A Tennessee jury awarded Milan Supply Chain Solutions, a trucking company, $31 million, finding that Navistar Inc. committed fraud and violated the state’s consumer protection laws when it sold the company 243 heavy-duty trucks without mentioning problems with its Maxxforce diesel engines.
The Jackson, Tennessee, jury awarded $10.8 million in actual damages with an additional $20 million in punitive damages, to the Plaintiff, which had accused Navistar of failing to disclose that the engines were launched with serious known defects. Milan also said that as Navistar praised the quality of its testing program, it knew the process had serious issues and that its customers would become the de facto test fleet for its 2010 model year engine.
Kevin Charlebois, Milan’s CEO, said in a statement that he was pleased with the decision and that he hoped it would force some change within Navistar, which he said continues to blame past management for problems with the Maxxforce engine. Charlebois had this to say:
We made every attempt to collaborate with Navistar to resolve these very legitimate engine issues, but rather than trying to sit down and work out a settlement, Navistar’s current executive team instructed its lawyers to carry out a contentious litigation strategy against our company. We need Navistar to stand behind their product and step forward to address the damages caused by these engines, and we hope the jury’s verdict will lead to a change in Navistar’s tactics.
Milan bought the trucks involved in the lawsuit in 2011 and 2012 – trucks that ran on a Maxxforce engine that used exhaust gas recirculation to cut down on diesel emissions. Navistar eventually switched to the selective catalytic reduction system that the rest of the heavy-duty engine industry used.
The decision to use exhaust gas recirculation led to numerous issues that resulted in hundreds of millions of dollars in warranty costs to Navistar and losses on the resale market for companies such as Milan.
Various executives testified during the trial, including Jim Hebe, Navistar’s former senior vice president of North American sales, who said the company “did not test” engines before selling them to consumers. Other evidence included an email exchange between Navistar’s current senior vice president of engineering, Dennis Mooney, to current CEO Troy Clarke, which said the company’s management had told its board of directors in 2013 that the physics of the Maxxforce engine at issue were “not sound.” None of this was revealed to the public prior to trial.
The jury also heard that Navistar knew when it launched the engine that its components had serious quality problems and a shortened lifespan. Jack Allen, Navistar’s former chief operating officer and president of truck operations, was called by Navistar to testify and said that it was “normal business practice” for companies to not tell customers ahead of sale about known defects in products or that they were buying a product that hadn’t been fully tested by the manufacturers. Clay Miller, one of the lawyers for Milan, of Miller Weisbrod, said in a statement:
The jury seemed shocked to hear this testimony about the corporate culture and philosophy of Navistar from one of the company’s top executives. It appeared the jury’s punitive damage verdict was a message to Navistar that it is not acceptable for the company to cover up important defects in the engines and the engine’s testing program in order to make a sale.
Milan was represented by Clay Miller and Warren Armstrong of Miller Weisbrod and Adam Nelson of Rainey Kizer Reviere & Bell. It’s most interesting that Corporate America appears to like the courts when they are injured and seek justice. It’s too bad they don’t feel the same way when they commit wrongs that hurt a person.