The 3M earplug litigation represents the largest mass tort in U.S. history. There have been more than 300,000 claims in which veterans accuse 3M and Aearo Technologies, a company acquired by 3M in 2008, of producing faulty earplugs that failed to protect their hearing from noise damage when they received them from the U.S. military.
3M manufactured, marketed and sold its Combat Arms Earplugs, Version 2 (CAEv2) from 1999 to 2015,with an alleged design defect which hampered their effectiveness.
3M announced that it has reached an agreement with the court-appointed negotiating plaintiffs’ counsel to resolve the Combat Arms Earplug litigation against Aearo Technologies (Aearo) and 3M. The settlement comes after 3M failed to move the lawsuits into bankruptcy court in hope of limiting its liability.
Under the agreement, 3M will contribute a total amount of $6.0 billion between 2023 and 2029, which is structured under the agreement to include $5.0 billion in cash and $1.0 billion in 3M common stock.
“This settlement is a tremendous outcome for veterans of Iraq and Afghanistan who put their lives on the line for our freedom,” said Duane Sarmiento, the Veterans of Foreign Wars (VFW) national commander. “For those who came home with hearing damage due to 3M’s faulty earplugs, this is not only compensation, it’s a statement that their sacrifices won’t be ignored.”
Last summer, Aearo Technologies filed for bankruptcy as a separate company, accepting responsibility for all the liability claims. The move was intended to give Aearo leverage in bankruptcy court to reach a settlement with the plaintiffs. 3M said it would pay for any settlement Aearo reached.
U.S. Bankruptcy Court Judge Jeffrey Graham in Indianapolis dismissed Aearo’s bankruptcy filing in June. The judge said Aearo did not qualify for bankruptcy protections as a distressed company since it had 3M’s promise to pay for a settlement. Aearo plans to appeal the ruling, as reported in The Wall Street Journal.
In February, VFW filed an Amicus Curiae brief to the Seventh Circuit Court of Appeals in support of claimants seeking relief from 3M for defective ear protection. 3M had tried to shift the blame to its subsidiary Aearo Technologies, who it said was responsible for the defective earplugs and who had filed Chapter 11 bankruptcy, to avoid paying claimants. The bankruptcy appeal is being held in abeyance pending finalization of the settlement.
This agreement, reached through the mediation process that 3M has previously disclosed, is structured to promote participation by claimants and is intended to resolve all claims associated with the Combat Arms Earplug products.
The agreement includes all claims in the multi-district litigation in Florida and in the coordinated state court action in Minnesota, as well as potential future claims. The Florida and Minnesota courts are entering orders to support implementation of the agreement.
3M also added to its announcement that this “agreement is not an admission of liability. The products at issue in this litigation are safe and effective when used properly. 3M is prepared to continue to defend itself in the litigation if certain agreed terms of the settlement agreement are not fulfilled.”
Aearo and 3M are actively engaged in insurance recovery activities to offset a portion of the settlement payments, and Aearo initiated insurance recovery litigation against its carriers in June related to the litigation.
According to Fox Business News, the settlement amount is significantly less than the $10 billion to $15 billion that some analysts predicted the case would cost the company. Still, the settlement will impact financial results. 3M will record a $4.2 million pre-tax charge in the third quarter, which “represents the $5.3 billion pre-tax present value of contributions under the agreement net of 3M’s existing accrual of approximately $1.1 billion related to this matter,” the company detailed.
More information about the settlement is available at 3m-earplugsettlement.com.