Takata’s bankruptcy filings with Delaware and Tokyo courts signal
the end to company crushed by debt related to defective airbag recalls
and civil lawsuits. Some personal injury and accident lawyers fear that
airbag injury victims may wind up receiving very little, if anything,
after the pending sale of the company to a Chinese corporation.
The U.S. operating division of Japan’s Takata Corporation, T.K. Holdings,
has filed a Chapter 11 (“reorganization”) bankruptcy petition
with a Delaware federal court. Almost simultaneously, T.K. Holdings parent
company, Takata Corporation, filed a petition asking for bankruptcy protection
with a court in Tokyo. The filings are an admission that Takata officials
believe the company’s current assets to debt ratio, and the prospect
of even more future debt related to an ongoing worldwide recall of potentially
defective airbags, are an indication that the company could not survive
as it now exists.
In its Delaware filing, the company’s U.S. subsidiary said that it
would be acquired by Sterling Heights, Michigan-based auto parts supplier
Key Safety Systems for $1.59 billion. Key Safety Systems is the U.S. subsidiary
of China’s Ningbo Joyson Electronic Corporation. Business analysts
expect that a substantial portion of the purchase price will go toward
settling a $1 billion fine owed the U.S. Department of Justice, while
the bulk of the remaining purchase funds will probably be used to settle
Takata’s debts to automakers that were forced to recall millions
of automobiles and trucks to replace potentially deadly defective airbags
manufactured by Takata over last two decades.
Legal and business analysts expect that if the bankruptcy petition is approved
“as submitted” there will little left to settle pending civil
defective product lawsuits or to fund reserves against future claims.
The Takada bankruptcy case, the largest bankruptcy filing of a Japanese
manufacturing corporation in history, has several lessons that should
be taken to heart by those who have suffered some type of personal injury
and are undecided about filing a lawsuit or even undecided about discussing
their potential case with an accident lawyer.
First, when a business files for Chapter 11 (reorganization) or a Chapter
7 (liquidation) bankruptcy, be it a subsidiary of a multinational corporation
or a mom and pop bakery, the court with which the bankruptcy petition
is filed will also issue what is known as an “automatic stay”
of litigation. This means that you can no longer file a lawsuit a lawsuit
against a company while that company’s bankruptcy petition is “in
the pipeline” and the court has not issued its ruling. Furthermore,
any lawsuit that has been filed is “stayed” and removed from
the schedule of the court that would have heard the case.
Next, remember that we live in a world of multi-national corporations and
multi-national jurisdictions. In today’s business environment, and
thanks to international treaties and other such agreements, filing for
bankruptcy protection in one country can often result in bankruptcy protection
in other countries as well.
One point that could offer some hope to potential future plaintiffs in
airbag injury lawsuits is that the Takata filing will have no effect on
the pending, or any future, lawsuits filed against automakers such as
Honda, General Motors, and Ford. Many yet to be filed lawsuits will probably
allege that some automakers, particularly Honda and its worldwide subsidiaries,
knew that there were safety issues with Takata’s products but were
reluctant to order recalls of their vehicles due to the potential costs,
as in millions if not billions of dollars, of such recalls.
In closing, the impact of the Takata bankruptcy filing on past and current
defective product and personal injury lawsuits will be up to the courts
in both the U.S. and Japan. The main takeaway points of interest are that,
once a company files for bankruptcy, that company can no longer be sued
in a U.S. court. Secondly, progress of any pending lawsuits is automatically
stopped and any litigation related to pending cases is also placed on
an indefinite hold. Lastly, anyone who believes that they have been the
victim of personal injury that is related to a defective product should
consult an accident lawyer as soon as possible lest they wait too long
and find themselves with a damages award that is essentially worthless
while a bankruptcy court spends a year or more in reaching its decisions.