3M earplug lawsuits fight, judge rules, despite bankruptcy case

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

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Aug 26 (Reuters) – 3M Co faces more than 230,000 lawsuits accusing it of selling faulty earplugs to the U.S. military, after a U.S. judge ruled on Friday that the company would be bankrupt. a subsidiary had not terminated the proceedings against the non-bankrupt parent company.

Companies that file for bankruptcy typically get an immediate reprieve from lawsuits, and 3M subsidiary Aearo Technologies LLC argued that extending those protections to 3M would give Aearo time to settle its debts and its restructuring objectives.

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

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But Indianapolis Bankruptcy Judge Jeffrey J. Graham said Aearo’s bankruptcy restructuring could proceed alongside the lawsuits.

Although the “sheer size” of the consolidated litigation may have prompted 3M and Aearo to seek “additional leverage” through the bankruptcy process, it did not create a legal need to protect 3M, a said Graham.

Lawyers representing hearing-impaired veterans said they looked forward to continuing their lawsuits against 3M in other courts.

“Judge Graham’s decision is a complete dismissal of 3M’s attempt to escape liability and hide in bankruptcy,” plaintiffs’ attorneys Bryan Aylstock and Christopher Seeger said in a statement.

A 3M spokesperson said it intended to appeal.

“Continuing to litigate these cases one by one over the next few years will not bring certainty or fairness to any party,” 3M spokesman Sean Lynch said.

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

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

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

The lawsuits were consolidated in federal court in Florida and became the largest mass tort litigation 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 denied responsibility, saying its earplugs provided protection for soldiers while allowing them to hear on the battlefield.

The Florida judge overseeing the earplug lawsuits, U.S. District Judge Casey Rodgers, chastised 3M for “naked duplicity” in attempting to offload its debts to a bankrupt subsidiary.

3M and Aearo in turn criticized Rodgers for allowing consolidated litigation to swell, pointing out that earplug cases now account for 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 stock price fell 12% on Friday to $129.

In recent years, companies have increasingly resorted to bankruptcy proceedings to protect non-bankrupt owners and affiliates from litigation, with Johnson & Johnson’s efforts to offload lawsuits alleging its powder for baby talc has caused cancer a recent example.

J&J denied responsibility and said its talc-based baby powder was safe. The J&J subsidiary’s bankruptcy case is under review, after cancer victims appealed a court ruling that blocked their lawsuit against J&J.

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

Our standards: The Thomson Reuters Trust Principles.

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