Dueling courts weigh controversial 3M-driven bankruptcy over military earplug litigation

A federal judge in Florida slammed 3M, but agreed — at least for now — to defer the fate of 230,000 lawsuits over the company's Aearo military earplugs to an Indiana bankruptcy court.

The ruling came over the weekend, and on Monday, a U.S. bankruptcy judge in Indianapolis began sorting out whether the avalanche of lawsuits against 3M will effectively be adjudicated in his court instead of federal district court juries.

Maplewood-based 3M put its subsidiary Aearo Technologies into Chapter 11 bankruptcy protection last month, a controversial move aimed at stanching mounting legal liabilities from the earplug litigation — one of the largest U.S. mass torts ever.

The earplugs in question were standard issue to the U.S. military for much of the 2000s and early 2010s. Veterans who say the earplugs damaged their hearing have scored several victories against 3M in U.S. District Court in northern Florida.

Aearo, which had developed the earplugs before it was purchased by 3M in 2008, also is a defendant in those lawsuits. With the bankruptcy, all suits against Aearo are automatically stayed.

But 3M is asking U.S. Bankruptcy Court Judge Jeffrey Graham to extend that litigation freeze to 3M itself. If granted, the bankruptcy court would then hold sway over the earplug cases, potentially limiting 3M's liabilities.

The claims against 3M and Aearo are "inextricably linked," Chad Husnick, a lawyer for Aearo, told the bankruptcy court.

And while Aearo is solvent, "a lot of times bankruptcy is necessary to solve a quagmire of issues facing a debtor. That is what we have here — a quagmire of litigation."

Attorneys for military veterans argue that the litigation freeze granted to Aearo in bankruptcy court should not be extended to 3M.

3M wants the benefits of bankruptcy without shouldering the burdens, Melanie Cyganowski, a lawyer for plaintiffs and their attorneys, told the bankruptcy court. "We believe this bankruptcy is a sham."

3M, she added, "engineered this bankruptcy to prevent plaintiffs from getting their day in court before a jury."

The 230,000 military earplug claims against 3M were roped into a "multidistrict litigation" — or MDL — presided over by U.S. District Court Judge Casey Rodgers in Pensacola, Fla.

MDLs are used in the federal court system for complex product liability matters with many separate claims. They commonly feature bellwether trials that are supposed to set a tone for settling all claims.

Plaintiffs won 10 of 16 bellwether cases against 3M; juries awarded them nearly $300 million.

On Sunday, Rodgers denied a plaintiff's request for an order preventing 3M and Aearo from using bankruptcy court as a shield.

While 3M has asserted Aearo's liability in bankruptcy court, it defended the MDL lawsuits as the full corporation, not its Aearo subsidiary, Rodgers wrote. Therefore, 3M — in her court — was not inconsistent with its previous legal position as plaintiffs had argued.

However, Rodgers let loose on 3M for carving out earplug liabilities specifically for Aearo in the bankruptcy proceedings.

"3M Company's statements and course of conduct since the start of the MDL are premised on two truths — that 3M Company is directly and independently responsible for the [earplug] liability in this litigation and that its subsidiaries are parties in name only," she wrote.

So 3M, displeased with the Florida court's rulings and the bellwether jury verdicts, attempted to "evade the 3M primacy narrative but only — and admittedly — because it no longer fits the companies' strategic objectives," Rodgers wrote in Sunday's order.

She noted a "naked duplicity in this newly concocted narrative" by 3M.

During opening arguments in Monday's bankruptcy court hearing, attorneys for earplug plaintiffs repeatedly cited Rodgers' order during opening arguments.

Meanwhile, Aearo's attorney complained about the plaintiffs' recent actions in Rodgers' court, saying they interfered with Aaero's bankruptcy reorganization.

Graham on Monday downplayed actions in the Florida court.

"Much has been made about what is going on in the Florida MDL. ... I don't think any of that is relevant to what we are doing here today."