3M fights earplug lawsuit to continue, judge rules, despite bankruptcy case

The logo of Down Jones Industrial Average listed company 3M is shown in Irvine, California April 13, 2016. REUTERS/Mike Blake

Aug 26 (Reuters) – 3M Co must face more than 230,000 lawsuits accusing it of selling defective earplugs to the U.S. military, after a U.S. judge ruled on Friday that the bankruptcy of a subsidiary did not stop lawsuits against its parent company that did not is bankrupt.

Companies filing for bankruptcy typically get immediate reprieve from lawsuits, and 3M subsidiary Aearo Technologies LLC argued that extending those protections to 3M would buy Aearo time to deal with its debt and restructuring goals.

Aearo and 3M had argued that bankruptcy provided a faster and fairer way to compensate veterans who say earplugs made by Aearo caused hearing loss.

But Bankruptcy Judge Jeffrey J. Graham in Indianapolis said Aearo’s bankruptcy restructuring could continue in parallel with the lawsuits.

While the “sheer size” of the consolidated lawsuit may have spurred 3M and Aearo to seek “additional leverage” through the bankruptcy proceedings, it did not create a legal need to protect 3M, Graham said.

Attorneys representing the veterans with hearing loss said they looked forward to continuing their lawsuits against 3M in other courts.

“Judge Graham’s decision is a complete rejection of 3M’s attempt to evade accountability and hide in bankruptcy,” plaintiff attorneys Bryan Aylstock and Christopher Seeger said in a statement.

A 3M spokesman said it intended to appeal.

“Continuing to litigate these cases one by one over the coming years will not provide certainty or justice for any party,” said 3M spokesman Sean Lynch.

3M subsidiary Aearo Technologies LLC filed for bankruptcy protection in Indiana on July 26, seeking to resolve a lawsuit alleging that 3M’s Combat Arms Earplugs Version 2 (CAEv2) caused hearing loss.

Aearo will continue in Chapter 11 proceedings and 3M will continue to defend its position in the lawsuit, the company said in a statement late Friday.

“3M continues to expect to complete the pending separation of the food safety business on the target closing date of September 1,” 3M added.

The lawsuits have been consolidated in a federal court in Florida and have grown into the largest mass tort lawsuit in US history. Aearo placed $1 billion in a trust to settle them and agreed to indemnify 3M for any liability related to CAEv2.

3M has denied liability, saying its earplugs provided protection to soldiers while allowing them to hear on the battlefield.

The Florida judge overseeing the earplug lawsuits, US District Judge M. Casey Rodgers, has admonished 3M for “naked duplicity” in trying to dump its liabilities into a bankrupt subsidiary.

3M and Aearo, for their part, have criticized Rodgers for letting the consolidated lawsuit go through the air, pointing out that earplug cases now make up as much as 30% of all cases pending in US federal courts.

3M has lost 10 of the 16 cases that have gone to trial so far, with about $265 million awarded in total to 13 plaintiffs.

3M’s stock price fell 12% on Friday to $129.

Companies in recent years have increasingly used bankruptcy proceedings to shield non-bankrupt owners and affiliates from lawsuits, with Johnson & Johnson’s attempt to fend off lawsuits alleging its talc-based baby powder caused cancer a recent example.

J&J has denied responsibility and said the talcum-based baby powder is safe. J&J affiliates’ bankruptcy case is under review, after cancer victims appealed a court ruling that blocked their lawsuits against J&J.

Reporting by Dietrich Knauth; Additional reporting by Ann Maria Shibu in Bengaluru; Editing by Josie Kao, Alexia Garampalvi and Rosalba O’Brien

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