3M Unit’s Bankruptcy Should Be Dismissed, Combat Vets Say (1)

Plaintiffs suing 3M Co. over allegedly faulty earplugs urged a judge to throw out its subsidiary’s bankruptcy case, citing a recent ruling in another case involving Johnson & Johnson that said Chapter 11 was being abused to avoid mass tort litigation.

A committee representing over 230,000 veterans and contractors with claims against 3M and bankrupt Aearo Technologies LLC joined several dozen plaintiff law firms in a filing Thursday evening urging the US Bankruptcy Court for the Southern District of Indiana to dismiss the contentious proceedings.

Aearo’s bankruptcy features an uncapped funding agreement from 3M, which was modeled after the arrangement J&J created for its bankrupt talc liability unit, LTL Management LLC, the committee said. Dismissal of Aearo’s case is therefore appropriate in light of the ruling this week from the US Court of Appeals for the Third Circuit that LTL lacks a valid purpose to remain in bankruptcy because it isn’t in financial distress, the claimants said.

“Bankruptcy is powerful medicine that is reserved for entities in genuine financial distress,” they told the court. “Here, just as in LTL, the Debtors were not in any financial distress when they invoked this Court’s jurisdiction.”

3M initiated its bankruptcy court gambit in July, looking to collectively settle all suits related to its Combat Arms Version 2 Earplugs without continuing to face multidistrict litigation in a Florida federal court. By putting its subsidiary into bankruptcy without filing for bankruptcy itself, 3M’s approach resembled that of J&J and a handful of other wealthy corporations accused of poisoning thousands with asbestos-laced products.

Calling out 3M for “tactical forum shopping,” the claimants said in their brief Thursday that the bankruptcy court could go beyond the Third Circuit’s ruling on LTL and dismiss Aearo’s case as “an improper litigation tactic.”

In a press release Friday, 3M said it remains focused on collectively mediating with the plaintiffs while preparing a formal court response to the dismissal motion that draws distinctions between the Aearo and LTL cases. Aearo was not specially created to absorb all of the earplug liabilities and is situated in a bankruptcy court that has different standards for dismissal, it said.

If the case is dismissed, “it would needlessly disrupt the well-established Chapter 11 process to return to protracted litigation in the mass tort system,” the company said.

The request to dismiss Aearo’s case is just the latest challenge in 3M’s bid to thwart civil court trials and proceedings. The company is currently appealing Bankruptcy Judge Jeffrey J. Graham’s August ruling that Aearo’s bankruptcy protections don’t extend to 3M. The appeal faces substantial opposition, with Democratic members of Congress urging the US Court of Appeals for the Seventh Circuit to reject the company’s arguments.

Separately, the federal judge overseeing the MDL proceedings ruled in December that 3M has full potential liability for hearing loss claims independent of Aearo based on its own assertions and defenses over several years.

The case is In re Aearo Technologies LLC, Bankr. S.D. Ind., No. 22-02890, 2/2/23