3M Creates $1 Billion Trust in Attempt to Resolve Military Earplug Lawsuit

The multinational conglomerate company, 3M, announced on July 26 that it would create a $1 billion trust in an attempt to compensate veterans who experienced hearing loss while wearing defective earplugs in combat. 3M also noted that Aearo, the wholly-owned subsidiary and manufacturer of the earplugs, will file for bankruptcy as part of the resolution. Lawyers close to the matter argue this is not an equitable solution for the hundreds of thousands of veterans affected and that they will take further action. 

The Earplug Case that is Getting Larger and Larger

A small safety product manufacturer called Moldex-Metric, Inc. filed the initial lawsuit as a whistleblower in 2016. The company argued that 3M and Aearo were well aware of the safety defects in the earplugs at least three years before receiving an exclusive government contract in 2003. The original lawsuit claimed the earplugs often became loose due to their design, allowing damaging sound to penetrate the user’s ears. In response, 3M admitted no wrongdoing but agreed to pay $9.1 million to settle the issue with the Department of Justice, $1.9 million of which went to Moldex-Metric.

Since then, a barrage of lawsuits has come raining down on 3M, primarily from veterans. In a press release, 3M stated that it is dealing with upwards of 235,000 filed claims as of June 30. 3M and Aearo maintain that they believe the earplugs in question, called Combat Arms earplugs Version 2, are effective and safe when used properly. Still, the striking number of veterans with hearing disabilities provides a different story. 

So far, 16 cases have reached resolutions, six of which 3M came out on top and ten where the plaintiffs won. 3M has paid out over $300 million so far as a result of these cases. One case awarded two army veterans $110 million in January for the damages they endured. 

To avoid impending settlements, 3M established the $1 billion trust in hopes that it would bring a faster resolution to the matter. 3M also says it will allocate an additional $240 million to the fund for extra expenses. 

Lawyers prosecuting on behalf of affected veterans argue that the trust is not nearly enough to justify the damage that the veterans experienced due to 3M’s negligence. One lawyer says that the $1 billion trust would only provide about $5,000 to each veteran who experiences hearing problems due to the earplugs. 

Related Article: Roe Reversal May Cause Downstream Issues in Repurposing Mifepristone

Potentially Leveraging Bankruptcy Courts to Halt Litigation

Although Aearo will file for bankruptcy as part of the plan to resolve the lawsuit, 3M stated that it would continue to support Aearo while it operates. All other facets of 3M will continue to operate as usual too. 

Filing for bankruptcy could halt litigation proceedings, forcing plaintiffs to seek compensation in the bankruptcy court rather than 3M or Aearo directly. The case is shaping up to be similar to Johnson & Johnson’s recent strategy to avoid the 40,000 claims lodged against it for its talc-based powder, which plaintiffs allege causes cancer. 

3M’s case differs from Johnson & Johnson’s because instead of creating an entirely new entity to allocate funds to before filing bankruptcy, 3M is having Aearo, an established subsidiary, voluntarily file for bankruptcy. The exact end goal of this creative maneuver is not entirely clear yet, but it appears to be some variation of the controversial “Texas Two-Step” strategy to minimize legal claims. 

The defective earplug court cases seem far from over even after 3M’s announcement of the $1 billion trust. After paying out over $300 million to plaintiffs, the proceedings might get even rockier as 3M tries to minimize damages due to the case. Lawyers around the US will have their work cut out for them going forward, trying to gain compensation for the affected veterans they serve. 

Author

Reed Slater