Lawyers representing present and former U.S. military members want a U.S. bankruptcy judge to dismiss 3M subsidiary Aearo Technologies’ Chapter 11 filing.
The tort claimants committee filed a motion to dismiss in U.S. Bankruptcy Court in Southern Indiana on Feb. 3. They’ve long claimed that having Aearo file for bankruptcy was a strategy to deny the present and former servicemembers the relief they seek from hearing loss caused by allegedly defective earplugs. 3M potentially faces billions of dollars in losses from the more than 230,000 lawsuits.
Now the lawyers filing the lawsuits want Aearo’s bankruptcy case dismissed.
A ‘Texas two-step’ like J&J’s case?
Their dismissal motion came just days after Johnson & Johnson lost an appeal over an arguably similar “Texas two-step” type of strategy in which a spun-out LLC called LTL Management had filed for Chapter 11. In J&J’s case, the company faced criticism that it sought to shield itself from huge lawsuit payouts involving people who claim J&J’s talc-based baby powder caused them to develop cancer.
Thomas Ambro, the Third Circuit judge, wrote in his LTL/J&J case ruling that “only those facing financial distress can call on bankruptcy’s tools to do so.” Ambro noted the “apparent irony” that J&J providing funding to LTL weakened its bankruptcy case. (J&J plans to appeal.)
With 3M providing a funding agreement to Aearo, the lawyers filing the lawsuits in the combats earplugs cases say Ambro’s ruling makes the case for dismissal. Their motion to dismiss said: “The decision in LTL – reversing the lower court rulings on which the debtors so heavily rely and remanding with instructions to dismiss LTL’s bankruptcy – knocks the props out from under these cases and requires their dismissal.”
According to a Reuters column, the LTL ruling has also made it into last-minute filings before the Seventh Circuit, where 3M is appealing the bankruptcy court’s decision to allow lawsuits to proceed amid the Chapter 11 case.
3M says it wants to find a way forward
In a statement released on Feb. 3, 3M said it remains focused on finding a way forward in mediation discussions to resolve the combat earplugs lawsuits. Additionally, 3M said the Aearo bankruptcy was different from the J&J/LTL case or a “Texas two-step” in important ways. For example, 3M noted that Aearo — which it acquired in 2008 — has been its own valid, operating business for more than 40 years. Plus, the case is in the Seventh Circuit — not the Third Circuit — so the standard for dismissal is different.
In addition to the Aearo bankruptcy, 3M is in the process of spinning off its Health Care business. 3M management expects the spinoff to take place by the end of 2023 or in early 2024.