Takata fights liability claims in US bankruptcy court

Beleaguered airbag manufacturer Takata is facing more legal troubles just weeks after filing for bankruptcy in a US court, and a number of the world’s biggest carmakers as well as some insurers could be dragged into the case. The US unit of the Japan-based company was responsible for the world’s largest ever auto recall due to faulty airbags and is now fighting huge liability claims from the victims of the defective safety devices, who are suing both Takata and the carmakers that installed its faulty airbags. So far, more than 69 million cars and 125 million airbags have been recalled due to the fact that the inflators degrade over time and inflate with too much force. Incidents have led to at least 180 injuries since 2009 and 17 fatalities, including one in June. Unusually, the Delaware courtroom where the bankruptcy proceedings are being heard will include a committee made up of victims – injured drivers as well as car owners whose vehicles have lost value due to the recall. While bankruptcy cases are typically used to limit a company’s liability in such cases, the official ‘committee’ status given to the victims means that Takata will have to provide it with funds to finance its investigations into liability and Takata’s financial assumptions. Typically, any plaintiffs have to pay for these things themselves making any legal action less attractive. Furthermore, the ability to question Takata’s assumptions could derail any attempt by the airbag manufacturer, its car-making customers and any insurers involved to cap their liability. In another departure from typical bankruptcy cases, the committee of drivers and car owners will also be an official creditor, alongside a committee of auto suppliers and vendors. Takata already reached a settlement with the US Department of Justice over compensation in January and has set aside $125m for consumers and $850m for automakers, which include Toyota, Honda and General Motors. However, liability claims could reach as much $50bn according to some estimates, not least because the carmakers being sued by consumers will turn to Takata for further compensation. For its part, the US unit of Takata is countersuing the states of Hawaii and New Mexico, the US Virgin Islands and hundreds of individuals in a bid to block their legal actions against the carmakers. Takata has also created a fund to compensate future injuries from the airbags in its bankruptcy filings, common practice in such cases where faulty products lead to bankruptcy and one that normally involves financial contributions from other liable parties including insurers, in return for protection against ongoing litigation. Legal experts expect carmakers to demand similar legal protections in return for contributing to a Takata fund. But the committee may also appoint its own experts to challenge those assumptions as well as investigating just how much the carmakers knew about the state of the air bags they installed, so as to determine their liability. "If I were an injured person, I wouldn't want Takata or the carmakers to decide on the size of the fund," said Steven Todd Brown, a professor at the University at Buffalo School of Law, who specialises in compensation funds, speaking to Reuters. Other legal experts cited by Reuters said they expect all parties to look to avoid any protracted battle, as has been the case with asbestos-related cases. However, according to John Pottow, a professor at the University of Michigan Law School, this may not be a foregone conclusion and we could yet see a long-running liability legal drama. "We're in pretty novel terrain here, given the amount of parties and the recall involved," he told Reuters.

Takata fights liability claims in US bankruptcy court

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