U.S. judge in Takata bankruptcy halts lawsuits vs automakers

16 August 2017: A U.S. judge overseeing the bankruptcy of Japanese auto supplier Takata Corp's U.S. business has halted for 90 days the lawsuits brought by victims of its faulty air bag inflators against automakers, a ruling that temporarily smooths its efforts to exit bankruptcy.

Takata argued for a six-month stay of the lawsuits so management could complete a $1.6 billion sale of its viable operations and replace air bag inflators that are subject to the biggest recall in automotive history.

Major automakers including BMW AG, Ford Motor Co , Honda Motor Co Ltd and Toyota Motor Corp , argued in favor of the pause.

"The record developed so far supports the claim that debtors need a breathing spell for reorganization," U.S. Bankruptcy Judge Brendan Shannon said on Wednesday in the Wilmington, Delaware courtroom. The stay expires on Nov. 15.

At least 18 deaths and 180 injuries worldwide have been tied to a defect that causes Takata inflators to explode with excessive force, unleashing metal shrapnel inside vehicles.

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, and last week Takata separately filed for U.S. bankruptcy protection, or Chapter 15, in an effort to pause U.S. lawsuits against the parent.

Takata and the automakers face hundreds of lawsuits including actions brought by Hawaii, New Mexico and the U.S. Virgin Islands.

Lawyers for the plaintiffs called the request to halt lawsuits against the automakers "an abuse of the bankruptcy laws for the benefit of all of the world's largest automobile manufacturers."

The official bankruptcy committee that represents injured drivers said in court papers 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.

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.