Automakers have won a temporary reprieve from lawsuits filed by victims of defective air bags made by bankrupt Takata Corp. that led to the largest-ever auto safety recall and at least 18 deaths. It appears the decision will give the Japanese auto supplier enough breathing room to work through its bankruptcy reorganization.
U.S. Bankruptcy Judge Brendan Shannon granted a 90-day halt on lawsuits brought by Hawaii, New Mexico, and the U.S. Virgin Islands as well as those filed by individual victims. Judge Shannon did not extend the shield to 48 federal cases that extend across several districts, saying the lawsuits had already advanced. Takata requested a six-month freeze on hundreds of lawsuits so management could complete a $1.6 billion sale of its viable operations. Takata said that was crucial to its reorganization. It would allow Takata to replace air bag inflators that are subject to the biggest recall in automotive history. Judge Shannon said he was “extremely sensitive” to the Plaintiffs’ cases, but believed a “breathing spell” for Takata was appropriate. The stay will expire on Nov. 15.
Major automakers, including BMW AG, Ford Motor Co, Honda Motor Co Ltd and Toyota Motor Corp, argued in favor of the stay. Takata and TK Holdings Inc, its U.S. unit, said they faced tens of billions of dollars in liabilities when they filed for bankruptcy protection in June, including claims from automakers that used its airbags and individuals who filed class-action lawsuits.
Bankruptcy automatically stayed hundreds of lawsuits against TK Holdings for wrongful death, injuries, economic loss and breach of consumer protection laws stemming from the faulty airbags. In July, the company asked the court to suspend lawsuits against automakers brought by airbag victims. Takata separately filed for U.S. bankruptcy protection (Chapter 15) in an effort to stay lawsuits in the U.S. against the parent. The official bankruptcy committee that represents injured drivers stated in court filings that the injunction would have “human consequences” and prevent people from pursuing compensation.
The committee cited a 23-year-old New Jersey woman who became quadriplegic from brain injuries that a government investigator said were caused by a faulty Takata air bag. The woman’s lawyers estimated her economic loss would be $18 million, not including potential damages for pain and suffering. As we have reported, the defective air bags have been linked to at least 18 deaths and 180 injuries worldwide. The recall, the largest in automotive history, will eventually cover 125 million inflators, many of which still need to be replaced. In January, Takata entered a settlement with the U.S. Department of Justice, setting aside $125 million to compensate consumers and $850 million in restitution for automakers.
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