Fairness of 3M Earplug Settlement Funding Including Common Stock Transfer To Be Evaluated By MDL, State Court Judges

3M has proposed using common stock to pay for $1 billion of its $6 billion earplug settlement agreement.

The U.S. District Judge presiding over all 3M earplug lawsuits has ordered a hearing for December, at which time the federal MDL judge and a Minnesota state court judge will evaluate the “fairness” of allowing the manufacturer to use common stock to partially pay for part of its $6 billion Combat Arms earplug settlement agreement.

The settlement seeks to resolve nearly 300,000 product liability lawsuits brought against 3M Company by U.S. military veterans, who say they suffered permanent hearing damage due to alleged design defects with the company’s Combat Arms earplugs, which were standard military issue for all service members between 2003 and 2015.

The veterans claim 3M Company, and it’s Aero Technologies subsidiary, knew the earplugs failed to properly seal the ear canal, yet continued to sell their product to the U.S. government, causing service members to be left without adequate ear protection during combat and training exercises.

Given common questions of fact and law raised in the litigation, all claims brought throughout the federal court system have been centralized for the past three and a half years before U.S. District Judge Casey Rodgers in the Northern District of Florida, as part of an MDL or multidistrict litigation. However, there are also a number of cases pending in state courts of Minnesota, where 3M’s headquarters are located.

Following a series of massive damage awards returned by juries in early cases that went to trial in the MDL, the manufacturer ultimately agreed to pay $6 billion to resolve the settlement, which will be funded over a five year period. However, the deal allows up to $1 billion of the 3M earplug settlement to be funded in the form of stock in the company, which has raised concerns among claimants.

3M Earplug Settlement Fairness Hearing Set for December 11, 2023

In an order (PDF) issued on October 18, Judge Rodgers announced the MDL will hold a joint fairness hearing with Judge Laurie Miller in the Fourth Judicial District Court of Minnesota on December 11, at which time the judges will consider whether 3M company can transfer common stock as a means to partially pay for the settlement agreement.

As part of the settlement, 3M will fund the deal between 2023 and 2029, with all consideration, including any 3M stock, deposited into a settlement fund before it is distributed to claimants under terms of the agreement.

“Eligible Claimants and/or their counsel may also ask to be heard regarding the proposed stock transfer at the Fairness Hearing by filing a Notice of Intent to Appear at Fairness Hearing Regarding Proposed Stock Issuances on the MDL docket, using the appropriate form provided in Exhibits B or C only, by December 3, 2023,” the order states. “Those who wish to be heard and who timely file the appropriate Notice of Intent must attend the fairness hearing in person in order to address the Court.”

While the parties move forward with the settlement claim process, there remain questions over whether enough veterans will approve of the deal to sign on. Plaintiffs were given six months from August 29 to accept or opt-out of the agreement, which is expected to pay an average of about $24,000 per plaintiff, which has been criticized by some as insufficient compensation for permanent hearing loss and tinnitus injuries. If less than 98% of plaintiffs agree to the settlement, the deal may fall apart.