The Delaware bankruptcy judge presiding over the Takata Chapter 11 will hear the company’s bid to halt lawsuits connected to its defective air bag inflators. Government agencies and personal injury claimants will strongly oppose Takata’s request. During an emergency hearing in Wilmington, U.S. Bankruptcy Judge Brendan L. Shannon set the hearing date for Aug. 9.
Takata had filed a motion for a temporary injunction related to an adversary action it filed earlier seeking to halt a large number of lawsuits over the company’s air bag inflators. The lawsuits Takata wants to freeze include much of the multidistrict litigation based in the Southern District of Florida, as well as actions brought by government agencies in Hawaii, New Mexico and the U.S. Virgin Islands.
Typically, the Chapter 11 automatic stay can halt litigation or collection efforts against a debtor unless a bankruptcy judge permits them to go forward. But Takata argues there are “gaps” in that power, and wants to have the same power extended to other named Defendants in the targeted suits, such as its major automaker customers – which include some of the world’s largest like Toyota Motor Corp., Ford Motor Co. and Honda Motor Co. Ltd. – that are helping to fund the case.
Judge Shannon set the August hearing date, despite calls from the official committee of unsecured tort claimant creditors to push it out further in order to perform “substantial discovery” before the proceedings.
The agencies in Hawaii, New Mexico and the U.S. Virgin Islands also signaled their opposition, saying they would be objecting to the preliminary injunction on the grounds that their actions fall under an exception to bankruptcy’s automatic stay that allows for exercise of state police powers.
Key Safety Systems
Takata’s restructuring plan depends on a global transaction in which competitor Key Safety Systems Inc. proposed to buy the debtor’s assets for $1.6 billion, with the money going toward paying off the $850 million still owed to the U.S. Department of Justice from Takata’s plea settlement earlier this year.
Committee Appointed With Personal Injury Victims
Takata’s Chapter 11 case has had an official committee appointed that includes personal injury victims of the defective airbag inflators. This gives claimants a rare and potentially powerful voice in the proceedings. The U.S. Trustee’s Office, which appoints official committees in Chapter 11 cases, put together a committee of unsecured tort claimant creditors consisting of seven individuals who say they were injured by defective Takata airbags linked to at least 11 deaths.
$125 Million Fund
A fund in the amount is $125 million is also slated to be set up to benefit wrongful death, personal injury and general unsecured claims. With the formation of an official committee, claimants will not only have a major vehicle with which to influence the case, but typically such panels’ legal fees are covered by the bankruptcy estate. The committee will be tasked with ensuring its members and constituency are treated fairly and it could make an effort to increase money available in the bankruptcy estate, potentially through litigation. That would be a good thing for all of the victims and families of deceased victims.
Unsecured Credits Committee
The U.S. Trustee’s Office has also appointed a committee of unsecured trade creditors in the case that includes XPO Logistics Worldwide Inc. and Mitsubishi Chemical Performance Polymers Inc. The sale transaction at the heart of the case has an expiration date of sorts because Takata must perform on its plea deal with the U.S. government by the end of February 2018, or the federal government can reopen the case and once again pursue criminal charges. Takata was scheduled to return to the bankruptcy court for a second-day hearing on July 26. However, at press time we didn’t have any information from that hearing.
Representation Sought For Future Air Bag Injury Claimants
Takata has also asked the bankruptcy judge to appoint a special representative to handle the claims of customers who sustain injuries from the company’s air bags in the future. With the certainty that more claims will be filed post-petition, Takata says it is seeking to avoid any conflicts between the two classes of claimants. Takata asked the judge to appoint a lawyer to represent the interests of future claimants and act as an independent fiduciary to represent those claimants’ interest with regard to the treatment of future personal injury and wrongful death claims in the debtors’ reorganization proceedings.
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