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Toyota May Issue Discount Coupons to Settle Suits : Autos: The accord would satisfy claims that customers were overcharged for vehicles between 1990 and 1994.

October 14, 1995|From Bloomberg Business News

SAN FRANCISCO — Toyota Motor Sales U.S.A. confirmed Friday a tentative agreement under which it will issue $1.275 billion in discount coupons to settle three class-action suits claiming its car dealers overcharged customers.

The suits claim the company inflated invoices with phony costs.

Under the previously unannounced settlement, which received preliminary approval from Federal District Judge Marilyn Hall Patel last month, 8.5 million customers who bought or leased Toyotas between 1990 and 1994 would receive coupons for $150 off a new or used Toyota. Customers could use $50 of the coupon to defray service or repair bills, but only if the bills exceed $120.

Toyota Motor Sales, a U.S. subsidiary of Japan's Toyota Motor Co., would pay as much as $4.5 million in attorneys fees to the lawyers who negotiated the deal on behalf of car buyers.

Car dealers and their advertising associations have not yet approved the plan.

J. Thomas Rosch, an attorney representing Toyota Motor Sales U.S.A., said Toyota admits no wrongdoing in the proposed settlement. He said the company entered the agreement "simply so that everybody can get back to selling Toyotas without the distractions of multiple lawsuits."

Charles Renfrew, a former U.S. Appeals Court judge appointed by Patel to review the settlement, concluded the coupons have "significant economic value."

In his report to Patel, Renfrew said the agreement is different from a widely criticized class-action settlement of suits against General Motors, which also used coupons.

The GM settlement grew out of product liability claims about its allegedly fire-prone pickup trucks. It would have distributed coupons for a $1,000-discount on a new truck.

Last week the Supreme Court upheld an appeals court, which rejected the GM plan because owners could not transfer the coupons to anyone outside their immediate family and because the coupons were good for only 15 months.

By contrast, the Toyota coupons would be good for up to five years and are freely transferable. "There are not the restrictions on transferability here that existed in the GM pickup truck settlement," Renfrew wrote.

Three court-appointed experts estimated that between $363 million and $518 million of the Toyota coupons would eventually be redeemed.

The suits against Toyota were filed in 1994 after a former sales manager alleged that dealer invoices were routinely inflated with phony charges for regional advertising associations. The settlement acknowledges that dealers received rebates of the advertising charges "in certain instances."

Toyota has begun mailing notices of the proposed settlement to its 12 regional advertising associations which will be given the option of participating in the settlement. Dealers will then be contacted to see if they wish to participate.

If a majority of both groups agree, customers will be notified of the proposed settlement beginning in January.

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