toyota owners by notifying them when they had not brought in vehicles for recall repairs. Hogan said the system, called Autovation, was a public service; Toyota said it was a marketing device that depended on improper mining of data from its proprietary website.
“It is true vindication for Roger Hogan and his family,” Siegel said. “This man is small potatoes compared to Toyota, the largest auto manufacturer in the world.”
The matter also resurrects some of the issues of transparency on safety that Toyota encountered in 2009 over allegations that its vehicles were subject to sudden acceleration. The company agreed to a deferred prosecution agreement on criminal allegations and paid billions of dollars in fines and civil judgments.
The company is still facing a civil suit seeking class-action status, filed in U.S. District Court in Los Angeles, which alleges that its Prius safety recalls failed to fix the vehicle’s defects and diminished the value of Prius vehicles on the market.
In a statement, Toyota officials said, “While we respect the jury’s decision, we remain confident the evidence and testimony clearly demonstrated that Toyota abided by its contractual obligations to the Hogan dealerships and has been transparent with its dealers, regulators and customers regarding the vehicle issues raised at trial. We will consider our options moving forward.”
In the jury verdict form, jurors said that Toyota had in one way or another concealed material facts from the dealerships, interfered with them and harmed them. But the jurors did not find Toyota acted with intent and therefore rejected allegations of fraud that could have dramatically increased the verdict with punitive damages. Hogan originally sued for damages of $100 million.
The jury also determined for unspecified reasons that Hogan had acted with “unclean hands” and reduced its verdict by $2.3 million. The jury form does not disclose why it made that decision, though Booth noted, “The jury heard evidence that the Hogan dealerships engaged in misconduct towards Toyota by data mining Toyota’s systems and by publicly disparaging the Toyota brand.”
Toyota had acknowledged defects in the 2010 to 2014 Prius in a 2014 recall. The problem involved a key part known as an inverter, which could overheat and fry itself, leaving the car with limited or no power.
The Times disclosed the existence of the dispute between Toyota and Hogan last year. The decision by Toyota to remedy the overheating problem in the inverter by modifying the software probably affected the vehicle’s fuel efficiency and emissions, according to academic experts on hybrid vehicle systems who were interviewed by The Times.
During the trial, a Toyota executive testified that the company had replaced 18,000 to 20,000 failed inverters and inverter parts after it issued the 2014 safety recall.
The manufacturer decided to issue new software in 2014 to prevent the overheating and make sure the car would enter a “limp home” mode if the inverter did overheat, so that drivers could pull over to the side of the road. But the software was not fixing the problem, Hogan said, and he said he saw Priuses returning to his dealerships in Claremont and San Juan Capistrano for repairs after the software fix had been made.
By December 2017, Hogan had filed a petition with the National Highway Traffic Safety Administration, asking that it initiate a defect investigation. About the same time, Hogan sued Toyota, alleging that it had retaliated against him for raising safety concerns.
After half a dozen meetings with Toyota and one with Hogan during 2018, NHTSA nudged Toyota to issue a new recall in October, in which the 2010 to 2014 Prius’ inverter would again be reprogrammed. But instead of preventing an overheating, this time the recall was only to change how the car would handle if the inverter overheated.
The trial included testimony by Toyota technicians, Toyota engineers and two motorists who described what they felt were frightening experiences when their Priuses lost power in traffic and forced them to avoid accidents. Toyota attorneys asserted that there were no documented cases of crashes caused by their system, so therefore the safety recalls had worked.
In an interview, Hogan said he was satisfied by the verdict, adding, “The stakes in this were very high because it involved public safety. It is not something we were willing to compromise on. It was a fight we had to fight. Our motivations went far beyond monetary rewards.”
On July 2, the day the jury began deliberating, Toyota issued a recall affecting another part of its Prius electric power system. The company notified its dealers of a recall of 500 Prius Model C vehicles made in 2018. The recall involves a manufacturing issue with the direct current converter, a part of the power system that could cause a loss of power and “increase the risk of a crash,” according to notices sent to dealers.
The company said that is distinct from the component affecting previous recalls. Toyota said it is still considering the remedy but will replace the direct current converter if necessary.
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