3M has reached a settlement of $6bn with over 250,000 veterans who claim that the combat earplugs they supplied to US Army did not protect them against hearing loss.
The company announced on Tuesday it would provide $5bn cash and $1bn stock over a period of five years to settle one of the biggest mass torts in US History.
US conglomerate known for Scotch tape and Post-it Notes, had previously tried to settle personal injury claims through a complicated bankruptcy scheme that involved a subsidiary. In June, however, a US federal court rejected the bankruptcy. This prompted the company to look for an alternative strategy in order to deal with the litigation.
The combat earplugs that are at the heart of the lawsuit were manufactured by Aearo Technology, which 3M purchased in 2008 for $1.25bn. US military personnel used the earplugs for training and combat operations in Iraq, Afghanistan and other countries between 2003 and 2015
In a statement, 3M stated that the settlement did not constitute an admission of fault and that the earplugs are safe and effective if used correctly.
The judge who was overseeing the 3M litigation dismissed about 50,000 claims out of an estimated 300,000. He also organised 16 bellwether trial to establish the parameters for global settlements over a period of four years. The plaintiffs won 10 out of 16 bellwether trials, and juries awarded damages totaling almost $300m.
Carl Tobias is a law professor at the University of Richmond. He said that if the judge approves the settlement, it will apply to more than 250,000 claimants. It would not be binding on future plaintiffs who sue 3M, unlike an agreement reached under the auspices a US bankruptcy judge.
Financial analysts had predicted that a settlement would cost up to $10bn. The company announced that it would charge approximately $4.2bn pre-tax in the third quarter of this year to cover the cost.
3M isn’t only liable for earplugs. The company is facing thousands of lawsuits claiming that its products exposed consumers to perfluoroalkyl or polyfluoroalkyl chemicals (PFAS), which are also known as “forever chemical” and do not degrade in nature.
3M reached an more $10bn settlement in June with US cities and town in relation to their PFAS exposure. The court must approve the agreement. Barclays predicted that there could be another $16bn of PFAS liabilities relating lawsuits brought by attorneys general, the federal Environmental Protection Agency, and individuals.
3M has agreed to pay $6.5mn in fines to settle allegations by the Securities and Exchange Commission (SEC) that it had tried to conceal payments made to Chinese government officials to cover their overseas travel and tourism expenses to encourage them to purchase its products.