Court reverses $31M verdict in Navistar MaxxForce engine lawsuit

A Tennessee court of appeals has reversed a lower court’s decision that found Navistar violated consumer protection laws with its faulty MaxxForce engines. The decision effectively taking the manufacturer off the hook for more than $30 million.

On Wednesday, Aug. 14, the court of appeals in Jackson, Tenn., returned a jury judgment of $31 million to trucking company Milan Supply Chain Solutions. A Madison County circuit court had previously found Navistar and Volunteer International, a Navistar dealer, liable for more than 200 faulty trucks sold to Milan.

The decision was based on the definition of a “good,” which the court deemed does not apply to the trucks in this case. The ruling comes less than three months after Navistar was slammed with a $135 million verdict for a similar case in Illinois.

Lisle, Ill.-based Navistar International Corp. manufactures and markets International Trucks.

Navistar ‘did not test s#@t’ on MaxxForce engines

From July 2011 to March 2013, Milan purchased 243 International ProStar trucks with model years ranging from 2012 to 2014. Those trucks were purchased from Navistar through Volunteer International. At the time of purchase, Navistar guaranteed the trucks were void of defects.

Despite assurances of trucks in perfect working order, trucks purchased by Milan began experiencing issues not long afterwards. Specifically, the trucks experienced issues with the exhaust gas recirculation system, EGR coolers, EGR valves and other engine components. Even after several repairs by Volunteer International, the trucks continued to be defective.

Court documents note that Navistar marketed its MaxxForce 13-liter engine by highlighting its unique EGR system that was certified under the EPA 2010 emissions standards. The lawsuit states that Navistar attempted “to distinguish themselves from competitors by becoming the only heavy-duty truck manufacturer in North America to rely entirely on EGR to meet the EPA 2010 emissions standards.” Other manufacturers used a combination of EGR and selective catalytic reduction.

However, the lawsuit alleges that Navistar engines never reached the EPA 2010 emissions 0.2g NOx standards threshold. Furthermore, the lawsuit claims that Navistar knew that the engines were never going to meet those requirements using EGR-only technology. Volunteer International salespersons told Milan other false claims, including that changes to EGR technology would eliminate high breakdown rates.

Milan ended up taking the trucks in for repairs for engine problems on “hundreds of separate occasions.” Issues around the truck were exacerbated due to the unavailability of parts, delaying repairs and keeping the trucks inoperable.

The lawsuit claims that Navistar was well aware of potential issues with MaxxForce engines. This claim is supported by the fact that industry standards require manufacturers to conduct “extensive testing for years before public distribution in order to work out any issues with design, material defects and/or workmanship,” the complaint says. In July 2012, Navistar discontinued 11-liter and 13-liter engines with EGR-only systems.

According to the lawsuit, Milan was forced to sell 25 of the 2012 trucks. Milan also claims several other financial losses, including loss of profits, downtime expenses/losses, diminished resale value of trucks and towing expenses. Allegations include breach of warranty, breach of contract, fraud, negligent/intentional misrepresentation and violating the Tennessee Consumer Protection Act.

According to a news release from Miller Weisbrod, Milan’s attorneys, several Navistar executives testified. One former senior vice president of North American sales said that Navistar “did not test s#@t.” Emails from the current senior vice president of engineering to the current CEO quote a former vice president of quality responsible for testing MaxxForce engines stating repeatedly that “we have no field testing.”

Jury verdict
In August 2017, a jury found Navistar committed fraud and violated the Consumer Protection Act. Milan was awarded $10.8 million in actual damages, including more than $8.2 million in damages for diminished value and more than $2.5 million in lost profits. Additionally, the jury awarded the trucking company $20 million in punitive damages.

Attorneys for Navistar tried to get the judge to vacate the jury’s verdict. After reviewing the verdict, the judge pointed out the “shocking” testimony heard by jurors. The judge also referred back to testimony where Navistar was essentially “bragging” about its work with the military and “what kind of money they generated for various things.” Regarding the reprehensibility of Navistar’s conduct, the judge called it “egregious and reprehensible,” further confirming punitive damages in favor of Milan.

In addition to actual damages and punitive damages, the court added more than $1 million in attorneys’ fees to the award since Navistar was found to violate the Tennessee Consumer Protection Act.

Navistar spokeswoman Lyndi McMillan gave Land Line the following statement shortly after the verdict:

“We’re disappointed in the jury’s verdict and we will be filing an appeal. 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. Navistar respectfully disagrees with judge’s characterizations of Navistar’s conduct and the plaintiff’s characterization of its employees. Navistar has and will continue to defend our products, our reputation in the market, and the integrity of our employees.”

Trucks are not ‘goods’
Navistar filed an appeal and received the conclusion it was looking for.

Essentially, the case came down to the Tennessee Consumer Protection Act, which the jury found Navistar violated. More specifically, Navistar was found to violate a provision that considers acts to be unfair and deceptive if goods are represented in a particular standard, quality or grade when the good is in fact not.

Navistar argues that trucks sold to Milan are not considered “goods,” which TCPA defines as “any tangible chattels leased, bought, or otherwise obtained for use by an individual primarily for personal, family, or household purposes or a franchise, distributorship agreement, or similar business opportunity.”

Since Milan is not an individual, only the second factor would apply. However, the appellate panel found that it does not.

“The second categorical definition of goods is also not satisfied, as the trucks at issue are clearly not a ‘franchise, distributorship agreement, or similar business opportunity,’” the court stated.

Consequently, the appellate court reversed the monetary judgment against Navistar and Volunteer International. The court affirmed a lower court’s ruling awarding Volunteer attorney’s fees for the circuit court case. However, fees incurred during the appeals process was not awarded.

Neither Navistar nor Milan’s attorneys could be immediately reached for comment.