INDIANAPOLIS, INDIANA — U.S. Bankruptcy Judge Jeffrey Graham has dismissed the bankruptcy case of Aearo Technologies, a subsidiary of 3M, on Friday, rejecting an attempt to address nearly 260,000 lawsuits claiming that 3M military earplugs caused hearing loss in veterans and service members.
Judge Graham ruled that Aearo, as a well-supported subsidiary, did not require bankruptcy protection due to its greater financial security.
3M Earplug Legal Battles Continue
The lawsuits, which have been consolidated in federal court in Pensacola, Florida, make up the largest mass tort in U.S. history, with around 330,000 cases filed and approximately 260,000 still pending as of March, according to court statistics.
3M and Aearo had argued that the earplug litigation had become unmanageable and could only be resolved through bankruptcy. However, Judge Graham stated that the lawsuits did not pose an imminent risk of insolvency, and there was no evidence that a settlement couldn’t be reached outside of bankruptcy.
While acknowledging the staggering scale of the earplug litigation, accounting for 30% of all pending cases in federal district courts, Judge Graham deemed Aearo’s bankruptcy to be a premature response. He noted that 3M had been shouldering the litigation costs against Aearo, and there was no evidence that either company had suffered significant harm from the lawsuits.
The earplug lawsuits make up the largest mass tort in U.S. history
Aearo is contemplating filing an appeal to revive its bankruptcy, according to a statement from 3M. Both 3M and Aearo remain committed to defending the safety of the earplugs in other courts, and 3M is pursuing appeals that could potentially overturn the outcomes of some trials. The company believes these appeals might fundamentally change the course of the earplug lawsuits.
Lead lawyers representing the earplug plaintiffs, Bryan Aylstock and Chris Seeger, criticized the bankruptcy as an abuse of the court system. They argued that the soldiers they represented deserved the opportunity to hold 3M accountable before a jury.
The Florida litigation had been largely on hold, pending a decision from the 7th U.S. Circuit Court of Appeals regarding the ruling that allowed lawsuits to proceed against parent company 3M, which is not bankrupt. Aearo has appealed this ruling.
3M has faced unfavorable outcomes in 10 out of 16 earplug cases that have gone to trial, with a total of approximately $265 million awarded to 13 plaintiffs.
3M Bankruptcy Strategy
The bankruptcy strategy employed by 3M parallels Johnson & Johnson’s attempt to address lawsuits by creating a bankrupt subsidiary called LTL Management. Johnson & Johnson faces allegations that its talc products, including baby powder, contained asbestos and caused cancer. However, a January ruling dismissing Johnson & Johnson’s bankruptcy move cast a “prominent shadow” over the Aearo case, as Judge Graham reached a similar conclusion that bankruptcy protections should be reserved for financially troubled companies. Unlike LTL, Aearo is an operating company with actual debts.
Despite the dismissal, LTL has not abandoned its bankruptcy strategy and has filed for bankruptcy a second time shortly after its initial case was rejected.
Source: Reuters
