Takata airbag components. (Photo: Diego M. Radzinschi/ALM)
Takata Corp., a Japanese automotive parts manufacturer subject to the largest product recall in history over its once faulty air bags, filed for bankruptcy on Sunday in Tokyo and Delaware.
The move comes five months after Takata agreed to pay $1 billion in criminal penalties to settle charges filed by the U.S. Department of Justice related to its sale of defective air bags. Civil multidistrict litigation in Florida will continue without its lead defendant, although plaintiffs’ lawyers had already taken into consideration the likelihood of Takata’s eventual insolvency. And now bankruptcy lawyers from dozens of large firms are entering the fray.
Weil, Gotshal & Manges business finance and restructuring partners Marcia Goldstein and Ronit Berkovich are advising Takata in its Chapter 11 case, along with counsel Matthew Goren. While Weil’s work on behalf of Takata became public last year, the size of the firm’s legal fees on behalf of the company are now laid bare in court filings, which show that partners are billing between $940 and $1,400 per hour for their services, with associates at hourly rates ranging from $510 to $930.
The firm, no stranger to big bankruptcy cases, was retained by Takata as restructuring counsel in August 2015. Since that time Weil has received payments totaling $19.1 million from the company, according to a declaration by Goldstein, with $9.9 million of that sum coming in the 90 days prior to Takata’s Chapter 11 petition. Goldstein’s declaration also states that Weil currently holds a $931,737.28 advance retainer payment from the debtor.
Mark Collins, chair of the bankruptcy and corporate restructuring department at Delaware’s Richards, Layton & Finger, and partner Michael Merchant are serving as local counsel to Takata. The company is also being advised by leading Japanese firm Nagashima Ohno & Tsunematsu. The Asian Lawyer, a sibling publication, recently touted Nagashima Ohno compliance and crisis management partner Akihisa Shiozaki for his air bag recall-related work on behalf of Takata.
As of Monday evening, neither Nagashima Ohno nor Richards Layton had filed billing statements with the bankruptcy court in Wilmington.
The Tokyo-based company’s proposed reorganization plan calls for it to be sold for $1.6 billion to air bag products maker Key Safety Systems Inc. (KSS), a suburban Detroit-based company acquired last year in another $920 million deal by Chinese auto supplier Ningbo Joyson Electronic Corp. The latter bought KSS in early 2016 from an ownership group that included the Canada Pension Plan Investment Board, Crestview Partners and China’s FountainVest Partners.
Davis Polk & Wardwell, Linklaters and Latham & Watkins took the lead in 2014 for Crestview, the CPPIB and FountainVest, respectively, on their roughly $800 million purchase of a controlling stake in KSS. The company, whose general counsel is Matt Cohn, has now turned to Skadden, Arps, Slate, Meagher & Flom to handle its proposed acquisition of Takata. Skadden corporate restructuring partners Ron Meisler and Felicia Gerber Pearlman are advising KSS, along with counsel Jason Liberi and Christine Okike. The deal, which requires bankruptcy court approval, will not see KSS inherit any of Takata’s air bag liabilities.
In its Chapter 11 filing, Takata listed between $10 billion and $50 billion in liabilities against $1 billion and $10 billion in assets. The company’s crippling legal troubles began in 2013 when it issued recalls for millions of automobiles due to defective air bags. In late 2014, the National Highway Traffic Safety Administration ordered a nationwide recall of all cars and trucks with Takata-made air bags.
Company executives were then called to testify before Congress about a series of lethal accidents involving Takata air bags that sent metal shrapnel from the devices into vehicle interiors, killing and maiming passengers. Lawyers representing plaintiffs moved in late 2014 to consolidate more than a dozen cases against Takata in a U.S. district court in Miami, while dozens of defense firms were hired to represent auto companies caught up in the mess.
In January 2015, Takata retained Squire Patton Boggs to handle federal lobbying work through former U.S. Secretary of Transportation Rodney Slater, a partner with the firm in Washington, D.C. In the first quarter of this year, Slater and Squire Patton Boggs received $30,000 from TK Holdings Inc., Takata’s North American subsidiary. TK Holdings paid another $1.77 million to Squire Patton Boggs in 2015 and 2016, according to records on file with the U.S. Senate.
