LOS ANGELES--(BUSINESS WIRE)--In a groundbreaking action, a prominent and longstanding Toyota dealer, Roger Hogan, and his Toyota dealerships in Claremont and San Juan Capistrano, California, have filed suit in Orange County Superior Court against Toyota Motor Sales, U.S.A., Inc. for fraud and breach of the covenant of good faith and fair dealing. The lawsuit seeks recovery of compensatory damages, plus punitive damages, for Toyota’s fraudulent scheme. The basis for the lawsuit is disturbing in terms of its implications not only for Mr. Hogan and his family but also for drivers of Toyota vehicles.
The lawsuit alleges that following Toyota’s massive, highly publicized, multi-billion dollar safety recall in 2009-2014, Hogan, who had been in business with Toyota for almost 40 years, created a software technology called Autovation. This software, when installed at and utilized by Toyota dealers, enabled the dealer to identify customers with uncompleted safety recalls—many involving dangerous defects such as unintended acceleration—and send them letters offering a fix. The recalls addressed dangerous defects such as “sticky acceleration pedals” and “floor-mat entrapment” that caused deaths and serious injuries—over which Toyota was charged criminally and fined $1.2 billion. Hogan and his dealerships developed the Autovation technology because many Toyota customers—hundreds of thousands—did not know their vehicles had open safety recalls.
According to the lawsuit, Toyota sent out only one recall notice to customers, and many customers, for various reasons, did not receive or ever see the notice. Also, the antiquated system Toyota put in place made it difficult, if not impossible, for dealers to identify open safety recalls when customers brought in their vehicles for service. Thus, per the lawsuit, Toyota was not fixing hundreds of thousands of recalled vehicles, despite hazards jeopardizing customer safety. The Autovation program was wildly successful, according to the lawsuit, enabling Hogan and other Toyota dealers to identify and notify thousands of customers with open safety recalls who otherwise would have been missed.
Of course, Toyota was required to pay for the additional safety recall work that Hogan’s Autovation Program was generating. Notwithstanding the positive effect of Autovation for Toyota customers, and the benefits to dealers who were servicing more customers, per the lawsuit, Toyota sought to, and did, kill the Autovation program in order to avoid having to pay multi-millions of dollars for repairs and fixes. According to the lawsuit, Toyota went even further, hatching a plan to rid itself of Hogan as a dealer.
As set forth in the lawsuit, Toyota told Hogan to create a succession plan for his dealerships, but then rejected Hogan’s sons for ownership and management positions, knowing that Hogan’s sons are his succession plan. And, as set forth in the lawsuit, Toyota did more to force Hogan out:
- Toyota instructed Hogan to purchase additional land for Capistrano Toyota (which he did for $2.5 million), only to later deny him the additional vehicles the new land entitled him to.
- Toyota claimed Claremont Toyota was not “sales efficient,” but Toyota continually refused to allocate the cars Claremont Toyota needed to reach Toyota’s view of sales efficiency.
- Toyota failed to allocate vehicles fairly and in good faith to Hogan’s Dealerships by, among other things, favoring Hogan’s competitors in vehicle allocation through Toyota’s secretive “General Manager’s Pool.”
- Toyota directed its financing arm to change the structure of its loan to Capistrano Toyota, tripling Capistrano Toyota’s monthly payments and slashing its value.
- Toyota extended the Capistrano Toyota franchise agreement for two years only and often only for months at a time, contrary to its customary practice, so that it could continue to pressure Hogan.
- Toyota unfairly distributed its best inventory to favored dealers in the region, and not to Hogan’s Dealerships.
- Toyota diverted Hogan’s customers to competing dealerships.
- Eventually, Toyota came right out and told Hogan to sell.
The lawsuit alleges that Toyota put corporate profits over customer safety, that millions of Toyota vehicles still have unrepaired safety recalls, and that Hogan and his dealerships have lost millions in revenues and value as a result of Toyota’s retaliatory actions. Per Skip Miller, counsel for plaintiffs at Miller Barondess, LLP in Los Angeles, “These are horrific facts. We look forward to our day in Court and putting Toyota before a jury.”
The plaintiffs, Roger Hogan and his dealerships, are being represented by Miller Barondess, LLP in Los Angeles and, in particular, partners Skip Miller and Amnon Siegel. A copy of the lawsuit is attached hereto.
