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Urgent Warning for Anyone with a Takata Airbag Client!

Urgent Warning for Anyone with a Takata Airbag Client!

Richard Newsome, Esq.
Frank Melton, Esq.
William C. Ourand, Esq.

Right now, certain companies are feverishly working to deny Takata airbag victims their day in Court.  Their method of attack is a “channeling injunction”—a bankruptcy oddity spawned by asbestos litigation.  It is imperative for everyone representing individuals injured or killed by Takata airbags to actively engage in the bankruptcy and take the necessary steps to protect their clients’ rights.

This article will discuss and analyze the proposed channeling injunction and other key recent events in the bankruptcy proceeding, and will then provide suggestions for protecting your clients’ rights.

I. The Takata Bankruptcy and the Proposed Channeling Injunction

Takata, the airbag supplier at the heart of the largest automotive recall ever conducted, declared bankruptcy this past June.[1]  Since then, there has been a flurry of complex legal actions filed throughout the world—including bankruptcy actions filed in Delaware, Japan, Canada, and elsewhere.[2]  Takata also filed a separate but related “adversary action” in which it sought, and obtained, an injunction against the prosecution of all state court cases involving a Takata airbag.  The injunction has drastically extended the automatic bankruptcy stay to reach beyond Takata and include all claims against Honda and other automakers—referred to as the “Original Equipment Manufacturers,” or “OEMs” for short.[3]

Just before midnight on Friday, November 3, 2017, Takata filed its Chapter 11 Plan of Reorganization.[4]  The Plan is a 289-page document which lays out Takata’s proposed reorganization after being purchased by Key Safety Systems, a rival automotive component part supplier.[5]  The Plan specifically includes a Channeling Injunction and the complete release of all claims against Takata and any OEM which chooses to participate.[6]

To establish the groundwork for the Channeling Injunction, the Plan first calls for the creation of a trust fund for airbag inflator injury and death claims.[7]   Any OEM which chooses to pay into the trust fund gets to become a “Protected Party”—meaning that the Bankruptcy Court would provide the OEM with a complete and total release of all potential personal injury or wrongful death claims involving a defective Takata airbag inflator equipped in one of their vehicles.[8]

If put into place, the Channeling Injunction would forcibly funnel all future airbag rupture claims involving vehicles produced by a “Participating OEM” into the trust.[9]  This means that the victims and their families would be unable to pursue a lawsuit against either Takata or the vehicle manufacturer.[10]  Instead, they would be forced to file an administrative-style claim with the trust.  The trust, in turn, would provide a pre-determined amount of compensation based on a settlement value matrix.  The matrix would be based on several categories of injuries, and would essentially provide a range of possible awards for each category.

At the time of this writing, the settlement value matrix has not been made public, and is being prepared in complete secrecy.  The vast majority of current injury victims have been provided no notice of or input in this process.

II. The Channeling Injunction is Unnecessary and Lacks Valid Legal Support in this Context

Channeling injunctions have been used in asbestos litigation and a few other rare “mass torts.” Their use is almost always controversial and should only occur in the most extreme of circumstances.  The lawsuits against OEMs for injuries and deaths caused by Takata airbags simply do not fit those extreme circumstances.

The Bankruptcy Code only contains one provision which allows for a channeling injunction.  That provision is Section 524(g), and it is specific to only asbestos cases.[11]  Of course, asbestos is an incredibly unique situation.  Individual asbestos manufacturers often faced tens or hundreds of thousands of lawsuits brought by those suffering from mesothelioma—an incredibly painful and lethal form of cancer.  The financial toll of these claims was immense.  Congress’ decision to pass 524(g) was the direct result of the unusual challenges presented by asbestos litigation.[12]  Critically, Section 524(g) also contains specific safeguards—including the requirement that a supermajority of 75% of the existing claimants vote in favor of the injunction.[13]

Given that Section 524(g) is specific to asbestos, the Takata Reorganization Plan instead calls for the Channeling Injunction to be implemented pursuant to Section 105(a) of the Bankruptcy Code.  Section 105(a) enables the court to “issue any order, process, or judgment that is necessary or appropriate to carry out the provisions” of the bankruptcy code.[14]  The use of Section 105(a) to enact a channeling injunction to release non-debtors is even more controversial than the asbestos-specific channeling injunction contained in 524(g).  There is currently a circuit split as to whether Section 105(a) provides such authority.  The Fifth, Ninth, and Tenth Circuit Courts of Appeal have all clearly held that Section 105(a) does not provide authority to release non-debtors.[15]  Other Circuits, however, have allowed for non-debtor releases under Section 105(a) under varying circumstances, applying either a case-by-case analysis or a set of specific factors.[16]

