In a move reminiscent of the tobacco lawsuits against Philip Morris years ago, the State of California has sued General Motors Corporation (NYSE: GM), Ford Motor Company (NYSE: F), Toyota Motor Corporation (ADR) (NYSE: TM), Daimler Chrysler AG (NYSE: DCX), Honda Motor Co. Ltd (ADR) (NYSE: HMC) and Nissan Motor Co. The theory is that the car companies created a "public nuisance" that will cost the state in infrastructure and health expenses. What the state will seek in damages is not clear.
At first blush, it would appear that these claims would eventually be no more successful than the smokers' suits were. The state had the power to set emissions standards or even to ban the sale of cars by manufacturers that built cars that did not fit criteria set by the state. Since the California legislature never took those steps, it will probably be difficult to claim monetary awards to offset the state's costs.
It is also likely that the issue of whether the cars accounted for all of the health and structural damage would be difficult to prove. Factories and other sources can also be tagged for producing toxic gas.
What the suit does do is open a Pandora's box of legal costs for the car companies, especially if other states follow California's lead. As Altria and other tobacco companies discovered, even winning cases can cost hundreds of millions of dollars. There was a time when Altria's legal costs were over $1 million a day.
Even if the car companies win against claims like those that have been brought by California, they could lose. The industry is not in any shape to shoulder that distraction or costs of litigation across a number of states.
Douglas McIntyre is a partner at 24/7 Wall St.
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Reader Comments (Page 1 of 1)
9-20-2006 @ 5:09PM
Jon Marsden said...
Well, California will have to sue every living person in the USA if they contend that Carbon Dioxide is a pollutant... Humans breathe in air, absorb the oxygen and expel carbon dioxide... Anyone with any sense knows that water vapor is the greatest contributor to the 'greenhouse effect' which purportedly is the cause of 'Global Warming'. What a load of crap. If I were a Californian, I would back a recall effort of the AG for wasting state resources in a banal effort to make news...
9-20-2006 @ 8:36PM
TG said...
One more reason why business and business people are fleeing California. Rediculous.
9-20-2006 @ 10:21PM
John Martini said...
Huh? Last I checked, the State of California (land of fruits and nuts) has not banned cars and most of its citizens drive cars. Shouldn't the state sue itself? I'm sure it owns and uses those carbon dioxide creating modes of transportation.
What kind of car does the AG drive? Should he sue himself?
Crazy!
9-21-2006 @ 7:34PM
Cecile said...
Well done California! The whole world is suffering from car emmissions. It's easy to make cars with fewer emissions and increase the miles per gallon obtained. California is acting as a responsible global citizen. Getting out of cars and walking is highly recommended as an easy and inespensive way to fight obesity.
9-24-2006 @ 5:36AM
Matty said...
While obviously yes, there is a small degree of hypocrisy in this, in that obviously the state uses petrol based vehicles everyday. The fact is that an viable electric alternative has existed for over a decade now, which car makers have failed to put in place, and even tried to drag down and crush into oblivion.
11-21-2006 @ 8:11PM
al schrader said...
My new car design is a true "green car"
I call it the Vector and it is straight out of the future.
You can email me if you would like more info about it.
alfredschrader@aol.com
11-21-2006 @ 11:30PM
JOHN ROSCOE said...
You, know, it is really hard to feel sorry for California since they had passed a zero emissions law years ago, and then let the car companies, and oil companies pressure them into dropping the law. GM had mass produced the EV1, which they "leased" to many very happy customers. At the end of the lease however, they refused to allow the customers to buy the vehicles or release them. They were all picked up and crushed. Then they had the nerve to say there was no demand for the items, and dropped the program. Demand? I find that a joke, GM, everyone who leased one, loved them, and wanted them. At least Ford had the balls to allow thier customers the chance to buy the electric Rangers. Until the states and people say NO to the car companies and oil companies, this will never change. Who is in charge here. Vote, write your congressmen, if they won't do it, vote them out. I feel sorry for the Californian's, but they have a problem with their government, and that does not include the Govanator, he is the only one there with any balls.