Takata also sought to beef up its in-house legal department. The company hired Bruce Angiolillo, a retired partner and former head of the securities litigation group at Simpson Thacher & Bartlett in New York, in January 2015 to serve as head of legal for Auburn Hills, Michigan-based TK Holdings. But Angiolillo lasted only six months on the job, making way later that year for Eric Laptook—a former legal chief at Japanese trading company Itochu International Inc.—who took over as general counsel, chief safety assurance and accountability officer.
But in January 2017, Laptook also left Takata, shortly after helping the company clinch a deal with the Justice Department that saw it plead guilty to wire fraud charges in a federal court in Detroit. The settlement called for Takata to pay $850 million to automakers affected by its air bag recall, $125 million to injured victims and a $25 million fine. (Laptook recently spoke with sibling publication Corporate Counsel about his time at Takata.)
Dechert, which stepped in for Takata in late 2014 on the litigation front, saw white-collar litigation partners Andrew Levander, Hector Gonzalez and Mauricio España take the lead for the company earlier this year on its criminal settlement, which resulted in charges against three individual executives. Court filings show that the Dechert trio worked on the matter with Covington & Burling partner Daniel Suleiman, who re-joined his firm in 2013 after three years at the Justice Department. Neither Covington nor Dechert entered an appearance Monday in bankruptcy court.
While Takata’s recall efforts will continue despite its Chapter 11 proceedings, civil litigation against the company will be stayed. Peter Prieto, a former Holland & Knight partner now serving as co-lead counsel to plaintiffs in his role at Miami-based litigation boutique Podhurst Orseck, said in a statement that Takata’s bankruptcy will not affect his clients’ bid to extract compensation from “auto manufacturer defendants for their role in the air bag scandal.”
Podhurst Orseck is working with Dallas-based Stutzman, Bromberg, Esserman & Plifka and Delaware’s Hogan McDaniels in their roles as bankruptcy co-counsel to Takata’s MDL plaintiffs, according to court filings. Boies Schiller Flexner is co-counsel with Podhurst Orseck for plaintiffs in the Florida MDL. Members of the steering committee in the litigation include Baron & Budd; Colson Hicks Eidson; Carella, Byrne, Cecchi, Olstein, Brody & Agnello; Lieff Cabraser Heimann & Bernstein; and Power Rogers & Smith.
In mid-May, four auto companies—BMW of North America LLC; Mazda North America Operations; Subaru of America Inc. and Toyota Motor Corp.—agreed to pay $553 million to settle U.S. consumer claims over recalled Takata air bags. Three of those companies, as well as many others operating in the auto industry, have already appeared on the docket for Takata’s Chapter 11 case.
Those companies and their outside counsel to have made appearances Monday include: AB Volvo (Baker & Hostetler); BMW (Norton Rose Fulbright); Daimler Trucks North America LLC (White & Case); Ford Motor Co. (McGuireWoods); FCA US LLC, also known as Fiat Chrysler (Sullivan & Cromwell); General Motors LLC (Honigman Miller Schwartz and Cohn); Honda Motor Co. Inc. (Sidley Austin, Vorys Sater Seymour and Pease); Mitsubishi Motors North America Inc. (Paul, Weiss, Rifkind, Wharton & Garrison); Nissan Motor Corp. (Jones Day); Subaru (Kramer Levin Naftalis & Frankel) and Toyota (Orrick, Herrington & Sutcliffe). Prime Clerk LLC, a bankruptcy claims administrator started by former Weil restructuring partner Shai Waisman, is managing the case’s docket.
Cravath, Swaine & Moore is advising John Buretta, a litigation partner at the firm in New York who was appointed in April as independent monitor for global operations at Takata. Buretta, a former principal deputy assistant attorney general in the Justice Department’s criminal division who joined the firm in late 2013, was initially tapped by the National Highway Traffic Safety Administration in late 2015 to help the agency oversee Takata’s recall remedy program.
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