In a significant development, industrial giant 3M has announced a settlement in a long-standing case involving defective earplugs sold to the U.S. military. The company will pay a staggering $6.01 billion over the next six years, with $5.01 billion in cash and $1 billion in common stock. This resolution marks the end of a decade-long legal battle, during which 3M faced allegations of deliberately supplying faulty earplugs, resulting in thousands of reports of hearing loss among military personnel.
For the settlement to be executed, a minimum of 98% of individuals with active or potential litigation claims must enroll and release all claims against 3M. Failing to meet this threshold gives 3M the right to terminate the agreement.
The settlement will have a substantial impact on 3M's financials, with a $4.2 billion pre-tax charge expected in their third-quarter results. The company has already set aside $1.1 billion for this purpose. Furthermore, 3M and its subsidiary, Aearo Technologies, are actively seeking insurance recovery to offset some of the payments.
Previously, 3M sought to minimize its payout by having Aearo file for bankruptcy in Indiana. However, this attempt was dismissed in June as the court deemed 3M-backed Aearo financially unstable.
Although 3M has reached a settlement, it has not admitted liability. The company maintains that the earplugs in question are safe and effective when used correctly. It emphasizes its readiness to continue defending itself in the litigation should certain agreed-upon terms of the settlement not be fulfilled.
The case originated in 2016 when Moldex-Metric blew the whistle on 3M and Aearo, alleging that they provided the U.S. Department of Defense with dangerously defective Combat Arms earplugs. These dual-ended earplugs, used by thousands of soldiers between 2003 and 2015, were intended to safeguard against hearing loss and tinnitus. However, they were found to be prone to loosening, potentially leading to hearing impairments.
This settlement covers all military-grade earplug claims, including a Florida class-action complaint and a Minnesota state court lawsuit, as well as potential future claims.
Over a quarter of a million lawsuits were consolidated into a Florida multi-district litigation, making it the largest mass tort action in U.S. history. Reports indicate that 3M has lost 10 out of 16 lawsuits, amounting to $265 million in damages.
The U.S. Department of Veterans Affairs identifies hearing loss, particularly ear-ringing tinnitus, as the most prevalent service-related disability among veterans. 3M, however, disputes any responsibility for this increase, citing Department of Defense data indicating that a significant majority of claimants met established hearing requirements.
According to 3M, approximately 25% of claimants with medically proven hearing loss had pre-existing conditions or other unrelated factors that may have contributed to their condition.
While the company maintains its innocence, this resolution brings a decade-long dispute to a close, providing some closure for affected veterans.