Honda 2007 Annual Report Download - page 71
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69
Legal Proceedings
Various legal proceedings are pending against us. We believe
that such proceedings constitute ordinary routine litigation inci-
dental to our business. With respect to product liability, per-
sonal injury claims or lawsuits, we believe that any judgment
that may be recovered by any plaintiff for general and special
damages and court costs will be adequately covered by our
insurance and reserves. Punitive damages are claimed in cer-
tain of these lawsuits. We are also subject to potential liability
by other various lawsuits and claims.
75 purported class actions on behalf of all purchasers of
new motor vehicles in the United States since January 1, 2001,
have been filed in various state and federal courts against
American Honda Motor Co., Inc., Honda Canada, Inc., General
Motors, Ford, Daimler Chrysler, Toyota, Nissan, and
Volkswagen and their Canadian affiliates, the National Automo-
bile Dealers Association and the Canadian Automobile Dealers
Association. Several of the state court actions also name
Honda Motor Co., Ltd. as a defendant, as well as other Japa-
nese and German parent companies of United States based
subsidiaries. The federal court actions have been consolidated
for coordinated pretrial proceedings in federal court in Maine
and 37 California cases have been consolidated in the state
court in San Francisco. Additionally, there are pending cases in
seven other states.
The nearly identical complaints allege that the manufacturer
defendants, aided by the association defendants, conspired
among themselves and with their dealers to prevent United
States citizens from purchasing vehicles produced for the
Canadian market and sold by dealers in Canada. The com-
plaints allege that new vehicle prices in Canada are 10 to 30%
lower than those in the United States and that preventing the
sale of these vehicles to United States citizens resulted in the
payment of supracompetitive prices by United States consum-
ers. The complaints seek treble damages under the antitrust
laws, but do not specify damages. The federal court has certi-
fied a class for injunctive relief and damages. We believe our
actions have been lawful and are vigorously defending these
cases.
In accordance with Statement of Financial Accounting Stan-
dards (SFAS) No. 5, “Accounting for Contingencies”, Honda
has recorded a contingent liability when it is probable that an
obligation has been incurred and the amount of loss can be
reasonably estimated. After consultation with legal counsel,
and taking into account all known factors pertaining to existing
lawsuits and claims, we believe that the overall results of all
lawsuits and pending claims should not result in liability to us
that would be likely to have an adverse material effect on our
consolidated financial position and results of operations.