Toyota’s troubles with defective accelerator pedals have attracted a great deal of media attention. While the idea of cars racing wildly out of control makes for dramatic imagery, sudden acceleration is an extremely rare event. Only a handful of lawsuits have alleged that Toyota’s accelerator problems led to an accident. While these lawsuits are certainly serious, they are similar to the cases all major automakers face on a regular basis. Toyota’s much bigger legal challenge will come from “diminution in value” class action lawsuits.
Diminution in value claims against Toyota will probably go something like this:
• The bad publicity surrounding Toyotas has hurt public confidence in the Toyota brand.
• Therefore, demand for Toyotas, both used and new, will go down.
• Lower demand for used Toyotas means lower prices, so current owners will not get as much for their used cars if they choose to sell them or trade them in for a different car.
• Plaintiffs will therefore claim that Toyota owes them money for the difference between what the vehicle was worth before the accelerator controversy and what it is worth now.
At first blush, a diminution in value claim doesn’t sound that bad. So what if the value of a car went down a few hundred dollars? Toyota can certainly afford that. But the problem comes when you multiply a few hundred dollars by the 5.3 million vehicles involved in the U.S. recall or by the many more millions of Toyotas on the road in this country today. With class action diminution in value lawsuits pending in multiple venues, these lawsuits can snowball into “bet the company” litigation.
While Toyota has a difficult legal road ahead, diminution in value claims present significant challenges for the plaintiffs. For example, it can be very difficult for the plaintiffs to show that a drop in the value of a used car is attributable to something as nebulous as negative publicity. The value of almost all used cars decreases steadily over time, even without questions concerning vehicle safety. Used car values also depend on a myriad of factors, including vehicle condition and mileage, as well as the negotiating skills of the seller and the buyer. As a result, it is very difficult to establish a “true” dollar value for any used car at any given time, and even more difficult to attribute any changes in that value to a single outside influence. As a result, the defense can often challenge the plaintiffs’ damages theory, which is the very heart of diminution in value claims.