August 22, 2019 10:45 AM, EDT

Navistar Gets Win Over Milan in Engine Suit, but Appeal Ahead

Navistar ProStarA more recent ProStar model by International Truck

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The Tennessee Court of Appeals has ruled that Navistar Inc. does not have to pay Tennessee trucking company Milan Supply Chain Solutions an estimated $31 million, reversing a 2017 jury decision.

Milan had been awarded 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.

Milan had alleged that Navistar failed to disclose to the motor carrier 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 Supply Chain Op n by Transport Topics on Scribd

However, the three-judge panel of the state’s appeals court ruled that the trial court erred in holding that a commercial truck sold to a company for business use falls within the Tennessee Consumer Protection Act’s definition of “goods.”

The judges also said that Milan’s fraud claims failed to show legal merit based on the so-called economic loss doctrine, suggesting that any remedies “must be pursued in a contract/warranty law.”

“Having concluded herein that the fraud and Tennessee Consumer Protection Act claims are without legal merit, it follows that the monetary judgments awarded against Navistar based on these claims cannot stand,” the court said. “We accordingly hereby reverse the monetary judgments entered in favor of Milan and conclude that the remaining issues raised by Navistar are pretermitted as unnecessary.”

A Navistar spokeswoman declined comment on the court decision.

Clay Miller, a Dallas trial attorney representing Milan, said the company plans to appeal the appeals court ruling to the Tennessee Supreme Court. The application for appeal must be filed in 60 days, he said.

“We’re real surprised about the decision,” Miller told Transport Topics. “Basically here’s how the court ruled: Even if you have a proven case of fraud, the person who committed the fraud can only be sued for breach of warranty.”

In its 2014 lawsuit, Milan, a logistics company that hauls refrigerated and dry van commodities nationwide, alleged that Illinois-based 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 12-member jury’s unanimous decision upheld Milan’s allegations that Navistar failed to disclose to Milan 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 after it purchased the tractors it experienced numerous breakdowns, specifically with the exhaust gas recirculation system, EGR coolers and EGR valves.

When Milan purchased Navistar’s trucks, they were subject to a standard “limited warranty.” Milan also purchased “optional service contracts” concerning the trucks.

“Pursuant to the terms of the ‘limited warranty’ and ‘optional service contracts,’ ” Navistar agreed to repair or replace parts of the trucks that proved defective, Milan alleged in court documents.

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, and some still are working their way through the courts.

In court documents, Navistar said it conducted millions of miles of road testing on the MaxxForce engines 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 emissions-control technologies using the same selective catalytic reduction technology as its competitors.