Toyota Faces Lawsuit by Investors

Los Angeles - Toyota Motor Corp. was sued today in Los Angeles federal court for failing to disclose to investors that there was a major design defect in the automaker's acceleration systems.

The proposed class action complaint, filed in U.S. District Court in downtown Los Angeles by a San Diego law firm on behalf of all purchasers of Toyota publicly traded securities, accuses Toyota, certain of its affiliates and certain of their officers and directors with violations of the Securities Exchange Act of 1934.

The suit alleges that Toyota issued "materially false and misleading statements" regarding its operations and its business and financial results and outlook when the company knew it had a design problem.

"Defendants misled investors by failing to disclose that there was a major design defect in Toyota's acceleration system, which could cause unintended acceleration," the lawsuit, filed by the firm Coughlin Stoia, alleges.

"As a result of defendants' false statements, Toyota's securities traded at artificially inflated prices -- reaching a high of $91.78 per share on Jan. 19."

On Jan. 21, Toyota announced it would recall 2.3 million vehicles in North America because of problems with the accelerator pedal sticking.

"On Feb. 2, after the market closed, Toyota reported that its U.S. sales for January 2010 had dropped by 16 percent from a year ago due to the recall and subsequent sales suspension of its most popular models," the lawsuit contends.

"Then, on Feb. 3, before the market opened, Toyota announced that it had received reports of brake problems in its 2010 model year Prius hybrid."

"As a result of this news, Toyota's (stock price) fell $4.69 per share, closing at $73.49 per share on Feb. 3, on high volume," according to the complaint. "Toyota's common stock also dropped approximately 6 percent."

Toyota's North American sales offices are located in Torrance.

A message requesting comment left with Toyota's media office after regular business hours was not immediately returned.

Toyota was also sued Friday in Los Angeles County Superior Court on behalf of all affected owners of the 2010-year Prius and the 2010 Lexus HS250h hybrid. Both models share the same braking system, which has been the object of consumer complaints.