Maryland will play a crucial role in the legal fallout from Toyota vehicle recalls, with the state's public pension fund being chosen to represent the grievances of investors nationwide who blame the Japanese automaker for their financial losses.
The Maryland State Retirement and Pension System claims the biggest loss — an estimated $18 million — of any shareholder that vied to be lead plaintiff in the class action lawsuit against Toyota Motor Corp.
The system administers retirement and pension benefits for more than 400,000 retirees, beneficiaries and current state employees. It had invested in Toyota's American depositary shares on the New York Stock Exchange as well as in Toyota common stock on the Tokyo Stock Exchange, said Campbell Killefer, deputy chief of the civil litigation division in the Maryland attorney general's office.
"The judge found that we were the best fund to operate as the lead plaintiff based on the fact that we had purchased in both those markets," Killefer said. "In the grand scheme of things, the loss is not a material hit to the system, but it's still a large amount of money and worth fighting over."
Nationwide, tens of thousands of Toyota investors claim the automaker misled them by not disclosing flaws in the acceleration system that prompted a recall of 2.3 million vehicles in North America in January. The automaker has recalled more than 8 million vehicles worldwide in the past year for defects including pedals that stuck or snagged on floor mats.
Attorneys argue that if investors had known about some of the alleged safety defects, they would not have bought shares or they would have sold shares earlier and avoided large losses.
Losses being claimed by the Maryland fund are a fraction of the fund's $31 billion under management. The system covers teachers, law enforcement personnel, legislators, judges and local government employees and firefighters.
"We would not want any state employees to be concerned about their pensions," Killefer said. "We the state are not in this to earn large legal fees. We are in it to achieve the public good."
U.S. District Judge Dale Fischer in Los Angeles, who is overseeing the shareholder lawsuit, formalized the Maryland fund as lead plaintiff Aug. 2. Plaintiffs, including individual and institutional investors, also hope the lawsuit will result in improvements in safety and corporate governance at the automaker.
The lawsuit is separate from product liability cases, which also have been consolidated.
Investors in Toyota's common stock may be excluded from the shareholder lawsuit, Fischer said in a July 16 ruling. A recent U.S. Supreme Court decision may allow only investors in the carmaker's American depositary shares to sue, he said.
Patrick Robbins, a lawyer for Toyota, declined to comment last week after a hearing on the investor suit.
Toyota, the world's largest automaker, and U.S. auto safety regulators are looking into causes of unintended acceleration in the company's cars and trucks.
A claim that Toyota knew of the problem in 2003 was included in multiple documents cited in a consolidated complaint filed Aug. 2 by consumers claiming economic losses related to sudden acceleration by Toyota vehicles. The consumer lawsuits, which have been combined for pretrial filings and rulings in federal court in Santa Ana, Calif., claim that Toyota drove down the value of vehicles by failing to fix or disclose defects leading to unintended acceleration.
Toyota rejects the claims that the plaintiffs suffered economic damages because of the recent recalls, spokeswoman Celeste Migliore said in an e-mail.
"Reliable scientific evidence will demonstrate the safety of our vehicles in the investigations currently under way and, ultimately, to the court," she said.
All told, Toyota faces more than 300 federal and state lawsuits including proposed class actions over economic losses and claims of personal injuries or deaths caused by sudden-acceleration incidents. All the class actions and most of the individual lawsuits were filed after September.
Bloomberg News contributed to this article.