$553M Takata Air Bag Settlement Puts the Heat to Remaining Auto Companies to Settle in MDL

By Emily Cox
Air Bag Settlement
Photo by Steve P. Snider

Toyota, Subaru, Mazda, and BMW agreed Thursday to pay a combined $553.6 million to exit the pending multidistrict litigation (MDL) over allegedly dangerously defective Takata Corp. air bag inflators, sending a strong signal to the remaining three car makers to reach their own deals fast.

The automakers settling out of court ups the pressure on Ford, Nissan, and Honda to follow suit in order to avoid jury trials in light of the impact of the MDL on recalling and replacing the faulty air bag inflators.

There’s also the ever-present threat that Takata Corp may go bankrupt to consider. Its US subsidiary TK Holdings, Inc. is buried in debt due to the recall and litigation. If Takata goes bankrupt, automakers remaining in the MDL will be left holding the bag for the claims.

“It’s certainly something that everyone in the industry is concerned about, and from a litigation management perspective, you never want to be the next guy in line when the guy at the head of the line goes bankrupt,” Thomas Regan of LeClairRyan said.

The Race to Settle in Takata Air Bag MDL

Also, plaintiff attorneys tend to be more generous to defendants who settle first, significantly raising the stakes for those who stay in the litigation.

“It was a wise move on the part of the automakers,” said Rebecca MacPherson of Jones Day. “Any automaker should get out of this thing as fast as they can.”

Takata’s air bag inflators, when deployed, can eject dangerous metal fragments and chemicals. They have caused at least 11 deaths in the US and are subject of the largest auto recall in US history.

The four automakers deals will speed up removing the inflators from almost 16 million vehicles and compensate class members for economic losses from the recall.

Under the terms of their agreements, BMW of North America LL will pay $131 million. Subaru of America Inc will pay $68,262,257. Toyota Motor Corp. and Mazda North American Operations are on the hook for $278,500,000 and $75,805,050 respectively.

The car makers remaining in the MDL will likely face much higher settlement agreements or jury verdicts, especially Honda. MDL plaintiffs allege that Honda and Takata colluded to keep consumers in the dark. They concealed their knowledge of the defect, while conducting their own internal investigation. Consequently, reaching any settlement will be problematic for the company.

“The dollar amount for Honda is going to be very high,” MacPherson said.

 

 

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