Is the bankruptcy of 3M earbuds the beginning of the end of MDL’s massive tort?

(Reuters) – The largest multi-county lawsuit in US history has been “damaged beyond repair” – crammed with hundreds of thousands of unverified and potentially unwarranted claims, unreasonably distorted by ads from plaintiffs’ attorneys and tainted by erroneous evidence held by court rulings pronounced a useless indicator of the actual exposure of suspects.

At least, that’s how Aearo Technologies LLC — a subsidiary of 3M Co that produced the military-issued earplugs that allegedly damaged the hearing of thousands of U.S. veterans — portrayed the MDL lawsuit Tuesday in a brief description of why Aearo Chapter 11- seeking protection in federal bankruptcy court in Indianapolis.

Aearo’s attorneys at Kirkland & Ellis have filed a petition in bankruptcy court to suspend MDL’s claims against both the subsidiary and 3M, arguing that the MDL lawsuit failed and that only bankruptcy proceedings can provide a fair outcome to the defendants and plaintiffs with legitimate receivables.

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3M shareholders applauded Aearo’s bankruptcy filing. As my Reuters colleagues reported Tuesday, 3M’s stock price was up nearly 6%, though the company said it would invest $1 billion, and possibly more, in an unlimited trust fund for earplug claimants.

Aearo’s bankruptcy filing, of course, is reminiscent of a similar maneuver last fall by Johnson & Johnson, which sent tens of thousands of claims that its talc products cause cancer to a new subsidiary, then sought bankruptcy protection for the subsidiary. (J&J claims its talc products are safe.)

What struck me when I read Aearo’s briefing was how closely the complaints about the MDL process follow the complaints we routinely hear from MDL critics in the organized defense bar. As you probably recall, MDL opponents have been lobbying for changes to federal rules for years to ensure an early and thorough vetting of plaintiffs’ claims and to allow defendants to request mid-term review of critical pre-trial rulings. to ask.

Aearo’s bankruptcy statement listed both alleged shortcomings as fatal flaws in the earbud MDL. It argued that of the 280,000 claimants who registered claims on an administrative deed, only about 1,500 are required to substantiate their case with medical and military records to prove that they actually used the allegedly defective earplugs and suffered hearing loss. When that vetting happens, Aearo said, the cases suddenly evaporate.

But in the meantime, the company argued, MDL judge Casey Rodgers of Pensacola, Florida, has pushed through more than a dozen whistleblower lawsuits — without waiting for the 11th U.S. Circuit Court of Appeals to decide whether to put 3M and Aearo on trial. has ruled out. of shifting the blame for the supposedly faulty earbuds to the US military.

“Basically, the tort system is no longer a viable forum to resolve this lawsuit, which is instead a cautionary tale of an MDL that is beyond repair,” Aearo said in the briefing. MDL critics, it said, have long questioned whether these sprawling consolidated cases are the best means of resolving mass wrongdoing. The earplug lawsuit, it said, proves the flaws in the MDL system.

If the MDL lawsuit is as broken as Aearo and 3M claim, and if bankruptcy courts allow otherwise thriving companies like 3M and J&J to take on massive tort liability, I wouldn’t be surprised if more MDL defendants follow the same playbook .

But there’s a gigantic question in that assumption: Did the MDL lawsuit really fail in the earplug lawsuit?

Not according to the plaintiffs’ steering committee leaders, Bryan Aylstock of Aylstock, Witkin, Kreis & Overholtz and Christopher Seeger of Seeger Weiss. In an email statement to me on Wednesday, Aylstock and Seeger pointed out that 3M and its subsidiary defendants agreed to and adhered to all administrative procedures they now renounce. The defendants only began to complain, Aylstock and Seeger said, when the juries sided with the plaintiffs. (Plaintiffs prevailed to reach a jury in 10 of the 16 Bellwether lawsuits, winning total damages of $265 million. 3M won six defense sentences and eight other Bellwether cases were dropped before trial.)

Aylstock and Seeger blamed 3M for failing to reach a global settlement of earplug claims, even after multiple rounds of mediation, on the MDL process. “3M is a hugely profitable $100 billion company that believes that U.S. military personnel should receive less than $5,000 each,” the plaintiffs’ lawyers said. “Instead of negotiating in good faith, as ordered by the court, 3M decided to move its relentless attack on US soldiers from the civilian courts to the bankruptcy system. We will be challenging this bankruptcy filing and are confident that 3M will fail in the courts.”

The MDL judge, Rodgers, also disputed Aearo’s portrayal of the consolidated lawsuit during a hearing Wednesday morning. Rodgers noted that in the past six months, as cases have shifted from the administrative role to the active role of the MDL, 60,000 lawsuits have been dismissed. That’s on top of nearly 20,000 previously dismissed cases, the judge said, for a total of 80,000 dismissed cases — a sure sign, she suggested, that the vetting process is working.

“I don’t think most defendants would characterize that as dysfunctional,” Rodgers said during Wednesday’s hearing. (The judge wrote a law review article last summer explaining her rationale for the minimal screening of initial claims and previously criticized 3M for criticizing the process after originally agreeing to it.)

The judge bluntly said at the hearing that the sheer size of the MDL is not an excuse “for a bankruptcy court to provide safe haven or bankruptcy protection to a perfectly solvent defendant, depriving more than 200,000 plaintiffs of their right to have their cases brought.” resolved by a U.S. district court.” She also said she plans to convene a hearing to determine whether 3M acted in bad faith in a just-concluded mediation with plaintiffs’ attorneys, as the bankruptcy case was filed immediately after. (A spokesperson for 3M said via email that the company believes the bankruptcy will provide “an efficient and equitable resolution”, adding: “We are willing to move forward and believe the applicable law supports our position. “)

The MDL process, and in particular the discretion of judges to manage their MDL files, will be the main issue in Aearo’s bankruptcy. It’s no understatement to say that this case will help decide whether mass wrongful MDLs remain viable, or whether defendants like Aearo will routinely use bankruptcy to avoid them.

Read more:

3M makes healthcare company independent, earplugs department files for bankruptcy

3M Banked For Trying To Tell MDL Judge How To Run Her File

J&J puts talc debts in bankruptcy

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Alison Frankel

Thomson Reuters

As a columnist for Reuters, Alison Frankel has covered high-stakes commercial disputes since 2011. A graduate of Dartmouth University, she spent more than three decades working as a journalist in New York for the legal industry and the law. Before joining Reuters, she was a writer and editor at The American Lawyer. Frankel is the author of Double Eagle: The Epic Story of the World’s Most Valuable Coin.

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