US Bankruptcy Judge
“We are disappointed in the court’s ruling today and will be filing an appeal. Further litigation in the MDL court benefits no one,” the company said, referring to the federal multi-district litigation program, where the soldiers claims are being prepared for jury trials.
“3M has every incentive to seek a settlement in that scenario,” said
Graham’s decision upends 3M’s decision to resolve the lawsuits by putting Aearo in bankruptcy, where controversial rules sometimes allow parent companies to benefit by halting jury trials and settling their lawsuits in one place.
A temporary halt would help 3M pressure soldiers into settling, Graham said in his ruling. But federal bankruptcy law in Indiana does not allow him to grant 3M’s request for an injunction, Graham ruled.
“Admittedly, it is tempting to be swayed by the sheer size of the MDL at issue in this case, but that alone provides insufficient reason for the court to conclude that an injunction is necessary,” Graham
3M is employing an increasingly popular strategy in which profitable companies use insolvency proceedings to force settlement talks with victims of allegedly harmful products.
Lawyers for the soldiers have demanded the right to continue taking their cases to trial. The ruling means 3M now faces the prospect of jury verdicts from around the country, with one expert hired by the soldiers’ law firms estimating the company could face more than $100 billion in damages from the claims.
That figure has been disputed by the company and criticized by some soldier’s advocates. During a trial about whether Graham should halt the lawsuits, a lawyer for the soldiers called the expert a crank, before apologizing for the insult.
Advocates for the veterans said the ruling vindicates their view that profitable companies should not be allowed to use bankruptcy court to avoid lawsuits.
“This is a tremendous victory for the 230,000 US service members who have been harmed by 3M’s deception and greed,”
On July 26, the company put Aearo into
The ruling sets up a conflict between two branches of the federal judiciary. A judge in another court district came to the opposite conclusion in the bankruptcy of a unit of Johnson & Johnson.
US Bankruptcy Judge
Kaplan’s ruling is being appealed by lawyers suing J&J on behalf of women who claim they got cancer from the company’s baby powder.
Until last month, 3M was fighting the claims in federal court in Pensacola, Florida, where a judge was overseeing the initial, procedural steps needed to prepare the lawsuits for separate jury trials that would take place in other courts. The judge overseeing that process, which is known as multi-district litigation, or MDL, has questioned 3M’s decision to use bankruptcy instead.
The bankruptcy is Aearo Technologies LLC, 22-02890, United States Bankruptcy Court for the Southern District of Indiana (Indianapolis).
(Updates with analyst comment in the fifth paragraph.)
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