Segal McCambridge Achieves Motion for Summary Judgment and Dismissal in Multi-Million Dollar Odometer Fraud Class Action Case


November 26, 2012

On November 13, 2012, Segal McCambridge obtained summary judgment for its client in a high-exposure class action Federal Odometer Fraud lawsuit. The court's decision relieved the firm's clients, Kawasaki Motor Corporation and Kawasaki Heavy Industries ("Kawasaki"), from potentially having to pay over $42M and secured a major victory affecting all motor vehicle and motorcycle manufacturers throughout the United States. Shareholder Jeffrey Singer led the Segal McCambridge defense team, with assistance from Shareholder Paul Wojcicki, Shareholder Howard Fried, and Associate Misty Martin.

The suit, entitled Keith Baxter v. Kawasaki Motor Corp., U.S.A., et al, began in 2008 when Plaintiff Keith Baxter alleged that the odometer in his 2006 Kawasaki Vulcan Nomad 1600 motorcycle was designed to intentionally over-register mileage, and that this design defect violated the Federal Odometer Act. The case became a certified class action lawsuit in September 2009, creating a class of 14,000 plaintiffs and entities who purchased or leased certain model years of a Vulcan Nomad 1600 or Vulcan Classic 1600 motorcycle. Plaintiff asked for $3,000 minimum per vehicle, plus an award of Plaintiff's attorneys' fees, potentially exposing Kawasaki to $42M in damages.

Consistent with Segal McCambridge's position, U.S. District Court Judge William Hart held that the Federal Odometer Act was not enacted to remedy alleged design and manufacturing defect claims.  The Odometer Act was created to prevent fraudulent tampering with "as built" odometers and to prosecute those who perform such actions.  Odometers calculate mileage through sensors that measure the rotation of a vehicle's wheel.  Yet, it is understood that due to environmental and material factors, odometers can never be completely accurate.  The industry standard for variance is +/- 4% of the actual distance traveled. Kawasaki's Vulcan odometers had a variance well below the industry standard.  However, Plaintiff still claimed that the odometers were designed to intentionally overstate mileage, and that this design was a violation of the Odometer Act.

Working with co-counsel, Thompson Coburn, the Segal McCambridge team conducted extensive discovery, rigorous expert witness work, and complex legal analysis. The team ultimately established that that there was absolutely no evidence that Kawasaki violated the Odometer Act.  Most significantly, the defense team contested the Plaintiff's incorrect interpretation of the Odometer Act and persuaded the Court to follow the Act's true intent -- to prevent tampering with odometers already in use -- not to govern manufacturing and design standards for odometers. This is a critical clarification of the scope of the Odometer Act that will protect manufacturers of automobiles and motorcycles across the United States.  Through successfully reaffirming the correct application of the Odometer Act, the defense team was able to avoid a costly trial and save Kawasaki Motor Corporation from unjust negative publicity and considerable expense of a case that ultimately had no merit.