A federal judge in California has pared back a lawsuit accusing Toyota Motor Corp <7203.T> of inflating its stock price by concealing problems with unintended acceleration in its vehicles.
U.S. District Judge Dale Fischer in Los Angeles partly granted Toyota's motion to dismiss the case, which was filed last year in the wake of a series of car recalls for safety concerns. Fischer rejected claims related to 26 of 33 company statements referenced in the complaint.
Nothing in the complaint permits a strong inference that any of the defendants intentionally misled investors about Toyota's corporate strategy with regard to quality and safety, Fischer wrote in the July 7 ruling.
It is much more plausible that Defendants believed Toyota could maintain high quality and safety while cutting costs, she wrote.
The plaintiffs, who are seeking class-action status for the lawsuit, say that Toyota misrepresented or hid facts related to recalls of up to 10 million Toyota and Lexus vehicles at an estimated $5 billion cost to the company. Toyota recalled the vehicles after complaints that they sped up outside their drivers' control.
The alleged misconduct caused a $30 billion drop in the company's stock market value, the plaintiffs contend.
The judge also tossed out claims related to violations of Japanese securities law, saying that the court does not have the power to rule on Japanese law claims.
Respect for foreign law would be completely subverted if foreign claims were allowed to be piggybacked into virtually every American securities fraud case, Fisher wrote.
The Maryland State Retirement and Pension System is the lead plaintiff in the lawsuit, which consolidates multiple shareholder complaints against Toyota. We respect the judge's decision, but as lead plaintiffs in the case we are prepared to move forward and we still plan to recover significant damages, said a spokesman for Maryland Attorney General Douglas Gansler on Monday. Gansler's office represents the pension fund in the lawsuit
Toyota welcomed Fischer's ruling. We are pleased that the court has granted Toyota's motion to dismiss most of the claims in the federal securities case, a Toyota spokeswoman said. The Court's ruling results in dismissal of the overwhelming majority of the case.
The plaintiffs' proposed class includes all people and entities that bought or acquired Toyota stock between May 2005 and February 2010.
The court gave plaintiffs a deadline of July 28 to file an amended complaint.
The case is In Re Toyota Motor Corporation Securities Litigation, U.S. District Court, Central District of California, No. 2:10-cv-00922
(Reporting by Moira Herbst. Editing by Robert MacMillan, Bernard Orr)