Class-Action Lawsuit Accuses Fiat Chrysler Of Hiding Safety Issues To Increase Stock Value

Fiat Chrysler once again finds itself in the legal doghouse after some of its investors filed a class-action suit, claiming the automaker deceived them by withholding information related to the safety and computer problems in millions of vehicles in order to inflate the price of company stock.

The lawsuit [PDF], filed in Manhattan Federal Court on Friday, accuses Fiat Chrysler and executives Sergio Marchionne and Richard Palmer of making false and misleading statements and failing to disclose information that may have had in adverse effect on the company’s financial standing.

According to the suit, at the time of Fiat and Chrysler’s August 2014 merger, neither company adequately informed investors of flaws in Chrysler’s “manufacturing processes, supply chain, electronic security measures, and/or quality control that ultimately rendered at least 3.1 million cars and trucks unsafe to drive” — and sent the company’s stock plunging.

“As a result of [Fiat Chrysler’s] wrongful acts and omissions, and the precipitous decline in the market value of the company’s securities, plaintiff and other class members have suffered significant losses and damages,” the lawsuit states.

The plaintiffs claim they were not made aware of Chrysler’s slow completion rates for recalls, slow or inadequate notifications to consumers, faulty approaches to addressing safety issues and improper actions by dealers that went on to become the subject to intense scrutiny by federal regulators this year.

Specifically, the lawsuit cites several recent high-profile safety recalls as evidence of the company’s misleading actions toward investors.

According to the lawsuit, a 2015 recall of Jeep Grand Cherokees and Dodge Durganos over faulty suspension components that could have led to component breakage and instability was actually pending at the time Fiat and Chrysler agreed to merge in 2014. Still, investors say they were never informed of the possibility of such a recall.

Shortly after that safety campaign was announced, Fiat Chrysler recalled an additional 1.4 million vehicles that were found to be susceptible to remote hacks via the Uconnect onboard infotainment system.

That recall was initiated after Charlie Miller and Chris Valasek, the security researchers who hacked the Jeep while a Wired.com reporter was driving it, exploited a security flaw in Uconnect that gave them the entry point to wirelessly take control of the vehicle. The plaintiffs point out that hackers had alerted FCA to the fact that there were architectural vulnerabilities in Jeep Cherokees in a paper back in 2014.

Just days later, the National Highway Traffic Safety Administration slapped Fiat Chrysler with a record-setting $105 million fine in connection with the handling of 23 previous recalls affecting more than 11 million vehicles.

Despite the fine, the suit claims the company’s safety issues continued, with more than 1.7 million Jeep Renegade SUVs and Dodge Ram pickup trucks having been recalled so far in September.

The class-action suit, which seeks unspecified damages and attorneys fees, is the second for Chrysler in the past two months.

Back in August, owners of several Jeep Cherokees sued the company and Harman International – the maker of the Uconnect onboard infotainment system – for fraud, negligence, unjust enrichment and breach of warranty related to hacking vulnerabilities.

[via Courthouse News]