Toyota’s War With Dealer Over Recalls Cost It $16 Million

Toyota Motor Corp. must pay $15.8 million to a California dealer who accused it of retaliating against him because he had developed safety-recall software that was costing the automaker millions of dollars in car repairs.

A state court jury in Santa Ana on Monday found Toyota liable for unfair interference in a contract Roger Hogan’s two dealerships had with the automaker. But the jury found Toyota didn’t intend to deceive the dealerships by hiding material facts, and as a result didn’t have to pay punitive damages.

“Other dealerships should be aware that Toyota cannot mishandle safety issues and cannot retaliate against dealerships for their commitment to safety without consequences,” said Amnon Siegel, Hogan’s lawyer. “This jury has put its foot down and said there will be consequences.”

The owner of Capistrano Toyota and Claremont Toyota accused the Japanese carmaker of concealing that it was planning to oust him from its franchise system as far back as January 2011 while he was investing millions of dollars to expand and renovate his dealerships.

Hogan claimed that his Autovation program, which he started in 2011 after a massive recall related to complaints about sudden acceleration, was much more efficient than Toyota’s own system in identifying and contacting customers whose vehicles hadn’t had repairs done.

According to Hogan, Toyota wanted to kill his program, which was also used by other Toyota dealers, and oust him because it was costing the carmaker too much money to fix all the cars Autovation identified.

Cars Unsold

“I still have these hundred cars sitting in my lot that I can’t sell,” Hogan said after the verdict. “Even though we prevailed, I still have a hundred vehicles and I will not sell these cars. They’re still unsafe. The jury saw that we did the right thing by stop selling those cars. They understood that they’re still dangerous.”

Toyota noted the jury discounted $2.3 million from its judgment because it found the dealerships weren’t blameless either and engaged in misconduct.

“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,” the company said in an emailed statement. “We will consider our options moving forward.”

At the trial, Toyota denied the allegations and argued that Hogan brought the lawsuit because the carmaker didn’t want to go along with the succession plan for his dealerships. The Autovation program was a for-profit side business Hogan was running in violation of his agreements with Toyota, the automaker’s lawyer said.

The case is Hogan v. Toyota Motor Sales U.S.A., 30-2017-00933647, Superior Court of California, Orange County (Santa Ana).