3M Co. had good reason to bet that it could use U.S. bankruptcy laws to shield itself from a mountain of personal-injury lawsuits filed over its allegedly defective military earplugs. But after a bankruptcy judge rejected a key aspect of its legal strategy, 3M is facing an uphill battle to find a way to control its costs stemming from 230,000 lawsuits on behalf of military veterans, the largest single multidistrict litigation by number in U.S. history, WSJ Pro Bankruptcy reported. A handful of large, solvent businesses have accessed chapter 11 in recent years to fight back against tort litigation, moving those liabilities to a new subsidiary and then to bankruptcy court for settlement. And bankruptcy courts have shielded them from further trials and verdicts in the civil justice system, even though they didn’t file for chapter 11 themselves. 3M used an existing subsidiary to try to replicate that outcome for its own legal problem: the mass lawsuits alleging the company’s combat earplugs exposed U.S. service members to harmful noise that damaged their hearing. It hasn’t worked as planned. Last week, a bankruptcy court declined to extend chapter 11 protections to 3M based on a bankruptcy filing by its subsidiary Aearo Technologies LLC, the earplugs’ manufacturer. As a result, 3M remains exposed to further jury verdicts in the earplug cases, which have yielded $265 million in damage awards against 3M in the small number that have gone to trial.
