After years of legal wrangling, 3M has reached a resolution in a protracted legal battle over allegations that it knowingly sold defective earplugs to the U.S. military, resulting in hearing loss among service members. The manufacturing giant recently made public its settlement, which entails a payment of $6.01 billion spread out between the years 2023 and 2029. This sum will be divided into $5.01 billion in cash and $1 billion in the form of common stock.
The agreement stipulates that the payouts will only occur if certain conditions are met, including a requirement that at least 98% of eligible individuals with current or potential litigation claims enroll in the settlement and release all claims against 3M. If these conditions are not fulfilled, 3M has the option to terminate the settlement.
To cover the financial obligations stemming from the settlement, 3M is gearing up to record a $4.2 billion pre-tax charge on its third-quarter earnings. Notably, the company has already set aside an additional $1.1 billion in anticipation of the settlement. In an effort to mitigate some of these financial implications, both 3M and its subsidiary Aearo Technologies are actively pursuing insurance recovery measures.
An earlier attempt to shield themselves from a significant settlement involved Aearo filing for bankruptcy in Indiana. However, this tactic was dismissed when the court concluded that the company, with the support of 3M, did not meet the financial criteria necessitating bankruptcy protection.
The primary aim of this settlement is to address all claims related to the faulty military-grade earplugs, encompassing a class-action lawsuit based in Florida, a concurrent action in a Minnesota state court, and potential future claims on this matter. However, it is important to note that 3M has not admitted any liability as part of this settlement agreement.
The legal dispute originates from a whistleblower complaint filed in 2016 by Moldex-Metric, a manufacturer of hearing and respiratory protection devices. The accusation claimed that from 2003 to 2015, 3M and Aearo were aware that they had been supplying the U.S. Department of Defense with faulty dual-ended Combat Arms earplugs. These earplugs were purportedly prone to loosening during use, leading to hearing loss and tinnitus among numerous military personnel who relied on them for hearing protection during training and combat operations.
While 3M eventually settled the initial case for $9.1 million without admitting guilt, this settlement paved the way for a multitude of individual plaintiffs to bring lawsuits against the company, attributing their hearing impairments to the ineffective earplugs. These individual cases were later consolidated into a multi-district litigation in Florida, ultimately amassing over 250,000 cases. This consolidation marked the largest mass tort action in U.S. history.
It’s worth noting that among the individual cases that proceeded to court, 3M lost 10 out of 16, resulting in a combined damage award of around $265 million.
The U.S. Department of Veterans Affairs highlighted hearing loss and tinnitus as the most common service-related disabilities among U.S. veterans, with a study from 2019 indicating an increase in tinnitus rates among active-duty service members since 2001.
3M, however, has maintained that it is not solely responsible for this rise in hearing-related issues. In a statement released in March, the company referred to Department of Defense data covering over 175,000 plaintiffs involved in the case. According to this data, more than 85% of these plaintiffs met the healthy hearing standards established by reputable medical associations. Furthermore, for those plaintiffs who did exhibit hearing loss based on these medical standards, approximately a quarter had pre-existing conditions recorded prior to the earplug use, as per 3M. The company suggested that post-earplug hearing issues could be attributed to a variety of factors unrelated to the earplugs.
