Class action lawyers are seizing on service bulletins as they
look for new cases to bring against auto makers, raising the risks
for manufacturers when they notify dealers of possible vehicle
problems.
The so-called technical service bulletins have surfaced in
purported class action lawsuits accusing BMW AG of leaky roofs;
Honda Motor Co. of defective torque converters; Land Rover of tire
alignment problems; Mazda Motor Corp. of faulty engine valves; and
Ford Motor Co. of spark plug issues; as well as in dozens of other
cases in recent years.
Auto makers have used the bulletins for decades to alert dealers
to potential problems with their cars and trucks. Plaintiffs'
lawyers increasingly deploy them in class actions, in support of
claims auto makers knowingly sold defective products.
"They basically tell us what the manufacturer knew and when they
knew it," said Joseph R. Santoli, a New Jersey lawyer who
represents customers in a class action against BMW. "Unfortunately,
buyers are not told about these problems ahead of time."
The service bulletins have appeared in lawsuits for decades but
are now commonplace, as plaintiffs' lawyers have peeled away from
personal injury work to focus on suits against auto makers, which
are less expensive to pursue, lawyers said.
Auto makers say the litigation hasn't altered their
practices.
A spokeswoman for Jaguar Land Rover said, "We agree the
plaintiff's bar uses Technical Service Bulletins as a basis for
class-action suits, but that does not change our practice to
continue to provide clear technical guidance to our retailers." The
spokeswoman added that the tire-wear litigation was resolved in a
settlement.
BMW, Honda, Mazda and Ford didn't respond to requests for
comment.
Class actions involving motor vehicles settle for more money, on
average, than those involving other industries. A study of
settlements from 2010 to 2013 by National Economic Research
Associates found that the average automotive class action netted
$247 million. The majority of cases that survive auto makers'
initial motion to dismiss end up settling, according to defense
lawyers.
The increase in class action claims has followed more aggressive
policing of the industry by prosecutors and regulators, industry
experts said, including the continuing criminal investigation of
General Motors Co. for an ignition-switch defect that has been
linked to more than 100 deaths. The company is also facing private
lawsuits. Two bulletins GM issued in 2005 and 2006 are central to
the litigation, according to one of the lead lawyers for the
plaintiffs.
"We don't let litigation risk get in the way of vehicle quality,
customer satisfaction or safety," said a spokesman for GM. "From
our standpoint, we have to completely put that in the background.
If it's going to happen, it's going to happen."
Last year, Japan's Toyota Motor Corp. agreed to pay $1.2 billion
to settle a U.S. criminal investigation into its disclosure of
safety problems related to unintentional acceleration in some of
its vehicles.
Toyota declined to comment for this article.
"[Auto makers] are being monitored in a way they weren't before
by class lawyers and the National Highway Traffic Safety
Administration," said Sean Kane, president of Safety Research &
Strategies Inc., a safety research firm that has been critical of
GM and Toyota.
As a result, auto makers have shown more of a willingness to
issue recalls in lieu of technical service bulletins, Mr. Kane
said. Some 64 million vehicles were recalled in the U.S. in 2014, a
record number, according to government data.
The service bulletins are meant to notify dealers of problems
that have been reported by drivers, mechanics and others and to
outline any necessary fixes. They can apply to minor problems like
a faulty air conditioner or cup holder but also to problems that
can turn out to be bigger.
It isn't clear yet whether any vehicle issues aren't being
announced in bulletins because of the increased risk of legal
exposure.
The National Highway Traffic Safety Administration posts free
summaries of service bulletins on safercar.gov. Some auto makers
will release full bulletins upon request, and repair shops have
access to them, but otherwise the bulletins are only available for
a fee from independent companies. The NHTSA didn't respond to
requests for comment.
For years, safety advocates have pressed federal regulators and
the industry to make the bulletins easily accessible to the public.
But the industry has declined to make them widely available, saying
the bulletins are copyrighted and are technical communications that
aren't aimed at the consumers.
Plaintiffs' lawyers said class actions have leveled the playing
field for car buyers, who often learn of the service bulletins
after they make their purchase, if ever.
"The bedrock of consumer protection is consumer choice," said
John Keefe, a New Jersey lawyer who represents vehicle owners. "I
don't think these service bulletins do anything in that regard to
protect consumers."
At least one federal judge has questioned plaintiffs' lawyers
use of service bulletins, in a 2011 ruling dismissing a class
action against BMW over an alleged burnt crayon odor in one of its
best-selling models.
"The court is hesitant to view technical service bulletins, or
similar advisories, as potential admissions of fraudulent
concealment of a defect," wrote U.S. Senior District Judge
Dickinson R. Debevoise in New Jersey. "Accepting these advisories
as a basis for consumer fraud claims may discourage manufacturers
from responding to their customers in the first place."
Neal Walters, a New Jersey lawyer who represents auto makers,
said: "Vehicles are complex bundles of parts. I don't think anyone
reasonably believes they will be perfect…It's unfair to penalize a
product company because it learned how the product may not be
perfect after sale and takes steps to improve it."
Write to Joe Palazzolo at joe.palazzolo@wsj.com
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