Victims' lawyers say unjust to halt U.S. air bag cases vs carmakers

WILMINGTON, Del. (Reuters) - Lawyers for people injured by Takata Corp’s defective air bags told a U.S. judge on Tuesday there was “no basis” for an “unjust” request by the company’s U.S. unit to halt hundreds of consumer lawsuits against car companies that used the air bags.

When the U.S. unit filed for bankruptcy in June, litigation against the unit for injuries, wrongful death, economic losses and breaches of consumer protection laws were automatically stayed.

Last week, Takata’s U.S. unit asked for a preliminary injunction that would halt similar lawsuits against Honda Motor Co, Toyota Motor Corp and other car companies that used the air bags.

Halting the litigation would help Takata sell its healthy business to Key Safety Systems, which is owned by China’s Ningbo Joyson Electronic Corp, according to TK Holdings Inc, the U.S. unit. Funds from that $1.6 billion proposed sale will be used to compensate injured drivers, according to court papers filed in the U.S. Bankruptcy Court in Wilmington, Delaware.

Plaintiffs lawyers, however, have said the U.S. bankruptcy is being used by automakers to protect themselves from spiraling litigation.

The air bags, which degrade over time and inflate with too much force, have been tied to at least 17 deaths and 180 injuries worldwide.

They are subject to the largest recall in automotive history which will eventually cover 125 million inflators, many of which still need to be replaced.

The cost of the recall forced the Japanese company and TK Holdings into bankruptcy in June in Japan and the United States.

At a hearing on Tuesday, attorney Dean Ziehl said there was “no basis” to block claims against the automakers during the bankruptcy. He represents an official committee of injured drivers in the bankruptcy that was appointed earlier this month.

Ziehl said the requested injunction was solely to benefit automakers.

Adam Levitt, a lawyer for the state of New Mexico, which has sued Takata and automakers for violating consumer protection laws, called the request “unjust” and “extraordinary.”

U.S. Bankruptcy Judge Brendan Shannon set an Aug. 9 hearing on the requested injunction, a schedule Ziehl criticized as “aggressive.” Ziehl said his committee intended to seek “substantial, expedited discovery” to investigate the motivation for requesting the injunction.

The requested injunction would not affect a $553 million class action settlement over economic losses, which was reached with Toyota, BMW AG, Mazda Motor Co and Subaru Corp.