3M's Aearo Technologies Files Ch.11 To Settle Earplug Claims

3M's Aearo Technologies Files Ch.11 To Settle Earplug Claims

Introduction

In order to address the hundreds of thousands of claims of hearing loss resulting from flaws in Aearo's Combat Arms Earplugs, 3M stated it had filed its Aearo Technologies subsidiary for Chapter 11 bankruptcy in Indiana.

According to 3M's announcement, it would set up a $1 billion trust to cover more than 230,000 claims for earplugs as well as claims for the discontinued Aearo mask and respirator devices.

The judgment will enable 3M and Aearo Technologies to resolve the earplug allegations in a manner that is more swiftly and fairly than the ongoing litigation, according to the CEO of 3M.

Thousands of military veterans and active duty personnel have filed a multidistrict lawsuit against the corporation in a federal court in Florida, claiming that the faulty CAEv2 earplugs that 3M and its subsidiary Aearo provided to the military between 2003 and 2015 caused their hearing loss.

The MDL court ordered the parties to mediation in June and rejected the company's plea to vacate an $8 million judgment in a bellwether trial last week. At least 10 of the first 16 bellwether cases resulted in victories for the plaintiffs, who received $300 million in total damages.

One of the plaintiff's lawyers claims that the MDL carries an exposure risk of more than $1 trillion. According to Aearo's Chief Restructuring Officer's Chapter 11 statement, the business has already spent over $347 million fighting the lawsuit.

The lawyer continued by saying that the business is also dealing with a lesser number of lawsuits alleging asbestos, coal dust, and other airborne pollutants injuries brought on by flaws in masks and respirators produced by Aearo. He said that as of this point, the company's accounting accrual for liability and defense expenditures is $41 million.

The documents state that 3M has agreed to provide $240 million for Chapter 11 expenditures and $1 billion to a trust fund that will be used to satisfy claims, with extra funds available if necessary.

Aearo argued in a different brief that settling the earplug claims under Chapter 11 would be more equitable for both the business and the claimants than continuing the MDL, which it claimed had devolved into a litigation vortex with unsubstantiated claims, disproportionate judgments, and a problematic bellwether trial procedure.

A scientific and data-driven estimation proceeding based on the facts will create the framework for stratifying and evaluating the viability and true value of the claims rather than keeping hundreds of thousands of claims in storage, each waiting for an uncertain chance to win a lottery verdict at trial.

The MDL and other lawsuits are halted by the automatic litigation stay given by a Chapter 11 filing, according to a complaint filed by 3M and Aearo on Tuesday. The proposed trust, according to the main plaintiffs' attorney in the MDL, is chronically underfunded, and the plaintiffs intend to fight the Chapter 11 filing.

Unlike Aearo, other businesses that were permitted to file for Chapter 11 to handle product liability tort claims, such as Johnson & Johnson talc unit LTL Management, had produced goods that may have contributed to long-lasting latency periods, such as cancer, opening the door to potential future claims.  The bankruptcy court's ruling approving J&J's bankruptcy included reference to this futures problem. 3M does not make the same claim in this case.

Aearo, situated in Indianapolis, was acquired by 3M in 2008 after being formed in the 1940s as the American Optical Company, according to the Chapter 11 documents. It presently employs 330 people and has focused on noise, vibration, shock, and heat absorption materials for use in heavy machineries, such as commercial vehicles and airplanes, after terminating its earplug line in 2015. The restructuring and financial advisers for Aearo are PJT Partners and AlixPartners.