3M Payment of $1B in Stock To Settle Earplug Lawsuits Deemed Fair by U.S. Judge

Those wishing to opt-out of the 3M earplug settlement must take action by January 15 to inform the court.

The U.S. District Judge presiding over all 3M earplug lawsuits has approved the use of $1 billion in stock to help fund settlement payouts for hundreds of thousands of outstanding claims for military veterans left with permanent hearing loss and tinnitus, determining that the use of stock to partially fund a $6 billion settlement agreement is fair and appropriate.

The settlement seeks to resolve nearly 300,000 product liability lawsuits brought against 3M Company by U.S. military veterans, who say they suffered permanent hearing damage due to alleged design defects with the company’s Combat Arms earplugs, which were standard military issue for all service members between 2003 and 2015.

The veterans claim 3M Company, and it’s Aero Technologies subsidiary, knew the earplugs failed to properly seal the ear canal, yet continued to sell their product to the U.S. government, causing service members to be left without adequate ear protection during combat and training exercises.

Given common questions of fact and law raised in the litigation, all claims brought throughout the federal court system have been centralized for the past three and a half years before U.S. District Judge Casey Rodgers in the Northern District of Florida, as part of an MDL or multidistrict litigation. However, there are also a number of cases pending in state courts of Minnesota, where 3M’s headquarters are located.

Following a series of massive damage awards returned by juries in early cases that went to trial in the MDL, the manufacturer ultimately agreed to pay $6 billion to settle the earplug lawsuits, which will be funded over a five year period. However, the deal allowed up to $1 billion of the earplug settlement to be funded in the form of stock in 3M Company, which has raised concerns among some claimants.

Judge Approves Fairness of $1 Billion 3M Stock Sale

As part of the settlement, 3M will fund the deal between 2023 and 2029, with all consideration, including any 3M stock, deposited into a settlement fund before it is distributed to claimants under terms of the agreement. Judge Rodgers held a fairness hearing on December 11, to determine whether the stock sale should be allowed.

In a court order (PDF) issued on December 31, the Court concluded that the stock issuances are fair, allowing the deal to go forward if 98% of plaintiffs agree to the settlement deal.

“Assuming the 98% Participation Level is reached and 3M does not, in its sole discretion, elect to pay some or all of the foregoing $1 billion in cash in lieu of issuing stock, 3M will issue shares of common stock to the Qualified Settlement Fund (“QSF”), established pursuant to this Court’s order, ECF No. 3856, in four separate tranches (the “Stock Issuances”) equal to $1 billion,” Judge Rodgers concluded.

Rules for Opting Out of 3M Earplug Settlement

While the parties move forward with the settlement claim process, there remain questions over whether enough veterans will approve of the deal to sign on.

Plaintiffs were given six months from August 29 to accept or opt-out of the agreement, which is expected to pay an average of about $24,000 per plaintiff, which has been criticized by some as insufficient compensation for permanent hearing loss and tinnitus injuries. If less than 98% of plaintiffs agree to the settlement, the deal may fall apart.

In a case management order (PDF) issued on December 28, Judge Rodgers indicates that plaintiffs who do not elect to participate in the agreement by January 15 must transition their cases from the administrative docket to the active docket by January 22, 2024.

Those who fail to strictly comply with that deadline and others that will follow after that date, such as deadlines for preservation of documents, status conferences and mediation, will result in dismissal with prejudice without further notice.