Ford Dismissal Upheld

The U.S. Court of Appeals for the Sixth Circuit has upheld the dismissal of a securities class action originally brought against Ford Motor Co. in 2000. The plaintiffs alleged that Ford failed to disclose safety problems with the tires on its Ford Explorer vehicles (prior to a tire recall) and failed to account for the possibility of future recall costs as a loss contingency.

In its decision (In re Ford Motor Co. Sec. Litig., 2004 WL 1873808 (6th Cir. August 23, 2004)), the court found that none of the alleged misrepresentations were actionable. Most of the statements were “either mere corporate puffery or hyperbole” and did not specifically address the safety of Ford Explorers. As for the few statements that did talk about the safety of Ford Explorers, the court held that the plaintiffs failed to establish that these statements were knowingly or recklessly false. Ford also warned investors about potential recall costs and the plaintiffs did not “allege any facts that establish that anyone at Ford thought or anticipated a massive recall of tires was necessary in the United States before the recall was announced.”

Holding: Motion to dismiss with prejudice affirmed.

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