3M Lawsuit Investors Ordered to Be Unmasked Amid $6 Billion Deal

A federal judge wants to know how much of a $6 billion settlement for military veterans injured by faulty 3M Co. earplugs is set to go to outside investors backing the lawsuits.

District Judge M. Casey Rodgers on Tuesday ordered plaintiffs lawyers in the massive litigation to file disclosures detailing outside funding deals. The order came hours after 3M Co. announced a settlement to resolve hundreds of thousands of claims against the company.

Rodgers expressed concern about outside funders’ role in the deal.

“For at least the past decade, settlements of this size and nature have often attracted the attention of third-party litigation funding entities intending to prey on litigants,” she wrote. Rodgers said she wants to ensure that the claimants are not being “exploited by predatory lending practices, such as interest rates well above market rates, which can interfere with their ability to objectively evaluate the fairness of their settlement options.”

The settlement will resolve roughly 260,000 lawsuits alleging defective 3M combat earplugs caused hearing damage to troops. The company agreed to contribute $5 billion in cash and $1 billion in common stock through 2029, under the terms of the deal.

The plaintiffs lawyers are required to disclose all funding agreements made with any claimant before or after the settlement, within 30 days, according to the order. The lawyers and the claimants are also barred from entering new outside funding deals without court approval.

The funding declarations, which Rodgers said will be filed under seal, will include lender names, loan amounts, and interest rates, among other information. Lawyers will be required to produce financing agreements and be prepared to discuss them, Rodgers said.

Disclosure is a contentious topic in the $13.5 billion litigation finance industry, where investment firms pool money into litigation in exchange for a portion of the award. A federal judge in Ohio made a similar move in 2018 in massive opioid litigation, requiring in camera disclosure of litigation finance agreements.

Funders in mass torts cases typically loan money to law firms against their entire docket of cases. The 3M order does not specify whether such “portfolio deals” are required to be disclosed.

The case is In re 3M Products Liability Litigation, N.D. Fla., No. 3:19-md-02885, 8/29/23.