Cummins faces shareholder and customer lawsuits after $2B settlement

Mike Wolanin | The Republic An exterior view of Cummins Columbus Engine Plant in Columbus, Ind., Friday, Oct. 7, 2022.

By Susan Orr | Indianapolis Business Journal

For  The Republic

Cummins Inc. is facing multiple lawsuits from shareholders and Dodge Ram truck owners after the company agreed to pay $2 billion late last year to settle allegations that it unlawfully altered hundreds of thousands of pickup truck engines in violation of Clean Air Act emission standards.

To date, six federal lawsuits have been filed against the Columbus, Indiana-based manufacturer. One case was filed in the U.S. District Court in the Southern District of Indiana. The other five were filed in California.

Jon Mills

Of the six complaints, four have been filed by shareholders. The two others come from a total of seven Ram truck owners. All the plaintiffs essentially allege that they were misled by the company and that they or the corporation was harmed by its actions.

Cummins spokesman Jon Mills said in an email that the company “denies the claims in these actions and will defend itself against them in court.”

Cummins did not admit to any wrongdoing in the Clean Air Act case, in which federal and California officials alleged the company had installed devices to bypass emissions tests on nearly a million Ram 2500 and 3500 pickup trucks produced from 2013 to 2023.

The shareholder lawsuits

The Indiana complaint was filed Jan. 19 by the Illinois-based Vladimir Gusinsky Revocable Trust, a Cummins shareholder since 2000. The complaint names as defendants current Cummins CEO Jennifer Rumsey, former CEO Tom Linebarger and a dozen current or former board members.

This lawsuit was filed as a shareholder derivative complaint, meaning the plaintiff is filing on behalf of Cummins itself and argues that the defendants’ actions caused harm to the company.

This lawsuit alleges a long-standing pattern of environmental violations by Cummins, citing several previous settlements, including one in 1998 in which the U.S. Department of Justice and the Environmental Protection Agency imposed a civil penalty totaling $83.4 million against Cummins and six other diesel-engine makers.

At the same time, the plaintiff alleges, Cummins issued “half-truths and outright misinformation” concerning its compliance with environmental regulations.

“These actions (and board inactions) lulled investors into a false sense of security for years,” the plaintiff alleges.

Two other shareholder derivative complaints were filed this month.

One was filed Feb. 5 by the Pennsylvania-based Catherine M. Sugarbaker Family Trust, whose trustee is Michael Mongiello. The other was filed Feb. 6 by a trust named Roberta Ann K.W. Wong Leung Rev U/A DTD 03/09/2018. The trustee is Roberta Wong Leung of Hawaii.

Both of these suits were filed in U.S. District Court in the Central District of California, and both name Rumsey, Linebarger and more than a dozen current and former Cummins board members as defendants.

In the Sugarbaker lawsuit, which also cites Cummins’ history of environmental settlements, the plaintiff alleges that the defendants acted in ways that “resulted in $2.04 billion in damages to date and significant damages to Cummins’ reputation, goodwill, and standing in the business community, as well as exposing the Company to potential liability for violations of state and federal law.”

The Leung suit alleges similar harms to Cummins resulting from the defendants’ actions.

Another shareholder suit was filed Jan. 15 in U.S. District Court in the Central District of California by shareholder Tom Baker. Cummins, Linebarger, Rumsey and Chief Financial Officer Mark A. Smith are all named as defendants in this complaint.

Baker’s complaint accuses Cummins of making multiple “materially false and misleading” statements in financial reports issued since 2019.

Specifically, he alleges that certain disclosures about the environmental investigation into the Ram truck engines, statements about the company’s risk factors, and statements about the company’s commitment to environmental sustainability were “materially false and misleading” because Cummins continued to manufacture the engines as it issued these statements.

Baker is asking the court to certify his complaint as a class action suit on behalf of anyone who acquired shares of Cummins stock between April 30, 2019, and Dec. 21, 2023.

Paul Vink

Attorney Paul Vink, who chairs the litigation group at Indianapolis-based law firm Bose McKinney & Evans LLP but is not involved with any of the Cummins cases, said shareholder suits and customer suits are commonplace in situations like this.

“It’s extremely routine that litigation like this is filed any time there’s some fairly significant damages paid by a corporation,” Vink said.

Both of the Cummins shareholder suits note that the company’s stock price fell $7.01 per share on Dec. 22, the day the settlement was announced. Shares of Cummins stock closed at $236.99 that day, down 2.87% from its Dec. 21 closing price of $244.

The stock has rebounded since then and as of Tuesday was trading at $253.58—higher than it was on Dec. 21.

Vink said the stock price rebound probably won’t hurt the shareholders’ cases.

“You can’t simply look at the stock and say, ‘Well, it’s now trading at where it was [before the settlement announcement]. So there’s no damages; case dismissed. That’s it.’ It won’t be viewed that way,” Vink said. “It’s still a $2 billion loss, and the company would have certainly been $2 billion better if they had never had the loss. So that’s the argument.”

What will be important in these cases, Vink said, is a general legal principle called the business judgment rule. Generally stated, the business judgment rule means a plaintiff can’t recover damages based on business decisions that turned out badly. The plaintiff must show that the defendants made those decisions recklessly or in bad faith.

“That’s always a big issue in these cases as to whether or not you can get over that hurdle,” Vink said.

The customer litigation

Cummins is also facing two separate lawsuits filed by California residents who own Ram trucks.

Both suits were filed in U.S. District Court in the Northern District of California. The first case was filed Dec. 27 by three California residents, and the second was filed Feb. 1 by a separate group of four California residents.

In both lawsuits, Cummins and FCA US LLC are named as defendants. FCA US LLC is the U.S. legal entity for Stellantis N.V., the corporate parent of the Ram brand. Based in the Netherlands, Stellantis was formed in 2021 when Peugeot S.A. merged with Fiat Chrysler Automobiles N.V.

Both lawsuits make similar arguments—that the plaintiffs either would not have purchased their Ram trucks, or would not have paid as much for them, if they had been aware of the vehicles’ emissions-control problems.

The plaintiffs in both cases are asking for the court to certify their complaints as class-action lawsuits, which would allow other Ram truck owners to join the cases.

Stellantis declined to comment on the customer lawsuits, telling IBJ the company does not discuss active litigation.


Though both shareholder and customer lawsuits are common, Vink said, it’s rare that they end up going to trial. More likely, he said, is that the cases will be resolved before that point, perhaps through a summary judgment, dismissal or settlement.

And because corporations and their directors and officers are typically protected by insurance, Vink said, Cummins likely won’t be on the hook financially even if it does end up paying a settlement or judgment.

Apart from the lawsuits, Cummins has seen some financial impact from the environmental settlement.

In its latest earnings report, issued Feb. 6, Cummins posted a rare quarterly loss of $1.4 billion, or $10.01 per share. In the same period in 2022, it saw a profit of $631 million, or $4.43 per share.

For the full year, Cummins reported a profit of $735 million, or $5.15 per share, compared with $2.2 billion, or $15.12 per share, in 2022.

The $2 billion environmental settlement, which Cummins recorded in the fourth quarter of last year, hurt both its quarterly and full-year financial results, the company said during a call with analysts.

But analysts who participated in that Feb. 6 call did not appear focused on the settlement. They asked Cummins executives more than a dozen questions, only one of which mentioned the settlement.

Over the past 52 weeks, shares of Cummins have traded from $203.18 to $265.28 apiece.