No Bankruptcy Shield For 3M In Combat Earplug Lawsuits

No Bankruptcy Shield For 3M In Combat Earplug Lawsuits

Introduction

A U.S. judge ruled on Friday that the bankruptcy of a subsidiary did not prevent lawsuits against the non-bankrupt parent business, 3M Co., which means that the company must now deal with more than 230,000 defective earplugs claims.

A subsidiary of 3M, Aearo Technologies LLC, contended that granting 3M the same protections that are generally granted to bankruptcy-filing businesses would provide Aearo more time to address its debts and restructuring objectives.

Veterans who claim that earplugs made by Aearo caused their hearing loss have a speedier and fairer means to be compensated because of bankruptcy, according to Aearo and 3M. However, an Indianapolis bankruptcy judge ruled that Aearo's bankruptcy restructuring may go through concurrently with the legal actions.

The judge determined that although 3M and Aearo may have sought extra leverage through the bankruptcy procedures due to the sheer enormity of the pooled litigation, there was no legal requirement to protect 3M.

The hearing-impaired veterans' attorneys expressed excitement about continuing their legal actions against 3M in other courts. According to the plaintiffs' attorneys, the jury's verdict completely rejects 3M's attempt to avoid responsibility and hide behind bankruptcy.

A 3M spokesman announced the company's intention to file an appeal, arguing that trying each of these lawsuits individually over the coming years won't bring about any certainty or fairness for any party.

On July 26, a 3M subsidiary named Aearo Technologies LLC sought bankruptcy protection in Indiana to settle claims that the company's Combat Arms Earplugs Version 2 (CAEv2) caused hearing loss.

According to a statement released by the company late on Friday, Aearo will continue to participate in the chapter 11 procedures and 3M will keep defending its position in the lawsuit. On the anticipated closing date of September 1, 3M is still anticipating that the ongoing separation of its food safety division would be finished.

The complaints, which were combined in a federal court in Florida, have developed into the biggest mass tort case in American history. Aearo agreed to pay them $1 billion in a trust and to hold 3M harmless from any claims relating to CAEv2 liability.

In its denial of responsibility, 3M said that its earplugs protected soldiers on the battlefield while preserving their hearing. The Florida judge presiding over the earplug claims has reprimanded 3M for acting with blatant dishonesty in trying to transfer its liabilities to a bankrupt subsidiary.

The bankruptcy judge has come under fire from 3M and Aearo for allowing the combined lawsuit to grow out of control, noting that earplug cases now make up a staggering 30% of all cases active in U.S. federal courts.

In the 16 cases that have gone to trial so far, 3M has lost 10, and 13 plaintiffs have received a total award of nearly $265 million. On Friday, 3M's stock price fell 12% to $129 per share.