Antitrust Law Daily Wrap Up, RICO—S.D. Fla.: Takata, vehicle manufacturers may be liable for conspiracy to conceal airbag defect, (Dec 3, 2015)

By Jody Coultas, J.D.

Vehicle purchasers stated Racketeer Influenced and Corrupt Organizations Act (RICO) claims against Takata Corporation and TK Holdings, as well as vehicle manufacturers, based on an alleged conspiracy to conceal a defect, according to the federal district court in Miami. The consumers, alleging economic loss, were part of a multidistrict litigation involving Takata’s allegedly defective air bag inflator (In re Takata Airbag Products Liability Litigation, December 2, 2015, Moreno, F.).

Consumers of vehicles equipped with Takata airbags containing ammonium nitrate as a propellant alleged that Takata, vehicle manufactures, and dealerships violated RICO by engaging in a collaborative scheme to defraud consumers. The consumers submitted communications among Defendants supporting claims that Defendants knew of a defect in the Takata airbag, knew that Takata had concealed the defect, and sold and serviced vehicles for more money than consumers would have paid had the vehicle not contained a defective airbag.

To establish a RICO violation, a plaintiff must present proof of conduct of an enterprise through a pattern of racketeering activity, as well as an injury to business or property caused by the RICO violation.

Consumers alleged sufficient evidence to state a plausible RICO claim for relief and will have the opportunity to develop the facts alleged through the discovery process, according to the court. Takata argued that the consumers failed to allege any specific loss and that any loss related to the defect could be alleviated by a free replacement airbag offered as part of Defendants recall arrangement. Also, Takata argued there was no link between the alleged injury and the alleged conspiracy to conceal the defect. However, the court found that the allegations were sufficient. Class members alleged injuries from overpaying for vehicles based on misinformation regarding vehicle safety and a diminished value in their cars because of the defect. Also, each individual plaintiff alleged that he would not have purchased a class vehicle had he known about the airbag defect.

The consumers also alleged that Takata and Honda Motor Co., Ltd. shared information about the airbag deployments, delayed and/or prevented the release of information about a possible defect, and misled regulatory authorities and the public about the safety risks those airbags posed. A common scheme or plan may be inferred from the conduct of the alleged participants or from other circumstances. The court concluded that the consumers alleged sufficient direct and circumstantial evidence to survive a motion to dismiss.

Nationwide class action claims for unjust enrichment, fraudulent concealment, negligence, violations of state consumer protection and implied warranty laws, and breach of implied warranty under the Magnuson-Moss Warranty Act survived an untimely motion to dismiss, according to the court.

The court also found that the consumers sufficiently alleged that Takata and the vehicle manufacturers breached the implied warranty of merchantability by selling a consumer vehicle that was not fit for the ordinary purpose of a safe passenger vehicle, nor properly designed, manufactured, marketed, contained, packaged or labeled in violation of the Magnuson-Moss Warranty Act.

The case is MDL No. 2599.

Attorneys: David Fernandes (Baron & Budd, PC) for Craig Dunn. Stephen J. Krigbaum (Carlton Fields Jorden Burt, PA) for Takata Corp. Benjamin R. Barnett (Dechert LLP) for Tk Holdings, Inc. and Highland Industries, Inc. Daniel John Kissane (Cole, Scott & Kissane, PA) for American Honda Co., Inc. Eric Y. Kizirian (Lewis Brisbois Bisgaard and Smith, LLP) for Bmw of North America, LLC.

Companies: Takata Corporation; TK Holdings; Honda Motor Co., Ltd.

Cases: RICO FloridaNews