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United States v. Takata Corp.

United States District Court, E.D. Michigan, Southern Division

March 21, 2018

UNITED STATES OF AMERICA, Plaintiff,
v.
TAKATA CORPORATION, Defendant.

          ORDER GRANTING SPECIAL MASTER'S REQUEST FOR APPROVAL OF THE REVISED INDIVIDUAL RESTITUTION FUND METHODOLOGY (DOC. 77) AND OVERRULING DEFENDANT'S OBJECTION (DOC. 56)

          GEORGE CARAM STEEH UNITED STATES DISTRICT JUDGE

         Now before the Court is the Special Master's Request for Approval of the Revised Proposed Individual Restitution Fund Methodology (“Revised Methodology”) which was submitted to the Court on March 15, 2018 and filed on the docket on March 19, 2018. (Doc. 77). The Special Master's initial Request for Approval of the Proposed Methodology (“Proposed Methodology”) was filed on January 2, 2018 (Doc. 54). Defendant Takata Corporation (“Takata”) timely filed an objection to the Proposed Methodology on January 11, 2018, limited to the issue of defining who are Eligible Claimants for purposes of the Individual Restitution Fund. (Doc. 56). The government filed a response on February 1, 2018, (Doc. 58) and Takata filed a reply on February 12, 2018, (Doc. 69) which the Court has duly considered. A hearing was held on March 5, 2018. Having carefully considered the written submissions and the oral presentations, and for the reasons set forth below, the objection shall be overruled and the Special Master's Request for Approval of the Revised Individual Restitution Fund Methodology shall be granted.

         According to the Proposed Methodology, Eligible Claimants who may recover from the Individual Restitution Fund are defined as:

“Eligible Claimant” means an individual (1) who has suffered personal injury or death caused by the rupture or aggressive deployment of a Takata phase-stabilized ammonium nitrate (PSAN) airbag inflator (the “PSAN Airbag Inflator Malfunction”) and was at the time the PSAN Airbag Inflator Malfunction occurred (a) in a vehicle registered in the United States, its territories or its possessions, or (b) a U.S. citizen or permanent resident (wherever the PSAN Airbag Inflator Malfunction occurred), and (2) who has not already resolved his or her claim against Takata Corporation and/or any of its affiliates.

(Doc. 54-1 at PgID 420). The proposed definition of Eligible Claimants in the Revised Methodology is slightly broader in scope, providing:

“Eligible Claimant” means an individual (1) who has suffered personal injury or death caused by the rupture or aggressive deployment of a Takata phase-stabilized ammonium nitrate (PSAN) airbag inflator (the “PSAN Airbag Inflator Malfunction”); (2) who was at the time the PSAN Airbag Inflator Malfunction occurred (a) in a vehicle located or registered in the United States, its territories or its possessions, or (b) a U.S. citizen or permanent resident (wherever the PSAN Airbag Inflator Malfunction occurred); and (3) who has not already resolved his or her claim against Takata Corporation and/or any of its affiliates.

(Doc. 77-1 at PgID 2127). The minor revisions to the definition of “Eligible Claimant” set forth in the Revised Methodology do not alter the court's analysis here. Takata argues this court should reject the definition of “Eligible Claimant” as set forth in the Proposed Methodology for six reasons. The court considers each argument in turn.

         First, Takata argues that the Plea Agreement itself imposes no geographic or nationality limitation on Eligible Claimants under the Individual Restitution Fund. However, the parties left the final determination of Eligible Claimants to the Court for resolution based on the recommendation of the Special Master. Specifically, Paragraph 3(E)(4) of the Rule 11 Plea Agreement states:

The parties further agree that the appointment of a Special Master is appropriate and necessary to determine the proper administration and disbursement of the . . . restitution monies the Defendant will pay in this case. The parties therefore jointly recommend, as set forth more fully in [the joint proposed restitution order], that this Court appoint . . . [a Special Master] . . . to make findings of fact and recommendations to this Court regarding: (a) the individuals and entities who should receive restitution; and (b) the restitution amounts which these individuals and entities should receive.

(Doc. 23 at PgID 108). Also, the Plea Agreement Paragraph 3(E) provides that “the parties agree to submit a joint proposed restitution order to the Court, included with this Agreement as Attachment E.” (Doc. 23 at PgID 105). The Joint Proposed Restitution Order specifically provided that “[p]ursuant to 18 U.S.C. § 3664(d)(6), within thirty days of this order the Court will appoint a Special Master to make findings of fact and recommendations to this Court regarding: (a) the individuals and entities entitled to restitution.” The Restitution Order entered by this Court included this same language. (Doc. 24 at PgID175). Thus, it is clear that the parties provided that the Special Master make recommendations to the Court for it deciding the class scope of Eligible Claimants under the Individual Restitution Fund.

         The government suggests that the Court consider the Special Master's recommendations using an abuse of discretion standard, but Takata correctly points out that this Court must review his recommendations de novo. 18 U.S.C. § 3664(d)(6).

         Takata argues that the Statement of Facts in the Plea Agreement involve global misconduct and thus potential individual claimants should be identified globally. Takata further argues that because a U.S. company - TK Holdings Inc. (“TK Holdings”) - manufactured every PSAN inflator that is or will be the subject of claims worldwide, no basis exists to exclude non-U.S. citizens from the scope of compensation. But the Individual Restitution Fund at issue here was established as part of a resolution of a criminal matter in the United States District Court for a violation of the laws of the United States. Moreover, the investigation of Takata and its U.S. subsidiary TK Holdings for a massive and systematic fraud related to Takata's exploding airbags - in which the overwhelming majority of known injuries and deaths occurred in the United States - was conducted exclusively by United States prosecutors and investigators in the United States, and was paid for by American taxpayers. Significantly, the parties agreed that Takata's applicable advisory guideline range for determination of a fine pursuant to the United States Sentencing Guidelines was in the range of $771 million to $1.5 billion (Doc. 23 at PgID 101), but the negotiated fine that Takata actually paid to the United States was a mere $25 million, just two percent of those guidelines.

         Although individuals killed or injured by a Takata airbag are not necessarily entitled to restitution for Takata's crime of wire fraud under the Crime Victim Rights Act, the government made it a priority to afford these individuals some level of compensation. Thus, the United States negotiated the Additional Restitution categories set forth at Paragraph 3(E)(2) of the Plea Agreement. Funds were available for such purposes only because the United States opted to forego its substantial fine. In creating the Individual Restitution Fund, the Department of Justice acted exclusively on behalf of its own constituents. Accordingly, it is reasonable to limit individual claimants to those who are U.S. citizens or permanent residents, or those injured or killed while in a vehicle registered in the United States, its territories or its possessions.

         Furthermore, other language of the Plea Agreement also militates in favor of a geographical limitation for the Individual Restitution Fund. Paragraph 3(E)(2)(ii) of the Plea Agreement provides for Additional Restitution for the claimant group of auto manufacturers saddled with recall costs “regardless of location.” (Doc. 23 at PgID 106) (emphasis added). But the language used to describe the Individual Restitution Fund set forth at Paragraph 3(E)(2)(i) includes no similar language to suggest that restitution should be on a global basis. If Takata intended for the claimant group of injured individuals to extend “regardless of location, ” Takata could have included such language in the Plea Agreement, but did not. However, Takata argues that the second OEM Restitution Fund provision in the Plea Agreement contains no “regardless of location” provision, yet that fund will also be available to ...


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