Call us anytime, toll-free: (888) 808-5977

NEWSOME LAW BLOG

News & Commentary

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 https://www.law360.com/articles/970070/takata-gets-nod-on-unusual-bankruptcy-financing-deal (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).

Carbon Monoxide Poisoning Cases

Carbon monoxide (“CO”) poisoning is a major health problem in the United States, resulting in thousands of injuries—including permanent brain damage—and hundreds of deaths each year. Many, if not most, of these injuries and deaths could be avoided by responsible industry behavior—including by using reasonable safeguards, like CO detectors, and by properly designing and manufacturing […]

Read more

Suing Lyft and Uber: Are There Any Viable Causes of Action Left?

This past session, the Florida Legislature passed, and the Governor promptly signed into law, House Bill 221. This bill constitutes a statewide overhaul of the laws governing transportation network companies (“TNCs”) like Uber and Lyft. Unfortunately, the legislation has horrible ramifications for consumers who are injured by a TNC driver, as it effectively eliminates certain […]

Read more

BREAKING NEWS: Florida Supreme Court Rules Med Mal Caps Unconstitutional

Florida Supreme Court, Florida Clerk of Courts, Florida Court System, Legal Aid, Attorneys Near Me, Orlando Attorneys, Orlando lawyers

Yesterday, the Florida Supreme Court issued a landmark decision, North Broward Hospital District v. Kalitan, which effectively abolishes the arbitrary caps on medical malpractice damages the Legislature enacted back in 2003. Historically, Floridians injured by medical negligence were stuck with incredibly limited awards for non-economic damages, thanks to the efforts and lobbying prowess of various […]

Read more

Asleep at the Wheel: How Trial Lawyers’ Heads are Buried in the Ground with Respect to Self-Driving Cars and Transportation Network Companies

By Richard Newsome, Esq. & William C. Ourand, Esq. Self-driving cars and transportation network companies will soon converge and bring about a paradigm shift of tectonic plate proportions for the auto industry, auto insurance industry, and lawyers who handle auto crash cases.  The industry is already preparing for the upcoming revolution, and is taking calculated political […]

Read more

GM Pushing Radical Robot Car Bill Through Florida Legislature

Florida is already out on the safety ledge with respect to self-driving car laws, and a new bill being advanced by General Motors will push us even further over the brink. Last year, Florida became the first state in the nation to make it legal for a self-driving car to operate without a human being […]

Read more

Florida Constitution Revision Commission Holds First Public Hearing Next Week in Orlando

The 2017-2018 Florida Constitution Revision Commission will hold its first public hearing next week in Orlando at the UCF Fairwinds Alumni Center starting at 5:00 pm. This public hearing was announced on Monday during the Commission’s organizational session. Florida’s Constitution Revision Commission – or “CRC” – was first created in 1968. The CRC is comprised […]

Read more

Newsome Melton Auto Recall Round Up

Defective Seatbelts; Hyundai Recalls 978,000 Sonatas             Seatbelts found in nearly one-million Hyundai vehicles can allegedly unfasten in a crash leading to a massive recall. The announcement affects the Hyundai Sonata sold under model years 2011 to 2014 and the Sonata hybrid from model years 2011 to 2015. Hyundai told authorities that during assembly the […]

Read more

Snowshoes May Break During Use; L.L. Bean Recalls 3,000

Snowshoes are designed to redistribute a person’s weight over an area greater than their shoe size so they can traverse snow without sinking or getting stuck. But if the material cannot hold the weight of the operator the snowshoe can break and make it even harder to travel over snowy conditions. After learning of at […]

Read more

Energizer Batteries Pose Burn Threat; 130,810 XBOX ONE Chargers Recalled

Overheating batteries continue to plague both manufacturers and the consumers who purchase wireless technologies. Defective batteries that power laptops, smartphones, hoverboards, and most recently XBOX ONE video game controllers, have led to millions of products deemed unsafe by the Consumer Product Safety Commission. After learning of 24 alleged incidents of their batteries “overheating and deforming […]

Read more

Free Case Evaluation

Contact one of our legal experts and get a prompt review of your case.

  • Name
  • Phone
  • State
  • Case Description

All fields are required.

Over $584.6 million dollars recovered

No fees until you are compensated

Strength, Experience and Compassion

Follow us to get the latest updates of our doings

201 South Orange Avenue, Suite 1500 Orlando, Florida

Call us toll-free, anytime:
(888) 808-5977

Sign up for weekly product liability alerts.

x