Navistar hit with at least two class actions over allegedly defective engines this month in Chicago

By Kenneth Lowe | Jul 23, 2014

A transportation company is suing Navistar, claiming it sold faulty engines in an entire class of vehicles and then tried covering it up.

Washington-based Par 4 Transport LLC filed the suit on behalf of a proposed class earlier this month against Lisle-based Navistar Inc., alleging an engine used in its ProStar series of tractor-trailer trucks caused damage due to emission control failures and other malfunctions.

Par 4's July 7 suit appears to be one of at least two filed against Navistar this month in Chicago's federal court over allegedly defective engines. Denis Gray Trucking Inc. and others made similar class in a proposed class action suit filed July 9.

In its complaint, Par 4 claims Navistar's allegedly defective engines harmed it and others "as a result of the vehicle’s experiencing chronic malfunctions and breakdowns, continuing inoperability and inordinate ‘downtime’ that was persistently disruptive to Par 4’s business (and that of other similarly situated Class Members)."

The company further alleges that Navistar misrepresented the effectiveness of the engines in its marketing even though it knew they did not function properly.

“[Navistar’s] marketing misrepresented and omitted material facts about Navistar’s ProStar vehicle sale and warranty coverage for Navistar Defective Engines in sale and lease agreements that included the Defective Engines, including not revealing that the diesel engines supplied by Navistar failed to comply with mandatory regulations and standards required by the United States Environmental Protection Agency (EPA) for 2010 (and newer) tractor-trailer trucks in accordance with strict EPA emissions standards.”

Par 4 is seeking class certification for any persons or entities that purchased vehicles fitted with the engines in question during the class period, Nov. 1, 2010 and April 30, 2013.

On Monday, U.S. District Judge Joan B. Gottschall denied the plaintiff's motion to certify a class, but noted that the motion remains pending as a placeholder and she would set a briefing schedule on the request at an appropriate time. Records show a status hearing is slated for Sept. 5.

While Navistar had marketed the engines as using a new type of configuration specifically meant to meet stricter EPA emissions standards implemented in 2010, Par 4 contends the new technology didn’t work and the company traded against its previous good behavior to outmaneuver paying emissions standard violations on its engines, even as it avoided telling prospective customers.

Par 4 asserts that in order to "not disrupt the sale of its Defective Engines, Navistar initially used a strategy approved by the EPA to use ‘credits’ previously accrued during earlier times with other engines and, when the credits exhausted, commenced paying a non-compliance fine ... for each non-conforming diesel engine sold or leased in the continental United States."

"Thus," the suit adds, "by the beginning of the Class Period, Navistar was facing technological and development problems that were extremely serious.”

Navistar’s marketers told customers they were compliant with EPA regulations and had made an “engineering breakthrough,” the complaint states, going on to quote Navistar CEO Daniel Ustian as having publicly said that “We are exceeding what we had committed to in terms of performance and fuel economy and all that."

Navistar eventually scrapped its plans to develop its own technology and used its competitor’s configuration in 2012.

“By the time commencing the Class Period, it was clear to [Navistar] that the system by Navistar was not working and could not reasonably comply with EPA standards,” Par 4 claims. “Despite the $700 million Navistar spent on developing its [new emissions technology], the company was not able to apply for EPA certification by achieving [the new standards] by the start of the Class Period––ten months after the EPA standard became effective.”

The suit includes counts alleging breach of implied warranty, breach of express warranty, unconscionability and unenforceability of unilaterally imposed durational limits to the express warranty and violations of the Illinois Consumer Fraud Act.

Par 4 is also seeking damages that include profit losses and towing charges arising from the defective engines. It is being represented by Jeffrey R. Krinsk and Mark L. Knutson of Finkelstein & Krinsk LLP in San Diego, as well as Lori Ann Fanning and Marvin Alan Miller of Miller Law LLC in Chicago.

Navistar is being represented by Brandon K. Crase, Megan C. Fitzpatrick, Kathleen Patricia Lally, Mark Steven Mester and Cary R. Perlman of Latham & Watkins LLP in Chicago.

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