(Reuters) 3M Co told a federal appeals court this week that an Indiana federal bankruptcy judge could have — and should have — followed any one of at least three distinct lines of reasoning to conclude that mass tort litigation over allegedly defective 3M Co military earplugs must be paused during the Chapter 11 bankruptcy of 3M’s Aearo Technologies LLC subsidiary.
Instead, argued 3M counsel Paul Clement of Clement & Murphy, U.S. Bankruptcy Judge Jeffrey Graham of Indianapolis repeatedly veered off track last August, when he ruled that tens of thousands of military veterans whose claims have been consolidated in multidistrict litigation in Pensacola, Florida, can continue litigating against 3M, despite Aearo’s bankruptcy.
3M’s opening brief at the 7th U.S. Circuit Court of Appeals asserted that Graham misread precedent, disregarded relevant facts and applied an overly cramped interpretation of his own inherent authority to enjoin litigation against 3M. It’s now up to the appeals court, 3M said, to correct Graham’s mistakes, pause ongoing MDL (multidistrict litigation) litigation against 3M, and allow 3M and Aearo to use the bankruptcy process to reach a fair resolution of the military veterans’ claims.
After all, 3M reminded the 7th Circuit, that is the process that many other federal appellate courts have endorsed in mass tort cases that were paused when a subsidiary defendant went into bankruptcy. Among the examples 3M cited: W.R. Grace & Co, Pfizer-owned Quigley Corp, Georgia-Pacific LLC and its bankruptcy subsidiary Bestwall LLC, USA Gymnastics, Purdue Pharma LP and, of course, Johnson & Johnson’s LTL Management LLC. (As you probably recall, the 3rd Circuit is reviewing a New Jersey bankruptcy court’s decision to stay tort claims against J&J because of LTL’s bankruptcy, in a mirror-image of the 3M scenario.)
The plaintiffs steering committee in the earplugs case said in an email statement that 3M’s appeal is meritless:
“The 7th Circuit should uphold Judge Graham’s thorough decision rejecting non-debtor 3M’s attempt to shield itself through the bankruptcy system. We look forward to holding 3M accountable for causing irreversible hearing damage to hundreds of thousands of men and women who served our nation.”
3M’s brief argued that the bankruptcy judge made at least two key mistakes in ruling that the automatic stay on litigation against Aearo, its bankrupt subsidiary, should not extend to 3M.
**Read the full story by Alison Frankel at Reuters here.
