Navistar Ordered to Pay Milan $30.8 Million in Connection With Flawed Engines
A civil jury has awarded a Tennessee trucking company more than $30 million in civil damages for fraud and violation of the state’s consumer protection act in connection with the sale of 243 Navistar International Prostar trucks with MaxxForce engines.
The 12-member jury’s unanimous decision upheld allegations that Navistar Inc. failed to disclose to Milan Supply Chain Solutions that it sold the International heavy-duty trucks and 13-liter exhaust gas recirculation engines in 2011 and 2012 with “serious known defects in the engine and its components,” Milan said in an Aug. 14 statement.
Navistar Inc., which makes heavy-duty trucks and engines in North America, is a subsidiary of publicly traded Navistar International Corp., based in Lisle, Ill.
The jury verdict, which came after a nearly two-week trial in Jackson, Tenn., was the first lawsuit to go to trial in connection with the truck maker’s troubled 13-liter EGR MaxxForce engines. Some of the lawsuits filed against Navistar have been dismissed, but an estimated 20 legal actions alleging troubles with the EGR engine remain active.
It took the jury about 2½ hours to reach the Aug. 10 verdict, according to Milan’s lead attorney, Clay Miller.
The jury said that the Milan, Tenn.-based motor carrier is entitled to $10.8 million in actual damages and $20 million in punitive damages.
In its lawsuit, Milan alleged that Navistar, while touting the quality of its testing program, knew that the trucks had serious flaws and sold the trucks “knowing that the customers would end up becoming the de facto test fleet for Navistar’s new 2010 year model engine,” Milan said.
The MaxxForce engine in question was Navistar’s advanced EGR sold between 2010 and 2012.
During its second-quarter earnings conference call in June, Navistar CEO and board Chairman Troy Clarke referenced the litigation, saying, “Warranty and used-truck issues from the MaxxForce 13 EGR products continue to diminish, and now is the time for us to take steps to put these issues behind us faster.”
Milan is a logistics company and owner of a commercial trucking fleet that hauls refrigerated and dry van commodities across 48 states.
Milan said after it purchased the tractors it experienced numerous breakdowns, specifically with the EGR system, EGR coolers and EGR valves.
“We’re disappointed in the jury’s verdict and are evaluating our options to challenge it,” Lyndi McMillan, Navistar’s external communications manager, said in a written statement. “We have successfully defended similar claims regarding our MaxxForce 13 engines in several other jurisdictions, including dismissal of claims of fraud in courts in Texas, Wisconsin, Michigan, Indiana, Alabama and Illinois.”
McMillan said Navistar tested the MaxxForce 13 engine consistent with industry standards.
“They were tested for 12 million miles prior to launch under rigorous conditions, in tests cells and on the road,” McMillan said. “At the time of the product launch, we were confident, based on this testing, that the product would perform. All products undergo continuous improvement throughout their life cycle.
“When some parts unexpectedly failed, we fixed them under warranty for our customers, including Milan Supply. We’ve invested a significant amount of resources standing behind our products and supporting our customers.”
At press time, the company did not indicate if it planned to appeal the jury verdict.
In court documents, Navistar said it conducted millions of miles of road testing with no serious issue or defects in design, components or materials. But when the truck maker could not obtain EPA approval for the MaxxForce engine after the expiration of its emissions credits, Navistar switched emission-control technologies using the same selective catalytic reduction technology as its competitors.
During the trial, Milan said its attorneys offered evidence and solicited testimony from current and former Navistar executives who said that prior to the launch of the trucks the truck maker had not completed field testing.
Miller told Transport Topics that Jack Allen, Navistar’s former president of truck operations, testified that in his opinion it was “normal business practice” for companies to not disclose to customers in advance of a sale information about known defects in the products or to disclose to customers that they were buying a product that had not been fully validated or tested by the manufacturer.
“Their attitude during the whole trial was arrogance,” said Miller, who works for Dallas law firm Miller Weisbrod. “They just don’t think they have to stand up and do right by the customer.”
McMillan disputed that contention.
“Navistar strongly disagrees with plaintiff counsel’s characterizations of Navistar’s conduct. Navistar has and will continue to defend our products, our reputation in the market and the integrity of our employees.”