Veterans Call for 3M Earplug Lawsuit Bankruptcy Filing to be Dismissed

A committee representing hundreds of thousands of veterans pursuing earplug hearing loss lawsuits is urging a federal bankruptcy court to dismiss a filing last year by 3M Company’s Aearo Technologies subsidiary, arguing that it was based on the same structure used by Johnson & Johnson in the talcum powder litigation, which an appeals court recently rejected as an improper use of bankruptcy protections.

More than 230,000 U.S. veterans are currently pursuing a product liability lawsuit against 3M and its Aearo Technologies subsidiary, each raising similar allegations that they were left with permanent hearing damage after receiving 3M Combat Arms Earplugs as standard issue military equipment before deployments between 2004 and 2015. Plaintiffs allege the earplugs were sold to the U.S. government with a known design defect, which left veterans without adequate ear protectors during combat and training exercises.

The earplugs were initially developed by Aearo Technologies, which was acquired by 3M Company in 2008, and the entire Aearo hearing protection business was “upstreamed” into 3M, which continued to market and sell the defective earplugs to the U.S. government without disclosing known problems that caused them to commonly fall out of the ear canal.

Following a series of massive verdicts in early 3M earplug bellwether trials, where different juries awarded millions in damages to each individual plaintiff, 3M Company failed to offer earplug settlements that any plaintiffs would accept as compensation for permanent hearing damage caused by their product.

Rather than making a good faith attempt to resolve the litigation, 3M made the controversial decision last year to place its Aearo Technologies subsidiary into bankruptcy, and has attempted to force the litigation into the U.S. bankruptcy court, even though the multi-billion parent company is well funded, and directly profited from the earplugs for years.

Johnson & Johnson Talcum Powder Bankruptcy Filing Used As Model in 3M Earplug Lawsuits

The 3M bankruptcy scheme follows a similar maneuver by Johnson & Johnson last year, as part of an attempt to avoid billions in liability in talcum powder cancer lawsuits.

Known as a “Texas Two Step”, Johnson & Johnson attempted to force the litigation through the U.S Bankruptcy system, by transferring all liabilities it faces for failing to warn consumers about the cancer risks from talcum powder into a separate company, LTL Management, LLC, which then immediately filed for bankruptcy.

However, last month, the U.S. Court of Appeals for the Third Circuit rejected the Johnson & Johnson bankruptcy filing, finding that since Johnson & Johnson has billions in assets to cover the liability, and a funding agreement existed with the subsidiary, there was no financial distress that required bankruptcy protections.

Lawyers for 3M Company have acknowledged the funding agreement with Aearo Technologies was modeled after the agreement between Johnson & Johnson and LTL, providing further support for veterans’ claims that the bankruptcy filing preventing 3M earplug lawsuits from moving forward was built on a similar foundation of bad faith.

Motion Filed to Dismiss 3M Earplug Lawsuit Bankruptcy Filing

On February 2, a joint motion (PDF) to dismiss 3M’s bankruptcy filing was submitted to the U.S. Bankruptcy Court for the Southern District of Indiana by the Official Committee of Unsecured Creditors for Tort Claims – Related to Use of Combat Arms Version 2 Earplugs, known as the CAE Committee, which represents more than 200,000 combat veterans who have filed complaints against the company.

The motion notes that 3M is not in any financial distress, and that its Aearo subsidiary has access to funding from 3M, invalidating the entire bankruptcy filing.

“Having modeled the Funding Agreement here on J&J and LTL, it is little surprise that [3M Company and Aearo] have relied consistently on the lower court decisions in the LTL bankruptcy as precedent, both in this Court and the Seventh Circuit,” according to the CAE Committee filing last week. “The decision in LTL – reversing the lower court rulings on which [3M and Aearo] so heavily rely and remanding with instructions to dismiss LTL’s bankruptcy – knocks the props out from under these cases and requires their dismissal.”

The CAE Committee points out that it is difficult to imagine a more directly on-point decision, than the recent appeals court order rejecting the J&J and LTL bankruptcy.

3M Earplug Lawsuits and Trials May Result As Soon As Bankruptcy Overturned

While 3M Company has continued to defend the Aearo Technologies bankruptcy maneuver, it has already faced a number of set backs, after judges found that the earplug hearing loss lawsuits can move forward against 3M for it’s independent liability in manufacturing and selling the product for years. 3M is pursuing an appeal of that ruling, but if the underlying Aearo Technologies bankruptcy is dismissed, it is expected that the entire litigation will quickly get back underway, with a rapid pace of jury trials scheduled nationwide.

The U.S. District Judge presiding over the litigation, which has been paused awaiting rulings on the bankruptcy matter and appeals being pursued by 3M Company, has already accused the manufacturer of engaging in a “brazen abuse of the litigation process”, and has begun preparations to start remanding large waves of cases to federal courts nationwide for trial once the issues surrounding the bankruptcy and appeal are resolved.

According to various reports, Johnson & Johnson lost 3% of its stock value after the Third Circuit ruling, and 3M lost 2% of its stock value after the same ruling, as financial experts largely predict its bankruptcy is likely to face the same fate.

Prior estimates had suggested the company would need to pay more than ten billion to settle the earplug lawsuits during early mediations. However, if the Aearo bankruptcy is dismissed and the company loses issues on appeal, the settlement estimates are likely to increase dramatically.