Recently, U.S. Bankruptcy Judge Jeffrey Graham ruled that the many thousands of military veterans who have sued 3M after suffering hearing loss in connection with its earplugs may proceed with litigating their claims notwithstanding the 3M subsidiaries’ declaration of bankruptcy. The ruling came as a surprise; it has broad implications for product liability lawsuits in which defendants hope to avoid liability in an MDL by strategically filing for bankruptcy and forcing a global settlement. Meanwhile, the company’s shares have been dropping. At Moll Law Group, our trustworthy Chicago-based product liability lawyers have been involved in numerous cases in which plaintiffs recovered billions in damages awards and judgments. It may be appropriate for our attorneys to pursue a product liability claim against 3M on your behalf if you believe that its defective earplugs are the reason for your hearing loss or other hearing difficulties. The earplugs may be defective in terms of their marketing, manufacturing, or design.
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3M’s Aearo subsidiaries had filed for bankruptcy to get out of the MDL process in connection with earplugs that plaintiffs believe are defective. The plaintiffs in these cases are largely veterans who have fought back against global settlements that may be too low by pointing to the defendants’ abuse of the bankruptcy process. The MDL judge left decisions about 3M’s bankruptcy in relation to the MDL to the bankruptcy court; he refused to rule on the merits of using bankruptcy court as an alternative to the MDL process.
The bankruptcy judge did conclude that the agreement left 3M responsible for Aearo’s earplug liability. Assuming the defendants’ appeal is not successful, the litigation against 3M won’t affect Aearo’s ability to reorganize and pay creditors for their claims.
Court watchers were surprised by the bankruptcy judge’s ruling. They believe that the bankruptcy judge’s ruling can be construed as a warning to companies that are attempting to evade liability by filing for bankruptcy. In the past, courts have agreed to extend litigation stays to the parents of subsidiaries in bankruptcy; one corporate maneuver, called the “Texas two-step,” occurs when a company that is solvent dumps liability onto a new subsidiary which then declares bankruptcy. By using the Texas two-step, corporations have been able to use the bankruptcy process to settle multidistrict litigation globally at lower amounts than they would need to pay if cases went to trial.
In the case of the 3M defendants, the ruling won’t stop them from seeking a global settlement through the bankruptcy process. The company lost 10 of 16 bellwether trials in the MDL related to their earplugs. 3M may continue to try to achieve a global settlement, but they have less leverage. They appealed the ruling; their subsidiary codefendants have also appealed.
The consequences of the ruling remain unclear. The 7th Circuit has a history of taking narrower approaches to the bankruptcy judge’s authority to enjoin related lawsuits.
Call Our Seasoned Defective Earplug Attorneys
The recent bankruptcy ruling spells good news for plaintiffs as it removes some of the leverage that 3M, the manufacturer of earplugs for many people in the military, was previously able to exercise. If you were harmed by defective 3M earplugs, call the trustworthy Chicago product liability lawyers of Moll Law Group about your potential claim. We represent claimants across the nation. Please complete our online form or call us at 312.462.1700.