3M to pay $6 billion in military earplugs case after hearing-loss complaints

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3M and attorneys representing plaintiffs agreed to a $6 billion settlement to resolve hundreds of thousands of complaints by military veterans that the company's earplugs did not protect them from hearing loss.

Under the deal, 3M will pay $5 billion in cash and another $1 billion in company stock, the industrial conglomerate disclosed on Tuesday. The company said that "the agreement is not an admission of liability. The products at issue in this litigation are safe and effective when used properly."

The earplug litigation represents the largest mass tort in U.S. history. There have been more than 300,000 claims in which veterans accuse 3M and Aearo Technologies, a company acquired by 3M in 2008, of producing faulty earplugs that failed to protect their hearing from noise damage when they received them from the U.S. military, according to reports. 

3M ORDERED TO PAY $50 MILLION TO ARMY VETERAN IN EARPLUGS LAWSUIT

3M and attorneys representing plaintiffs are nearing a settlement to resolve hundreds of thousands of complaints by military veterans that the company's earplugs did not protect them from hearing loss. (REUTERS/Nicholas Pfosi/File Photo / Reuters Photos)

The settlement amount is significantly less than the $10 billion to $15 billion that some analysts predicted the case would cost the company. Still, the settlement will impact financial results. 3M will record a $4.2 million pre-tax charge in the third quarter, which "represents the $5.3 billion pre-tax present value of contributions under the agreement net of 3M's existing accrual of approximately $1.1 billion related to this matter," the company detailed. 

The earplugs, developed by Aearo Technologies, were created to protect a person from hearing explosions and other loud noises while allowing them to hear voices or softer noises.

3M agreed to pay $9.1 million in 2018 to the U.S. government to resolve allegations that its earplugs were defective because they could imperceptibly become loose in a person's ear. The company argued that the earplugs were effective if worn correctly.

3M LOSES FIRST TRIAL OVER MILITARY EARPLUGS

The earplugs were created to protect a person from hearing explosions and other loud noises while allowing them to hear voices or softer noises. (3M)

Last summer, Aearo Technologies filed for bankruptcy as a separate company, accepting responsibility for all the liability claims. The move was intended to give Aearo leverage in bankruptcy court to reach a settlement with the plaintiffs. 3M said it would pay for any settlement Aearo reached.

U.S. Bankruptcy Court Judge Jeffrey Graham in Indianapolis dismissed Aearo’s bankruptcy filing in June. The judge said Aearo did not qualify for bankruptcy protections as a distressed company since it had 3M’s promise to pay for a settlement. Aearo plans to appeal the ruling, as reported in The Wall Street Journal.

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3M Chief Executive Mike Roman said during the second-quarter earnings call last month that the company was progressing on its legal issues. 

"The addressing litigation, our strategy there is independent of what the share price is doing. I mean, certainly, there's an overhang in the stock price and the uncertainty around that. And we are focused on doing what we can to address litigation, help address that uncertainty" said Roman. 

Shares of 3M have dropped over 11% compared to the S&P 500's 17% rise. 

This report which was originally published on 8/28/23 and updated on 8/30/23.