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Thursday, November 21, 2024

Ear plug plaintiffs file to stop transfer of 3M's assets to bankrupt subsidiary

Lawsuits
Earplug

3M ear plugs

PENSACOLA, Fla. (Legal Newsline) - Plaintiffs in the massive 3M ear plug litigation are asking for a Florida federal judge for backup as they fight the company's plan to spin its liabilities onto a subsidiary.

Putting assets in Aearo will leave the company unable to pay to resolve the approximately 220,000 cases for an estimated $82 billion to $111 million, says a request for a permanent injunction filed in Pensacola, Fla., federal court by plaintiffs Richard Valle and Manuel Colon.

Days before the complaint, an Indiana federal judge rejected 3M's request to pin the ear plug liability on Aearo.

"Through this two-part scheme, 3M has demonstrated an 'intent to hinder, delay, or defraud' Plaintiffs by stopping the MDL and delaying any payments to Plaintiffs, and the Court should therefore enjoin the fraudulent transfer of 3M’s healthcare spin-off," the complaint says. 

"Second, 3M’s plans to spin-off its healthcare assets and give away billions of dollars to shareholders through stock repurchases and dividend payments are prohibited fraudulent transfers under (the Florida Uniform Fraudulent Transfer Act) because they will leave 3M insolvent if consummated and/or will leave 3M with unreasonably small assets in relation to 3M’s business...

"Injunctive relief is therefore necessary to stop 3M from gifting billions of dollars to its shareholders to the detriment of innocent tort victims, like Plaintiffs."

The bankruptcy strategy has been successful for other mass-tort defendants, including Johnson & Johnson, which put its talc business in Chapter 11 to resolve asbestos claims; and the Sackler family, which won a halt to opioid lawsuits against them personally in exchange for providing billions of dollars to fund the reorganization of Purdue Pharma. 

No such luck for 3M, however. Judge Jeffrey Graham took a close look at the funding agreement between the Minnesota company and its Aearo unit and decided 3M’s open-ended financial commitment to Aearo meant there was no reason to stay the earplug lawsuits in order to preserve Aearo’s assets.

The lawsuits allege defects in ear plugs for members of the military caused hearing loss. They are heard in a multidistrict litigation proceeding.

Plaintiffs are 13-6 in trials, and the average verdict is a $14 million loss for 3M.

Nineteen cases have gone to trial, with

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