Toyota shareholders file suit against automaker over recalls

In the wake of Toyota's unprecedented global safety recalls, shareholders who recently acquired stock in Japanese automaker Toyota have filed suit in the U.S. District Court in California, claiming that the automaker made "materially false and misleading statements" about its operations and future outlook.

In the class action suit made against Toyota Motor Corporation of Japan, Toyota Motor North America and Toyota Motor Sales USA, the law firm filing the suit claims that Toyota "failed to disclose ongoing safety issues and quality control problems with Toyota's automobiles, especially the fact that accelerator pedals installed in many of Toyota's cars were defective and could become stuck in the depressed position, leading to unintended acceleration."

Made by law firm Murray, Frank & Sailer of New York, the class action suit applies to individuals and institutions which purchased stock in Toyota Motor Corporation between December 22, 2006 and February 2, 2010 - the latter date corresponding to just before when Toyota announced its January 2010 U.S. sales and its American Depositary Shares dropped 6 percent.

Analysts say that lawyers will have to prove that Toyota's executives were aware that the company's stock would drop dramatically - a difficult accusation to prove in a securities case.

"You are going to have to prove knowledge among the corporate management," Wayne State University law professor Peter Henning told the Detroit News. "Unless something else emerges, it seems that Toyota didn't think that it would be the kind of problem that it turned out to be."

Yet another analyst was harsher on Toyota, saying that if documents proving a cover up are found, it could be disastrous for the automaker. Documents would have prove that Toyota had made false and misleading statements in releases issued to investors and the media.

"I could see this being the end of Toyota," John Eberhardt, managing partner of investment bank Coutant Capital, told the New York Post. "If there are documents that show a cover up, they are in big trouble."

The law firm says that shareholders have until April 9 to become a part of the suit.

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