JACKSON, Tenn. — A jury in Jackson, Tennessee, last Thursday found that Navistar Inc. committed fraud and violated the Tennessee Consumer Practice Act in connection with the sale of 243 Navistar International Prostars with Maxxforce engines, but the OEM plans to fight the verdict, noting dismissal of claims of fraud in courts in Texas, Wisconsin, Michigan, Indiana, Alabama, and Illinois.
The jury awarded damages to the trucking company that purchased the trucks — Milan Supply Chain Solutions — in the amount of $10,800,000 of actual damages and $20,000,000 in punitive damages.
Milan brought suit against Navistar alleging that Navistar misled them in the sale of the Navistar International heavy-duty trucks and engines and failed to disclose that the Maxxforce 13-liter engine was launched with serious known defects in the engine and its components.
Milan also alleged that Navistar, while touting the quality of its testing program, knew that the testing had serious flaws, was incomplete at launch and put the trucks into customers’ hands knowing that the customers would end up becoming the de facto test fleet for Navistar’s new 2010-year model engine.
In an official response, Navistar expressed disappointment at the outcome and said it was evaluating options to challenge it.
Navistar also said it had tested the MaxxForce 13 engine “consistent with industry standards. They were tested for 12 million miles prior to launch under rigorous conditions, in tests cells and on the road. At the time of the product launch, we were confident, based on this testing, that the product would perform. All products undergo continuous improvement throughout their lifecycle.
“When some parts unexpectedly failed, we fixed them under warranty for our customers, including Milan Supply. We’ve invested a significant amount of resources standing behind our products and supporting our customers.”
In addition, Navistar said it “strongly disagrees with plaintiff counsel’s characterizations of Navistar’s conduct. Navistar has and will continue to defend our products, our reputation in the market, and the integrity of our employees.”
A news release from the Buzzell Company, which bills itself as “a full-service public relations and marketing firm in Dallas,” stated that Milan purchased Prostars in 2011 and 2012 powered by Maxxforce engines, “Navistar’s ill-fated Advanced Exhaust Gas Recirculation engine that was sold between 2010 and 2012. When Navistar could not obtain EPA approval for the Maxxforce engine after the expiration of its emissions credits, Navistar switched emission-control technologies using the same technology as the entire rest of the heavy-duty engine industry.
“Navistar’s decision to use Advanced EGR versus SCR led to numerous quality problems with the engine that resulted in hundreds of millions of dollars of warranty costs to Navistar and tremendous losses on the resale market for trucking companies like Milan.”
The news release had the letterhead of Miller Weisbrod, one of law firms representing Milan.
During the trial, according to the release, former Senior Vice-President of North American Sales Jim Hebe testified that Navistar “did not test s#@t,” and went on to say that “Navistar failed to follow industry standards and never tested the final version of the engine before selling it to customers.”
The release also stated that in an e-mail from Navistar’s Senior Vice-President of Engineering Dennis Mooney to CEO Troy Clarke, the former Vice-President of Quality Tom Cellitti was quoted as stating “we have no field testing” because “the company only tested engineering development trucks rather than validation trucks.”
The release also stated that “the jury also heard evidence that Navistar knew when it launched the engine that critical engine components had serious quality problems and a shortened life span.”
Jack Allen, Navistar’s former chief operating officer and president of truck operations, stated that in his opinion, it was “normal business practice” for companies to not disclose to customers in advance of a sale about known defects in the products or to disclose to customers that they were buying a product that had not been fully validated or tested by the manufacturer, the release stated.
Milan maintained it had lost more than $35,000 per truck on trade-in values over the last several years — the basis of $8,200,000 of the jury’s award for compensatory damages.
Miller said that Navistar never made any serious effort to resolve the Milan case prior to trial.
“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,” stated Kevin Charlebois, CEO of Milan Supply Chain Solutions Inc.
“We have had the same experience with Navistar in our case,” stated James "Bo" Keith, President of Nashville, Tennessee-based First Express, Inc., whose company is also involved in similar litigation against Navistar.
Milan was represented at trial by Clay Miller and Warren Armstrong of Miller Weisbrod and Adam Nelson of the Jackson, Tennessee, law firm of Rainey Kizer Reviere & Bell.