Equipment Type

Navistar Fined $30.8 Million for Fraud

Milan Supply Chain sued after buying 243  heavy trucks

August 17, 2017
Milan Supply won its lawsuit filed against Navistar.

A Jackson, Tenn., jury has ruled Navistar must pay $31 million in damages for failing to disclose problems with its MaxxForce engines in the first judgment against the truck maker from dozens of lawsuits filed for damages related to the MaxxForce engine.

Milan Supply Chain sued the engine maker and its dealer, Volunteer International, in September 2015 for Breach of Contract, Fraud, Fraud by Nondisclosure, Negligent Misrepresentation and violation of the Tennessee Consumer Protection Act after Milan bought 243 semi-trucks (models years 2012,'13,'14) between July 2011 and March 2013, fitted with MaxxForce 13-litre EGR-equipped engines. (Plaintiff's complaint available here)

Above: Milan Supply Chain sued after buying 243 heavy trucks

At the time of the purchases, Milan was assured by Navistar and Volunteer International that the MaxxForce engines, the only engine at the time using EGR intended to meet 2010 EPA emissions regulations, were well tested and suitable for heavy highway use.

In its suit, Milan said it began to experience numerous breakdowns on its truck, specifically the EGR system, EGR coolers, EGR values and other components. Despite hundreds of attempts to correct the EGR issues and other problems in the trucks, Navistar and Volunteer were not able to adequately fix the vehicles.

Milan said Navistar knew as early as 2010 its EGR-only technology was "still maturing" but chose to conceal this information from Milan and the buying public. By mid-2011, Navistar knew the MaxxForce engines were experiencing significant warranty clams and again did not disclose the problem to Milan or the public.

As a result of the MaxxForce engine failures and Navistar's failure to disclose its knowledge of potential problems with the EGR engines, Milan was forced to sell 25 of its trucks at a loss of $35,000 per truck. The court awarded Milan $10,800,000 for actual damages and $20,000,000 in punitive damages.

Kevin Charlebois, Milan’s CEO, said in a Monday statement that he was pleased with the decision and that he hoped it would force some change within Navistar, which he said continues to blame past management for problems with the Maxxforce engine.

“We made every attempt to collaborate with Navistar to resolve these very legitimate engine issues, but rather than trying to sit down and work out a settlement, Navistar’s current executive team instructed its lawyers to carry out a contentious litigation strategy against our company,” Charlebois said. “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.”

Fraud and misrepresentation

In Deborah Lockridge's article in Today's Trucking, an email to current CEO Troy Clarke, Navistar’s current Senior Vice President of Engineering Dennis Mooney quoted former Vice President of Quality Tom Cellitti, in charge of testing the Maxxforce engines, as saying over and over again prior to the launch to customers, “we have no field testing,” because the company only tested engineering development trucks rather than validation trucks. 

Worse, Jack Allen, former Navistar president of truck operations and witness for Navistar, testified 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.  

Read more of Lockridge's story in Today's Trucking here:

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