The Delaware Court overseeing the Takata Bankruptcy sits within the Third Circuit Court of Appeal.  We believe a strong argument can be made that existing Third Circuit precedent forbids the use of Section 105(a) to impose the type of channeling injunction sought in the Takata Reorganization Plan.[17]  Among other things, we believe that a channeling injunction is particularly inappropriate in this case because:

  • Certain OEMs allegedly engaged in separate and distinct tortious conduct as compared with the Debtors, including by allegedly failing to meet their own specific reporting obligations under the TREAD Act, and by allegedly concealing the dangerous defect for more than a decade.  It would be unlawful and inequitable for Takata’s bankruptcy to shield those certain OEMs from liability for their own alleged independent misconduct.
  • The facts and circumstances of this litigation, including the number of lawsuits which have been and are likely to be filed, simply do not warrant the extraordinary relief sought.  Other litigations where such injunctions have been entered, e.g. asbestos, have involved true “mass torts” with thousands or tens of thousands of lawsuits and claimants.  The Takata airbag inflator injury and wrongful death litigation is nothing like the asbestos litigation.
  • The Channeling Injunction appears to be the product of the joint effort between the Debtors and certain OEMs to design and execute the Bankruptcy proceeding in such a manner as to shield the OEMs from liability moving forward.  Evidence supporting this joint effort includes the fact that the Debtors allegedly never looked elsewhere for operational funding—including traditional DIP funding sources—and instead allegedly sought to become financially dependent upon operational funding provided by certain OEMs.
  • The Channeling Injunction, if ratified by the Court, would serve as a dangerous road map for future cases.  Manufacturers would know that they can buy off their liability without ever having to face a civil jury by simply contributing relatively modest amounts (compared with their potential liability in civil lawsuits) to secure a channeling injunction.
  • The Channeling Injunction violates the Constitutional rights of current and future victims of the airbag inflator defect by denying those individuals the right of access to the Courts.

III. Protecting Your Clients’ Cases

It is imperative for anyone with a Takata case to actively monitor and participate in the bankruptcy proceeding in order to safeguard and preserve their clients’ rights.  For most plaintiffs’ attorneys, bankruptcy is a relatively unfamiliar area of law.  There are numerous pitfalls which exist in any bankruptcy proceeding, and these hazards are compounded in this case because of the bankruptcy’s international magnitude and scope.

Our firm has retained multiple bankruptcy law firms. We have retained one firm located in Japan to help coordinate filing notices of claim in the Japanese proceeding. We have also retained another firm located in Delaware to help monitor and confirm deadlines, and to coordinate filings in the US bankruptcy proceeding.  This has been a complicated and time-consuming process, and is still nowhere near complete at the time of this writing.

Critically, the Takata Bankruptcy Court will conduct a confirmation hearing sometime in the next few months.  This is when the Court will either approve or disapprove of the Reorganization Plan, including the Channeling Injunction.  To ensure a voice at the hearing, personal injury victims must timely file all required notices and proofs of claim.  This will enable those individuals to object to the Reorganization Plan and the Channeling Injunction.  It will also provide those victims with an opportunity to present arguments against the legal validity and constitutionality of the Channeling Injunction.

IV. Conclusion

The Takata Bankruptcy has been fraught with hazards for the true victims of the airbag inflator debacle.  The latest and most severe concern is the possible implementation of the unprecedented proposed Channeling Injunction which would forever close the courthouse doors to the victims.  It is imperative that anyone representing clients who have suffered injuries due to a defective Takata airbag inflator be actively engaged in the bankruptcy proceeding.


[1] In re: TK Holdings, Inc., et al., Case No.: 17-11375, D.E. 1 (June 25, 2017).
[2] Matt Chiappardi, Takata Gets Nod on Unusual Bankruptcy Financing Deal, Law360, available at (Oct. 2, 2017).
[3] See In re: TK Holdings, Inc., et al., Case No.: 17-50880, D.E. 117 (Nov. 6, 2017).
[4] In re: TK Holdings, Inc., et al., Case No.: 17-11375, D.E. 1108 (Nov. 6, 2017).
[5] Id.
[6] Id. at 115-17.
[7] Id. at 81.
[8] Id. at 115-17.
[9] Id.
[10] Id.
[11] 11 U.S.C. § 524(g).
[12] Joshua M. Silverstein, Overlooking Tort Claimants’ Best Interests: Non-Debtor Release In Asbestos Bankruptices, 78 U.M.K.C. L. Rev. 1, 55 (Fall 2009).
[13] 11 U.S.C. § 524(g)(2)(B)(ii)(IV)(bb).
[14] 11 U.S.C. § 105(a).
[15] Eric Anderson and Jay Basham, Please Release Me, Let Me Go: Eleventh Circuit Embraces Third-Party Release Standards, 34-6 ABIJ 20 (June 2015).
[16] Id.
[17] See In re Combustion Eng’g, Inc., 391 F.3d 190, 237 (3d Cir. 2004).

