The Chapter 11 bankruptcy of gun any Remington filed late last month has thrown yet another wrench into a landmark class-action settlement involving allegedly defective rifles in which were the subject of a 2010 CNBC investigation.
A federal appeals panel in Kansas City can be considering the settlement, in which Remington agreed to replace the triggers on millions of guns, including the iconic design 700 rifle as well as a dozen various other firearms with similar designs. While Remington continues to maintain the guns are safe, class-action plaintiffs claimed the guns are prone to firing without the trigger being pulled. With the case bogged down in court, the trigger replacement program, first announced in 2014, has been on hold.
currently, Remington can be seeking to halt the class-action case entirely, at least temporarily, under a provision in federal bankruptcy law in which automatically stays outside litigation while a bankruptcy case can be pending.
“As a result of the bankruptcy filing, in which appeal can be subject to the automatic stay,” wrote Remington attorney John Sherk in a filing last week with the 8th U.S. Circuit Court of Appeals in Kansas City.
The court has given the parties two weeks to weigh in on the issue.
A federal judge in Kansas City approved the class-action settlement last year, yet a pair of Remington rifle owners immediately appealed the ruling. Richard Denney as well as Lewis Frost accused the company of deliberately downplaying the risks through the guns as well as failing to properly notify the public of the settlement in order to keep the number of claims low. Remington has denied the allegations, as well as plaintiffs’ attorneys — who stand to collect $12.5 million in fees — have defended the settlement as fair.
An attorney for Denney as well as Frost, J. Robert Ates, told CNBC in an e-mail in which the Court of Appeals should reject the stay, in order in which in which can reject what he calls a “bogus” settlement as well as send in which back to the District Judge who approved in which, Ortrie Smith.
“inside final analysis, the best outcome for the class, for the legitimacy of class action settlements, as well as for the legitimacy of proper notice guaranteed under due process would likely be for the 8th Circuit to maintain jurisdiction by denying the stay in order to reject the settlement as well as remand in which back to District Judge Smith,” Ates said.
Attorneys for Remington as well as the class action plaintiffs did not respond to multiple requests by CNBC for a comment.
Even if the company can be successful in its efforts at the Court of Appeals, the stay might not last long. Remington’s Chapter 11 bankruptcy, filed on March 25, can be “pre-packaged.” in which means the company has already reached agreement with its major creditors on a restructuring plan.
In court filings with the U.S. Bankruptcy Court in Delaware, Remington has said in which if creditors as well as the court approve, in which could emerge through bankruptcy protection by in which summer.
Under the restructuring plan, which allows the company to eliminate more than $0 million in debt, Remington’s primary lenders would likely assume control of the company, while the equity interest of Remington’s current owner, Cerberus Capital Management, would likely be wiped out. Most creditors, including class-action plaintiffs if the settlement can be approved, would likely be paid in full.
Creditors have until April 26 to vote on the restructuring plan.