Veterans' Right to Trial By Jury at Risk - 3M Gaming the Bankruptcy System
Updated: Aug 2, 2022
In a move reminiscent of the Texas Two Step (see our blog post from June 2, 2022), 3M Company is now attempting to obtain immunity from trial by piggy backing on the bankruptcy filings of its codefendant.
3M and its subsidiary, Aearo Technologies LLC, were named in thousands of lawsuits for knowingly providing defective hearing protection to U.S. service members from 2003 to 2015. In 2016, a competitor filed a whistleblower, or "qui tam" lawsuit against 3M for selling the hearing protection to the U.S. government while knowing that the earplugs did not meet government standards. The qui tam suit resulted in a $9.1 million settlement with the U.S. government.
In the wake of qui tam settlement, which compensated the government for costs resulting from treating veterans' hearing loss, thousands of service members and veterans filed individual claims against 3M and Aearo for hearing loss and tinnitus resulting from the defective earplugs. Those claims were consolidated in a federal multi-district litigation (MDL) court in the Northern District of Florida, where they have been litigated for the past three and a half years. During this period, the parties have tried 16 bellweather trials, ten of which resulted in plaintiff victories and six in defense victories. After these trials, the Federal MDL judge ordered the parties to participate in good faith mediation to attempt to resolve the remaining cases. However, unbeknownst to the court or the plaintiffs, 3M and Aearo entered into a scheme in which they purported to participate in the mediation while surreptitiously preparing to file a bankruptcy petition for Aearo. In short, 3M and Aearo never intended to go through with a good faith mediation because they planned to circumvent the litigation altogether with a bankruptcy filing.
Significantly, 3M did not file for bankruptcy; only Aearo did. When a company files for bankruptcy, it generally is entitled to an automatic stay (or stop) to all pending litigation while the bankruptcy process takes place. If the bankruptcy is approved, then the stay becomes permanent, and all claims must be handled through the bankruptcy system; if the bankruptcy is disapproved, then the company is returned to the tort system to complete the litigation. Parties that do not file for bankruptcy are not entitled to a stay. But, although 3M did not file for bankruptcy, it now claims that it should be able to piggy back on Aearo's stay and get out of all litigation in the MDL. Not only did 3M claim it was entitled to the benefits of Aearo's stay; 3M unilaterally cancelled a number of depositions and acted as though a stay had already been approved on its behalf.
This is yet another attempt to undermine the 7th Amendment right to jury trial, and it sets up a very real conflict between an Article III Federal District Court and a bankruptcy court created under Article I of the U.S. Constitution. 3M is a massively profitable, $100 billion corporation--it is not "bankrupt" by any possible definition of the term. Allowing 3M to exit the jury trial system under a bankruptcy stay intended for an entirely different entity is nothing more than a scheme designed to fraudulently deprive nearly 240,000 plaintiffs of their right to pursue their lawfully filed claims and have their day in court.