FCA Must Face Lawsuit Over Safety Compliance Claims

Fiat Chrysler Automobiles NV has been ordered to face a lawsuit that claims the company defrauded shareholders in 2014-2015 by claiming it was “substantially” in compliance with U.S. recall rules when it wasn’t.

U.S. District Judge Jesse Furman agreed that shareholders were likely to assume from FCA’s statements at the time that the company had no significant compliance problems. He also ruled that shareholders may pursue claims that CEO Sergio Marchionne and U.S. sales chief Scott Kunselman failed to properly disclose the company’s compliance problems.

The lawsuit argues that FCA inflated its stock price by downplaying problems with its recall procedures even as it was being investigated by the National Highway Traffic Safety Administration for just such shortcomings. The probe resulted in FCA being fined $105 million in 2015 for delaying 23 recalls covering more than 11 million vehicles in the U.S.

Furman dismissed a claim by the same lawsuit that FCA violated accounting rules by failing to earmark enough funds to cover recalls it knew were likely to occur. The company booked roughly $670 million for recalls.