“It may sound silly, but lost resale value is what cost Toyota a whopping $1.3 billion in claims when those suits were settled in late 2012.” And if lawyers can extract $1.3 billion in a case where there was nothing wrong with the cars, imagine how much they might extract in a case where there was. [Jalopnik]
I was a guest Tuesday on the Roger Hedgecock program at the San Diego Union-Tribune, discussing the way Washington, D.C. seems to have come down at least as hard on Toyota as on General Motors, maybe harder, even though the safety shortcomings falsely attributed to Toyota appear actually to be present in the GM case.
One striking feature of the GM story is the extent to which a culture of putting as little as possible on paper appears to have undermined GM’s capability to grasp the scope of the safety problem with the flimsy ignitions and their relationship to nonfunctional airbags. Bill Vlasic of the New York Times reports:
To the legal department at General Motors, secrecy ruled. Employees were discouraged from taking notes in meetings. Workers’ emails were examined once a year for sensitive information that might be used against the company. G.M. lawyers even kept their knowledge of fatal accidents related to a defective ignition switch from their own boss, the company’s general counsel, Michael P. Millikin.
As I’ve often noted, organizations gripped by fear of legal consequences or hostile oversight often develop a “put as little as possible on paper” mentality, even though such a mentality regularly proves counterproductive to the organization’s mission by fostering ignorance and lack of coordination and allowing bad practice to take root.
“As a big employer that the government made a big bet on, ‘GM starts off in a position where institutional Washington has to be rooting for it to come through,’ said Larry Kamer, a public affairs strategist who worked in the past for GM and Toyota.” [Washington Post, related] Talk about spotting a dangerous defect that needs fixing…
Last week the Department of Justice announced a deal with Toyota in which the Japanese automaker would fork over $1.2 billion and place itself under supervision for allegedly not being forthcoming enough with information at the height of the 2009-2010 panic over claims of unintended acceleration in its cars. The acceleration claims themselves had turned out to be almost entirely bogus, and were refuted in a report from the federal government’s own expert agency, NHTSA. Instead, the prosecution relied on a single count of wire fraud: Toyota had supposedly given regulators, Congress and the public an erroneously positive view of its safety efforts. It should therefore have to “forfeit” a huge sum supposedly related to the volume of business it did over a relevant period.
I’ve got an opinion piece in Monday’s Wall Street Journal (unpaywalled Cato version here, related Cato post here) about this whole appalling affair, which should frighten other businesses that might face draconian charges in future not just for compliance infractions, but more broadly for defending their products in the court of public opinion. Meanwhile, the Justice Department’s grandstanding and demagogic press release goes to some lengths to leave the impression “that unintended acceleration is some mysterious phenomenon of auto design unrelated to flooring the accelerator.” Someone here is irresponsibly misleading the motoring public and withholding vital safety information, but it’s not Toyota.
A few related links: NHTSA unintended acceleration report, Car & Driver’s coverage, and my 2010 opinion piece. And Holman Jenkins at the WSJ (paywalled) compares the still-unfolding story of ignition problems at GM, also discussed by Paul Barrett at Business Week.
I’ve got a new post up (my first, in fact) at Cato at Liberty taking issue with my friends at the Competitive Enterprise Institute over their petition to the Federal Trade Commission asking it to investigate General Motors’s ridiculous bailout ad campaign.
In 1992, Diana Maychick drove her mother’s Oldsmobile back to Washington Place in Greenwich Village, and got out. Her mother, the 74-year-old Stella Maychick, slid over from the passenger seat to the driver’s seat, readying herself to return to Yonkers. Maycheck, a shorter-than-average woman, suddenly took off in the car, which sped up, ran two stop signs, and tore through Washington Square Park, killing five and maiming several others.
Diana Maychick is now Diana Foote, a restaurant reviewer for a Palm Beach newspaper, and recently recounted the accident, claiming the recent Toyota troubles exonerated her mother.
Which I found fascinating, because I worked on that litigation—and the evidence that Maychick hit the gas instead of the brake was so strong that the plaintiffs’ lawyers abandoned the standard specious “mysterious gremlins caused the car to accelerate” theory and replaced it with a “General Motors knew that drivers were hitting the wrong pedal but didn’t do enough to warn them” theory. I took issue with Foote’s column in a letter to the newspaper.
As for the lawsuit itself, the judge excused everyone in the voir dire who expressed the remotest skepticism about plaintiffs’ theory, and GM settled shortly after the start of trial. One certainly marvels at the chutzpah of the theory of the case, given trial lawyers’ role in trying to persuade the public that driver error couldn’t possibly be to blame.
“The House approved legislation on Thursday that would grant Chrysler and General Motors dealerships the right to challenge the companies’ decisions to close them in third-party arbitration.” The measure apparently has the support not only of Democratic leaders but of House Minority Leader John Boehner (R-Ohio). [NYT]
The supposed “bankruptcy” process that winds up sparing politically influential constituencies keeps rolling along: let’s hope the Senate can say “no”. [Detroit News via Salmon, Drum, Manzi ("seems only fair, as the dealers paid good money for these politicians")]
Hey, we took a risk suing the ailing auto giant on behalf of its investors, say the entrepreneurial lawyers. The company might have gone bust while our suit was pending, and then where would our payday have come from? But a judge cut the fees from a requested $60 million to a mere $45 million. “That adds up to a rate of $1,825 per hour, said U.S. District Judge Gerald Rosen for the Eastern District of Michigan,” notes AP. At least they’re not overpaid executives.
Wounded feelings, hostage rescues by lawyers, and Philadelphia politics:
- Sayre’s Law in action: Despite improving bar passage rates from 68% to 97%, Duquesne University Law School Dean Donald Guter has been demoted to professor, for hurting the feelings of Duquesne President Charles Dougherty;
- Oh no, not again: “New prosecutor takes fresh look at JonBenet Ramsey case”;
- Foppish Brit dandy names the ten most annoying Americanisms. Meanwhile, I need subtitles to understand most modern British television shows;
- A roundup of suppression of political speech on college campuses in 2008, from the Foundation for Individual Rights in Education;
- If you have a website domain registered through OnlineNIC, which says it’s “one of the earliest domain registrars accredited by ICANN,” consider changing registrars. The company was hit with a $33 million default judgment for “cybersquatting” domains named after Verizon trademarks. Ryan Gile has more on the perils of failing to take lawsuits seriously;
- WWFRD. What would Frank Rizzo do? Philadelphia Mayor Michael Nutter faces a “people’s indictment,” for crimes against libraries and children;
- Your tax dollars at work: General Motors files suit to recover “hostage” auto parts;
- Bargain of the century: You can buy the trading arm of Madoff Securities. Be sure to check the seller’s feedback rating, PayPal preferred, all sales final.
In the next edition of Microblog, we’ll answer the question, “How many lawyers does it take to change a lightbulb?”
A. Because protecting the UAW’s contract, and the entrenchment of auto dealers under horrible state laws, and the executives’ perks, and the CAFE-law irrationalities, and the various goodies a half-dozen other constituencies want to hold on to, is the whole point of structuring the bailout the way Congress is structuring it. You’re welcome. (Dec. 11).
P.S. At Forbes, Dan Gerstein wonders why Chrysler’s rich parent Cerberus deserves bailing out.