$31 MILLION MaxxForce Engine Fraud Judgement REVERSED
Knoxville, TN – A Tennessee Appeals Court jury has reversed a 2017 judgement of $31 million against Navistar stemming from its highly publicized MaxxForce engine debacle.
In 2017, a Tennessee jury determined that Navistar committed fraud and violated the state’s consumer protection laws when it sold Milan Supply Chain Solutions 243 heavy-duty trucks without disclosing problems with its Maxxforce diesel engines.
The Jackson, TN jury awarded $10.8 million in actual damages, plus $20 million in punitive damages finding Navistar sold the engines with serious known defects and did not disclose the issues.
During the 2017 trial, numerous current and former Navistar executives offered damning testimony.
One such example was Navistar’s former senior vice president of North American sales, Jim Hebe, who said the company “did not test s**t” before selling the engines to consumers.
In a decision filed Wednesday, the Tennessee Court of Appeals reversed that decision finding instead that the Tennessee Consumer Protection Act’s definition of “goods” is products sold to an individual for “personal use,” not for “business use.”
Therefore, the jury said the Milan, TN-based company cannot seek relief and recovery under Tennessee’s consumer protection law.
Instead, the claims fall under the state’s warranty and contract laws, the counts of which were dismissed before the suit went to trial, according to the opinion.
Further, the court also reversed the judgment on Milan’s fraud claims.
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The jury determined that since the trucks were purchased for business purposes and the original suit was brought to remedy economic and monetary losses, a tort claim such as fraud was not applicable.
Milan appealed the dismissal of its warranty claims, but the court rejected that appeal also.
The jury determined Milan had waived that appeal because the company did not file a motion for a new trial raising the issue of those claims.
Wednesday’s ruling is another step forward in Navistar’s goal of putting the failed MaxxForce diesel engines saga behind it.
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In May, the company agreed to a $135 million class action settlement with plaintiff truck owners and lessees alleging that Navistar, Inc. and Navistar International, Inc. sold or leased 2011-2014 model year vehicles equipped with certain MaxxForce 11- or 13-liter diesel engines equipped with a defective exhaust gas recirculation (EGR) emissions system.
Then, in June, the United States District Court for the Northern District of Illinois issued an Order granting preliminary approval to the proposed settlement.
The settlement provides class members with $2,500 per truck or $10,000 rebate off new truck, or option to seek up to $15,000 per truck in out of pocket damages caused by alleged defect.
The settlement “denies all claims…wrongdoing, liability or damage of any kind, and denies that [Navistar] acted improperly or wrongfully in any way.”
According to an 8-K form filed with the Securities and Exchange Commission in May, Navistar notified shareholders the company would take a $159 million charge-out in the second quarter as part of the settlement.
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