According to Reuters, 3M Co (3M) must face more than 230,000 lawsuits accusing it of selling defective earplugs to the U.S. military after a US judge decided on Friday that the bankruptcy of one of its subsidiaries didn’t stop lawsuits against the company’s non-bankrupt parent.
In a bankruptcy filing, companies are legally relieved of most debts. Aearo Technologies is a subsidiary of 3M and they believe that they should be exempt from debt while they focus on restructuring their company.
Aearo and 3M maintain that bankruptcy is a faster, more fair way to compensate veterans who say that the earplugs made by Aearo caused hearing loss
The judge of the case allowed that Aearo’s bankruptcy restructuring could proceed in parallel with the lawsuits.
It was not necessary for them to use this bankruptcy process to protect themselves from the consolidated litigation.
Attorneys representing veterans with hearing loss said they looked forward to continuing their lawsuits in other courts following their dismissal of the case against 3M in New Jersey.
Lawyers Bryan Aylstock and Christopher Seeger, who represent the plaintiffs, said: “Judge Graham’s decision is a complete rejection of 3M’s attempt to evade accountability and hide in bankruptcy.”
In light of the above mentioned, it is 3M’s intention to appeal.
“Continuing to litigate these cases one-by-one over the next years will not provide certainty or fairness for any party,” 3M spokesman Sean Lynch said
The subsidiary of 3M that created the Combat Arms Earplugs filed for bankruptcy on July 26 following a number of lawsuits claiming its products caused hearing damage.
3M has said that it will continue operating in chapter 11 proceedings and defending its current position in the litigation for as long as it continues to operate.
“3M expects the pending divestiture of its food safety business to close as planned on September 1,” 3M said.
Trials have been consolidate at the Florida court together and has become the largest tort cases in US history.
3M have denied liability, by saying that their earplugs protected soldiers while they were still able to hear while on the battlefield.
A U.S. District Judge has commented negatively on 3M’s attempt to use a bankrupt company as a scapegoat for their earplug problems by saying they were “engaged in naked duplicity”.
3M and Aearo have criticised Rodgers for allowing the consolidated litigation to balloon – earplug cases now account for a whopping 30% of all cases pending in U.S. federal courts
3M has won very few cases of late, with 13 out of the 16 cases that went to trial resulting in a victory for the other side. The company still has $265 million left that it owes.
As of Friday’s close, 3M Corp.’s stock price was down 12% to $129.
Companies are increasingly using bankruptcy proceedings to protect non-bankrupt owner and affiliates from litigation. Johnson & Johnson’s effort to offload lawsuits alleging that its talc-based baby powder caused cancer, for instance, is a recent example of how bankruptcy proceedings can assist in protecting the company.
J&J has denied liability and said its talc-based baby powder is safe. The J&J affiliate’s bankruptcy case is still pending review, after cancer victims appealed a court ruling that blocked their lawsuits against J&J.