3M settles yearslong earplug litigation for $6 billion with military service members

3M has reached a $6 billion settlement with veterans and military service members over allegations that defective earplugs led to hearing loss among users.

The settlement caps a yearslong saga and ends one of the largest clusters of civil litigation in U.S. history.

There were more than 240,000 pending claims about 3M's Combat Arms CAEv2 earplugs, which were once standard military issue.

Dwight Howell was among the claimants.

The Lake Elmo man served in the Army from 2006-19 and wore Combat Arms earplugs during tours in Iraq and Afghanistan as a combat engineer. Now 38, Howell, who retired at the rank of major, suffers from bilateral tinnitus and high-frequency hearing loss.

"The settlement is good news, at the end of the day," Howell said. "I have a lot of empathy for everyone in this situation. We take for granted a lot of it, hearing loss, tinnitus, a lot of ailments veterans may have suffered in their service."

Maplewood-based 3M said in a statement the settlement is not an admission of liability.

"The products at issue in this litigation are safe and effective when used properly," the company said. "3M is prepared to continue to defend itself in the litigation if certain agreed terms of the settlement agreement are not fulfilled."

Lawyers for the plaintiffs celebrated the settlement, which will ask claimants to register for a payment plan and provide proof of hearing damage.

"We hope that today's announcement brings some measure of relief for veterans and their families," attorney Bryan Aylstock said at a virtual news conference Tuesday. "In the coming months, we will begin implementing this agreement to ensure every veteran receives their rightful compensation."

The attorneys expect near-universal acceptance of the settlement from the plaintiffs, a requirement for full payouts from 3M.

"This is the best deal they can possibly get," Aylstock said.

Aearo Technologies — which 3M acquired in 2008 — developed and sold the Combat Arms earplugs. The military purchased them between 1999 and 2015.

The settlement, the result of months of confidential negotiations, is meant to address claims that are pending in state court as well as federal cases. Unlike in a class-action lawsuit, the settlement will not go through a lengthy approval and appeal process and is already entering court dockets.

Aylstock said the earplug claims represent a third of all U.S. civil cases in federal courts right now. The federal judge overseeing the litigation had made clear the need to resolve the cases without trying each individually and ordered mediation this summer.

Civil litigation expert Alexandra Lahav said it looks like a good deal for 3M, but it remains to be seen whether it's a good deal for the plaintiffs.

"I cannot say if this is fair to claimants. Let's wait and see the terms and what claimants say about it before judging that," said Lahav, a professor at Cornell University. "It seems like a good result for the company, given their high market cap and the possibility of putting this behind them."

3M will pay $660 million this year to address past trial verdicts and federal and state bellwether cases. The bulk of additional payments — contingent on at least 98% participation from claimants — will come in the next several years, lasting through 2029.

"We've been on a journey and the journey continues," Howell said. "It's been awhile for us just to get to this point. There's still a lengthy road ahead before we start to see any kind of compensation."

In the past two years, military plaintiffs won 10 of 16 earplug bellwether trials in U.S. District Court in northern Florida, and juries awarded them nearly $300 million.

A bellwether trial in Minnesota state court regarding civilian claims was to begin next month. A coal miner who used Combat Arms at work and alleged hearing loss brought that case.

Legal action began in 2016 with a whistleblower lawsuit that alleged 3M knew its earplugs were defective and did not tell the military. The company settled the allegation for $9.1 million in 2018.

The first personal injury lawsuits came in 2019. 3M previously tried and failed to resolve the cases in bankruptcy court after the Aearo subsidiary filed for bankruptcy protection.

"Today is an important step forward for 3M," Kevin Rhodes, 3M chief legal affairs officer, said on a conference call with analysts Tuesday.

Several analysts offered congratulations as some of the legal uncertainty weighing on 3M has been lifted.

Morningstar analyst Joshua Aguilar wrote that the settlement is "a big win for the company and its shareholders, particularly after it lost 10 of its 16 bellwether cases."

"We think the balance sheet can readily absorb this blow," he said.

Rhodes also said state attorneys general have withdrawn their rejections for the up to $12.5 billion PFAS settlement with water systems announced earlier this year, making court approval more likely.

Billions more in PFAS payouts could be coming as other lawsuits regarding the "forever chemicals" remain unresolved.

"We've pegged lingering PFAS liabilities at about $9 billion, but we still acknowledge that figure is highly uncertain," Aguilar wrote.

3M will cease making and selling products with PFAS by 2025.

The company also still faces claims about its Bair Hugger medical device and respirators.

"We'll continue to focus on resolving litigation risk as appropriate, whether through defense of cases or opportunities for negotiations," Rhodes said. "The other big thing we're all focused on is the spinoff of our health care business, which involves a tremendous amount of legal work."

That spinoff should wrap up by the end of this year or early 2024.

3M stock jumped more than 5% Monday amid speculation an earplug settlement was near. The company's share price rose nearly 2% Tuesday afternoon to close at $105.57.

The company's stock is down 13% since the beginning of the year.

"By addressing these risks, we can focus on driving business performance," Rhodes said.