3M Co. should be blocked from spinning off its health care business and paying shareholder dividends in order to preserve money that soldiers suing the industrial conglomerate expect to win, according to a new federal lawsuit, Bloomberg News reported. A group of soldiers who claim faulty 3M earplugs damaged their hearing want a judge to ensure that the company has enough assets to pay tens of billions of dollars in judgments it could lose in the future. The company faces more than 200,000 lawsuits from veterans who used the earplugs. The complaint, filed in Pensacola, Florida, accuses 3M of trying to protect valuable assets in its health care business from being used to pay soldiers who win their cases. Verdicts against 3M in a handful of initial trials shows that the company may be forced to pay out at least $82 billion, according to the complaint. A representative of the company did not immediately respond to a request for comment. The company has said it is willing to set up a trust fund with $1 billion to pay legitimate claims. 3M has been fighting the claims in federal court in Pensacola for about 3 years. A federal judge is overseeing the initial, procedural steps needed to prepare the lawsuits for separate jury trials that would take place in other courts. Read more.
3M Co. plans to eliminate jobs as part of a broader cost-cutting drive in response to the slowing economy, according to internal communications, Bloomberg News reported. The move comes just days after 3M suffered a setback over a key legal strategy designed to mitigate mounting liabilities and as it faces an array of other challenges, ranging from inflationary woes to sluggish growth. Michael Vale, head of 3M’s safety and industrial division, disclosed the planned cuts in a message to employees of the unit. “The business can’t avoid this tough necessity,” he said in the communication, which was reviewed by Bloomberg News. The scope of the workforce reduction couldn’t be immediately determined, but in the memo Vale said other parts of the company would see similar actions. 3M, which makes everything from dental adhesives to Post-it notes, employed about 95,000 people at the end of 2021, according to securities filings. The multinational manufacturer has underperformed in recent years amid supply-chain snags, currency fluctuations and rising costs. 3M said in July it will spin off its health-care operation, which accounted for almost a quarter of sales. Management also cut its full-year sales and profit outlook. It also potentially faces billions of dollars in future costs tied to environmental liabilities and lawsuits alleging that it sold faulty combat earplugs to the U.S. military that led to hearing damage. A bankruptcy judge last week rejected 3M’s attempt to use controversial bankruptcy rules to halt those claims, allowing them to proceed to trial. 3M has said it plans to appeal the ruling. Read more.
The Boy Scouts of America is nearing final approval of a reorganization plan that would allow the youth organization to set up a $2.3 billion trust to settle decades’ worth of claims by more than 80,000 men who say they were abused as children by troop leaders, Reuters reported. Bankruptcy Judge Laurie Selber Silverstein in Wilmington, Delaware, at a Thursday court hearing overruled remaining objections to the Boy Scouts' chapter 11 plan. She stopped short of approving it, however, instead asking for further revisions that the organization said could be completed relatively quickly. Boy Scouts' attorney Jessica Lauria acknowledged in court that it had some "work to do," but said that the remaining changes could be completed in less than a week. The Boy Scouts had sought confirmation of a modified chapter 11 plan that aimed to address Silverstein's July 29 ruling rejecting some parts of the plan. The biggest change was the removal of a $250 million settlement between the Boy Scouts and the Church of Jesus Christ of Latter-day Saints, which Judge Silverstein refused to approve because it went too far in protecting the Mormon church from abuse claims that were only loosely connected to scouting activities. Judge Silverstein overruled the remaining objections to the plan from insurers and sexual abuse claimants who argued that recent revisions went beyond the scope of Silverstein's July opinion. The insurers, for example, objected to a new assertion that the bankruptcy court's estimation of the value of abuse claims did not act as a limit on insurers' eventual liability for those claims.
A company partially owned by Alex Jones is asking a judge to allow a court-appointed trustee to review the bankrupt Infowars parent’s finances, a request that could delay Sandy Hook victim families’ attempt to remove him from the chapter 11 proceeding, Bloomberg Law reported. PQPR Holdings Ltd., which is owned by the right-wing conspiracist and his parents, on Wednesday said it would pay up to $100,000 for an examination of bankrupt Free Speech Systems LLC’s finances by the bankruptcy trustee working on the case. Free Speech, a Jones-controlled company which operates his website Infowars, declared bankruptcy in July after a state court ordered him to pay judgments for his lies that the 2012 school massacre was a hoax. Last month, a jury awarded two parents nearly $50 million in damages. PQPR’s motion comes after families of Sandy Hook Elementary School shooting victims last week asked a Texas bankruptcy court to remove Jones and his bankrupt company from running its operations and chapter 11 proceedings. The families’ requests to remove Jones should be put on hold until a trustee has reported its findings to the court, PQPR said. PQPR, which is listed as one of the largest creditors of Free Speech, is partially owned by Jones through several limited liability companies and managed by Jones’ father, according to court papers. Jones father and mother also hold interests in PQPR via separate limited liability companies, according to court records.
