Judge Blocks 3M from Relitigating MDL in Aearo’s Bankrupcty

Update on August 26, 2022: Bankruptcy will not be an option for 3M’s 230,000 Earplugs Lawsuit  

An Indiana bankruptcy judge denied 3M a temporary shield from the hundreds of thousands of veterans’ claims that the company’s earplugs caused hearing loss. The ruling will prevent the non-bankrupt parent company from benefiting from its subsidiary’s bankruptcy protections. 

Typically, companies that file for bankruptcy receive an immediate halt of the lawsuits. Previously, Aearo Technologies LLC, 3M’s subsidiary, stated that those protections would help 3M by giving Aearo time to address its restructuring goals and debts. 

Aearo’s 3M argument for choosing to file for bankruptcy was to offer a faster, fairer way to compensate veterans. However, Judge Jeffrey J. Graham in Indianapolis said that Aearo’s bankruptcy restructuring could proceed in parallel with the other lawsuits.

Previous Attempts of Relitigating MDL in Aearo’s Bankruptcy

On Tuesday, August 16, 2022, a Florida judge blocked 3M Co. from using a subsidiary bankruptcy to relitigate against resolved issues from the multidistrict litigation over its allegedly faulty earplugs. However, the judge will allow a bankruptcy court to decide whether to shield the company from ongoing litigation. 

Judge M. Casey Rodgers in the U.S. District Court in Pensacola, Fla, overseeing 230,000 lawsuits claiming the earplugs cause hearing loss, granted part of service member Richard Valle’s request to stop 3M. This grant would lead to an injunction preventing 3M from going against her court’s prior orders in a bankruptcy court in Indiana, where 3M subsidiary Aearo Technologies LLC filed for chapter 11 bankruptcy. 

The judge expressed apprehension that 3M and Aearo intend to use the bankruptcy to resolve all defective earplug-related claims through a bankruptcy claims trust instead of an Article III court. Aearo filed for Chapter 11 protection in July 2022, after assuming liability for roughly 230,000 pending claims against the business and its publicly traded parent company 3M. 

The judge, who oversees the earplug litigations, said in the hearing that it appears that 3M placed Aearo under Chapter 11 to get out of her courtroom and face the earplugs claims in a bankruptcy court instead. 

Judge Rodgers said the following:

“If successful, hundreds of thousands of individual plaintiffs will be deprived of their constitutional right to a jury trial while 3M — a fully solvent and highly profitable Fortune 500 company that will never actually file a bankruptcy petition itself — will reap all of the benefits of the bankruptcy system without the attendant burdens. The unabashed justification for dismantling this MDL is 3M/Aearo’s dissatisfaction with the MDL system, this court’s legal rulings, and the multiple jury verdicts against it in this litigation.”

Despite her concern, Judge Rodgers said that the issue would best be resolved by the bankruptcy judge, who has simultaneous jurisdiction evidence and documentation of the matter. Bankruptcy offers tools for corporate defendants to settle injury lawsuits and has been used to resolve mass claims involving opioid addiction, California wildfires, and sexual-abuse allegations in the past years.

A 3M spokesman said the company’s court filings show the chapter 11 process was to “offer a more efficient, efficient and expeditious means to resolve this litigation. Claimants determined to be entitled to compensation will be paid sooner, and 3M and Aearo will be able to better focus on making products depend on.”

Under agreements signed between Aearo and 3M, the parent company has committed to pay $240 million to fund the reorganization of Aearo in the U.S. Bankruptcy Court in Indianapolis and at least $1 billion more towards settling the earplug litigation. As a result, 3M would be shielded from all pending and future earplug claims.  

How can The Carlson Law Firm Help

3M has been accused of negligence for not disclosing the design defect in its earplugs, exposing thousands of U.S. service members to hearing loss. You may be entitled to compensation if you served in the U.S. military between 2003 and 2015 and used 3M earplugs. Our 3M earplug attorneys are evaluating 3M combat arms earplug lawsuit claims and are ready to help.