Takata Airbag Update: BMW Recalls 230,000 Additional Vehicles

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Takata Update: BMW Recalls 230,000 Additional Vehicles Last week, BMW announced the recall of an additional 230,000 vehicles over concerns that they may have defective Takata inflators. The German automaker told U.S. authorities that they recently discovered that some of Takata’s faulty inflators had been used as a replacement part in certain older vehicles after […]

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Takata Agrees to Plead Guilty & Pay $1 Billion as Massive Recall Expands

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Takata to Pay $1 Billion as Massive Recall Continues to Expand The largest automotive recall in U.S. history continues to grow as regulators say more than 20 million dangerous Takata airbag inflators remain on American roads.  It is now estimated that 42 million vehicles, equipped with around 70 million defective Takata inflators, will be recalled […]

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New Takata Study Undermines Manufacturers’ Blame the Consumer Defense

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“The findings in this analysis conducted for The Safety Institute are disturbing, said Richard Newsome of Newsome Melton law firm. “For months now, all we have been hearing is how it’s the consumers responsibility to not drive cars that have been recalled, yet here we see evidence that car owners couldn’t get their recalled vehicles fixed […]

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URGENT: Takata Recall Update

Federal safety regulators announced more than 300,000 Hondas and Acuras should not be driven until their Takata airbags are replaced.

The National Highway Traffic Safety Administration (NHTSA) said new tests show these airbags have a much higher risk of exploding and killing a driver or passenger. These airbags have a 50% chance of exploding when they are deployed in an accident, according to the agency. Other Takata airbags have less than a 1% chance of exploding.

Cars located in humid regions of the country such as Texas, Florida and the Gulf Coast are at particular risk.

The models identified by NHTSA include: 2001-2002 Honda Civic, 2001-2002 Honda Accord, 2002-2003 Acura TL, 2002 Honda CR-V, 2002 Honda Odyssey, 2003 Acura CL, 2003 Honda Pilot.

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2001-2003 Honda/Acura Takata Airbag PSA

A new public service announcement (PSA) featuring Corey Burdick, one of many victims of defective Takata airbags that have been recalled.

“The federal government just issued an urgent warning to consumers about certain 2001/2002 Honda vehicles with defective airbags,” Newsome can be seen saying in the PSA. “The warning told consumers not even to drive their vehicles until they have taken it into a dealership to make sure that if they have a defective airbag, it has been replaced.”

Takata, whose airbags can be found in one in every five cars on the road in the United States, has come under Congressional scrutiny for intentionally putting forward a product which executives knew was defective. U.S. Senator Bill Nelson of Florida has stated that the current Takata airbag recall may reach upwards to 250 million vehicles worldwide.

In the educational PSA, a disfigured Burdick speaks into the camera stating, “I lost my eye because of a defective airbag…take your car in today so that this doesn’t happen to you.”

Corey Burdick’s life was forever changed on May 29, 2014 when he was involved in a minor traffic incident while driving to work in Lake County, Florida. During the minor incident, the Takata airbag in his 2001 Honda Civic ejected sharp metal shrapnel into his right eye, leaving him disfigured and permanently blind in that eye.

Burdick later found out that his Civic had been previously recalled multiple times for the dangerous airbag defect. Unfortunately, Burdick never received notice of the recall. As a result, Burdick, his wife, and their two young children are now forced to live with permanent and needless injuries he suffered as a result of the shrapnel defect.

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Takata Recall: Breaking News

On Wednesday, June 1st, during a news conference with Sen. Bill Nelson, our client Tiffany Vu spoke with the media about a fender-bender she was in that ended with doctors removing shards of metal from her body at a hospital due to a faulty Takata airbag. On or about April 14, 2016, Tiffany Vu, 27 […]

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Defective Takata Airbags Being Sold With New Vehicles

This morning the United States Senate Commerce Committee released another report as part of their investigation of Japanese airbag manufacturer Takata, which revealed that 2.1 million new vehicles have recently been sold with defective airbags. According to the Report, “Fiat Chrysler, Mitsubishi, Toyota and Volkswagen all admitted to equipping some new vehicles with non-desiccated ammonium-nitrate […]

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The Dirty Secret About the Takata Airbag Recall

Orlando, FL – Last week 40 million more cars were recalled because of exploding Takata airbags. The recall now affects around one out of every four cars in America, making it by far the largest recall in history. But the dirty truth about the recall is that sitting here today, it’s impossible for anyone to […]

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