3M earplug bankruptcy creates “corrosive” tension with other courts, attorney says

The 3M logo is seen at its global headquarters in Maplewood, Minnesota. REUTERS/Nicholas Pfosi

(Reuters) – A 3M Co subsidiary on Wednesday criticized the way federal courts have handled 290,000 consolidated lawsuits over allegedly defective earplugs it made for the U.S. military, saying that the “broken” legal system allowed claims to balloon and threatened the company’s ability to settle them.

3M subsidiary Aearo Technologies LLC pressed for, but did not get, a court order that would protect its parent company from the lawsuits at its first hearing in U.S. bankruptcy court in Indianapolis. Instead, it reached a more limited agreement with plaintiffs to pause work for three weeks, interrupting witness depositions and expert reports scheduled in the lawsuits, which have been consolidated in the largest-ever multidistrict litigation (MDL) in U.S. court.

Plaintiffs sued Aearo and 3M over the company’s Combat Arms Earplugs version 2 (CAEv2), claiming they are defective and damaged their hearing. The cases ballooned to a peak of more than 290,000 last year and now account for nearly one-third of all cases pending in all federal courts, according to a court filing.

Aearo filed for Chapter 11 protection on Tuesday to resolve the lawsuits and has committed $1 billion to fund a trust to fund the settlement.

The filing triggered a multi-court battle over how the bankruptcy should impact the ongoing litigation against 3M. Aearo attorney David Bernick said at Wednesday’s bankruptcy court hearing that 3M and Aearo needed a broader pause of MDL litigation to pursue a bankruptcy restructuring. Bernick said the judge who is overseeing the MDL had already questioned whether the bankruptcy was filed in good faith, which could prevent progress in bankruptcy court.

“We’ve got a tension that’s developed between this proceeding and the MDL, and it is very corrosive,” Bernick said.

U.S. Bankruptcy Judge Jeffrey Graham said he did not have enough evidence on Aearo’s first day in court to block further litigation against 3M, which is not bankrupt, but said he would consider the matter at a hearing on Aug. 15.

U.S. District Judge Casey Rodgers in Pensacola, Florida, had said at a hearing Wednesday morning that she did not believe Aearo’s bankruptcy filing automatically protected parent company 3M, and she castigated the company for canceling scheduled depositions Tuesday with “not so much as a phone call” to her.

Separately, a group of plaintiffs filed notice with the Judicial Panel on Multidistrict Litigation, requesting that the bankruptcy case be transferred to Florida and overseen by Rodgers. The attorney who made the request, Ashley Keller, said he would not withdraw it as part of the three-week litigation pause.

Of the 16 bellwether trials in the MDL to date involving 19 service members, plaintiffs have won in 10, with about $265 million in combined awards to 13 plaintiffs.

The case is Aearo Technologies LLC, U.S. Bankruptcy Court for the Southern District of Indiana, No. 22-10493.

For Aearo Technologies: Chad Husnick and David Bernick of Kirkland & Ellis

For the MDL plaintiffs’ committee: Rob Pfister and Sasha Gurvitz of KTBS Law

Read more:

Is 3M earplug bankruptcy the beginning of the end of mass tort MDLs?

3M to spin off healthcare business, earplugs unit seeks bankruptcy

3M tries to scale back massive earplug litigation through filing fees

Reporting by Dietrich Knauth

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