Samsung has just been awarded $7 billion by a US judge for failing to fix a battery failure that resulted in more than a million phones worldwide being lost or stolen.
The case is a wake-up call for the South Korean company as it looks to regain consumer trust in its mobile devices.
Samsung lost the case when it failed to make a recall of its Galaxy Note7 smartphone, which was linked to at least 1,400 phone thefts.
The verdict from US District Judge James E. Briscoe, released on Wednesday, was a big blow to the South Korea-based company.
The ruling came after Samsung pleaded guilty to two felony charges, including one count of making false statements to the Securities and Exchange Commission (SEC) to mislead investors.
The company admitted to misleading investors by failing to tell investors about its battery issues.
“The jury found that Samsung had failed to properly investigate and mitigate the potential risk of battery cell failure, and that its failure to do so contributed to the widespread and serious losses suffered by Samsung and its customers,” the judge said.
“We are grateful for the support of our colleagues across the country and beyond.”
The court awarded Samsung $7.2 billion in damages.
Samsung, which had been battling a lawsuit by Apple, Microsoft, and others over the alleged battery problems, was able to get $4 billion from the US government for the losses it suffered in the Note7 battery recall.
Apple was awarded $1.9 billion for its losses.
But Samsung is still reeling from the fallout of the case.
It has spent more than $200 million in legal fees and lost tens of millions of dollars from the lost sales of the Note 7, which it blamed on the battery problem.
“It’s a really important case for the company,” said Brian Goldberger, an analyst at Forrester Research.
“But it’s a bigger deal for the court.
It’s going to take Samsung some time to get over the damage it’s done.
They need to come back to their basics.”
Briscoed was able because he relied on a ruling from the judge that found that the company did not act recklessly in its handling of the battery issue.
Samsung has been working on a recall for its Galaxy smartphones since early March, and the company said that it expects to complete the recall by early November.
“Samsung is committed to making the Galaxy Note 7 and the Galaxy S8 smartphones and tablets available to our customers in time for the holidays,” Samsung said in a statement.
“However, we must be clear that we do not yet know the full extent of the damage and we will take all necessary steps to correct the situation as soon as possible.”
The US Department of Justice has been investigating the matter for more than two years.
The judge’s decision was not expected to have much impact on Samsung, as it has been able to avoid fines that it would have incurred in a similar case.
Samsung is expected to be able to refinance some of its debt as part of the deal.
However, the judge found that “Samsung has demonstrated that it did not take the steps necessary to address the issues that were identified and that it failed in its duties to act with due diligence, to conduct an adequate investigation of the alleged defect and to conduct a credible and timely review of the evidence and conclusions that resulted from its investigation.”
The judge also said that Samsung failed to meet its fiduciary duty to its investors by not taking any action to prevent the battery problems.
“Solving the problem of defective batteries will require more than mere technical fixes,” the court said.