3M Awaits Bankruptcy Ruling That May Sink Litigation Tactic

(Bloomberg) — 3M Company’s effort to stall jury trials of more than 230,000 lawsuits alleging harm to US troops faced a significant test this week before a federal judge in Indianapolis.

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US Bankruptcy Judge Jeffrey J. Graham is set to consider temporarily halting the lawsuits so that 3M and its bankrupt subsidiary, Aero Technologies, can attempt to settle claims, most of which have been filed by veterans who say combat weapons earplugs survived. Are them with hearing damage.

Harvard Law School professor Jared Elias said in an interview that Graham’s decision would resonate in the offices of other firms facing a large number of product liability lawsuits.

“Even as 3M suffers a setback, it is likely to sound alarm bells in other corporate boardrooms of companies that want to take advantage of the bankruptcy system,” Elias said.

The Arrow case uses an increasingly popular tactic in which profitable companies use insolvency proceedings to force settlement negotiations with victims of allegedly harmful products. Johnson & Johnson and lumber giant Georgia-Pacific have also thrown units into bankruptcy with the same goal of ending the litigation woes in one location rather than fighting thousands of trials across the country.

Final court papers from the company and its critics were due on Monday evening. Parts of the trial, a temporary stay ordered by a federal judge in Florida, is set to end Wednesday.

It is impossible to fight each case in front of various jurors across the country, the insolvency units of J&J and 3M have argued in court. Critics of mass torture, or trial, systems agree.

“Mass torts are legal terrorism because even if there is no liability for 80% of the claims made against a company, the defense costs will kill it,” bankruptcy attorney Martin Bienstock said in an interview. Bienenstock is Head of Business Solutions Practice at the Proskauer Rose law firm.

On July 26, the company plunged Aero Technologies into bankruptcy in Indianapolis. Under Chapter 11 rules, Aearo is automatically entitled to freeze the lawsuits it faces, but because 3M itself hasn’t filed bankruptcy, a judge has to agree to grant the industrial conglomerate the same protections. needed.

“Bankruptcy can eliminate decades of litigation and its expense and make the company stronger,” Bienstock said. In bankruptcy, victims can still collect money from the company, but under different rules that make a massive, multi-million dollar judgment less likely.

taking responsibility

Soldiers’ advocates suing 3M argue that Chapter 11 bankruptcy rules were never designed for profitable corporations.

“The purpose of our bankruptcy process was never to allow our Fortune 500 companies to evade responsibility,” Melanie L. Cyganowski, a lawyer for some veterans, told Graham during an Aero Court hearing last week. Cyganowski is a former bankruptcy judge fighting the efforts of 3M and J&J to resolve their legal problems in bankruptcy.

Read more: Hearing-impaired veterans fumes on 3M’s strategy on earplug suits

3M defended its approach to the lawsuit, arguing that bankruptcy would be better for the claimants and the company.

Eric Rucker, 3M’s vice president and associate general counsel, said, “There’s going to be more certainty about who can qualify for a claim, how to value equally-located claimants, and we’ll be getting a resolution soon.” going to do it.” in an interview.

Litigation Outlook

Ilyas, who opposed J&J’s strategy, said that if 3M fails to move the lawsuit to bankruptcy court, the damage would make other companies hesitant to use the process.

“No CEO wants to file bankruptcy,” Elias said. “The only thing worse than filing for bankruptcy is filing for bankruptcy and being told you didn’t do it right.”

Until last month, 3M was fighting for claims in federal court in Pensacola, Florida, where a judge was overseeing the preliminary, procedural steps needed to prepare lawsuits for separate jury trials that will take place in other courts. . The judge overseeing that process, known as multi-district litigation, or MDL, has questioned 3M’s decision to use bankruptcy.

US District Court Judge M Casey Rodgers said in a recent court decision, “3M and Aearo have devised a plan to avoid MDL and this Court.” The company was “unhappy with the decisions of this court and the decision of the Belvedere jury,” she said.

Bankruptcy Aero Technologies LLC, 22-02890, is a United States Bankruptcy Court for the Southern District of Indiana (Indianapolis).

(Adds details on the litigation-related deadline in the sixth paragraph.)

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