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.
A bankruptcy court is expected to approve the Boy Scouts of America’s sex-abuse settlement plan, advancing the use of chapter 11 to resolve mass torts in an evolving area of the law, WSJ Pro Bankruptcy reported. Large companies and nonprofits have drawn controversy for invoking bankruptcy as a litigation management tactic and using the tools of chapter 11 to forge settlements outside the civil jury system. The Boy Scouts faced protests from insurance companies, abuse victims and others involved in its strategy for settling 82,200 claims of childhood sexual abuse. Ultimately, 86% of the survivors who cast ballots on the plan voted yes. In July, Judge Laurie Selber Silverstein of the U.S. Bankruptcy Court in Wilmington, Del., largely overruled those objections and indicated she would approve the chapter 11 plan once it was revised to reflect her views. Her ruling is likely to be appealed. The Boy Scouts are expected today to propose a revised plan for the judge’s confirmation.
The parent company of far-right website Infowars agreed yesterday to face a second U.S. defamation trial stemming from the company's false claims the deadly 2012 Sandy Hook elementary school shooting was a hoax, Reuters reported. Free Speech Systems' attorneys told U.S. Bankruptcy Judge Christopher Lopez in Houston the company would no longer oppose a trial in Connecticut next month, even though the company's bankruptcy would normally shield it from lawsuits. The Connecticut trial will determine how much FSS and its founder, conspiracy theorist Alex Jones, should pay in a defamation case brought by family members of children slain in the shooting. Families of children killed in the 2012 shooting have won judgments finding Jones and his companies liable for defamation in Texas and Connecticut. On Aug. 5 a Texas jury decided Jones must pay the parents of a 6-year-old boy killed in the massacre $45.2 million in punitive damages — on top of $4.1 million in compensatory damages — for falsely claiming the shooting was a hoax. Free Speech Systems filed for chapter 11 on July 29, when the Texas defamation trial was already under way. The company initially argued that going to trial in Connecticut would jeopardize its ability to reorganize, but it agreed to participate after a Connecticut judge ruled that the trial could go forward against Jones, who is not bankrupt.
A federal appeals court resuscitated a $200 million bankruptcy claim against PG&E Corp., ruling in favor of investment firms that argued the California utility underpaid them on accrued interest when it exited chapter 11 as a solvent company in 2020, WSJ Pro Bankruptcy reported. The Ninth U.S. Circuit Court of Appeals in San Francisco found that unsecured creditors of a solvent business like PG&E have an equitable right to interest payments after a chapter 11 filing at the original rate specified in the contract. PG&E’s chapter 11 plan didn’t pay full contractual interest of 10% or more, instead offering unsecured creditors the federal judgment rate of around 3%. Yet the bankruptcy plan also classified those creditors as unimpaired, or paid in full. Monday’s ruling sided with Citigroup Inc., Whitebox Advisors LLC and Olympus Peak Asset Management LP, but didn’t award them the $200 million interest outright. The bankruptcy court that oversaw PG&E’s restructuring must now “weigh the equities and determine what rate of interest the creditors were entitled to,” according to the decision. PG&E’s reorganization plan paid $25.5 billion in wildfire-related claims and covered its other financial debts under a complex compromise between shareholders and creditors.
A bankruptcy judge declined on Friday to shield 3M Co. from continued litigation involving its military earplugs, a setback for the conglomerate’s attempt to shift the mass injury claims to a friendlier forum, WSJ Pro Bankruptcy reported. Judge Jeffrey Graham of the U.S. Bankruptcy Court in Indianapolis said he wouldn’t extend to 3M the same protection against the pending earplug injury lawsuits that its subsidiary Aearo Technologies LLC received by filing for chapter 11 last month. The bankruptcy filing marked the latest of several recent attempts by corporate defendants to leverage the powers of chapter 11 to resolve legal troubles. But 3M didn’t succeed as other businesses have. Judge Graham’s ruling leaves roughly 230,000 personal injury claims pending against 3M, which didn’t seek chapter 11 protection itself, but has played a central role in the bankruptcy proceedings of Aearo, the earplugs’ manufacturer. Friday’s decision backed plaintiffs’ lawyers, who have alleged the defective earplugs left U.S. military veterans with lasting hearing damage and won $265 million in jury verdicts before Aearo filed bankruptcy. 3M, which has denied the combat earplugs are unsafe, said it would appeal Friday’s ruling and that continuing to litigate the earplug cases one-by-one over the coming years “benefits no one.”
