3M denied new trial after jury awarded ex-Green Beret $50m damages in MMM faulty earplug injury lawsuit verdict

Oct 31, 2022

3M (MMM) has been making headlines this year and for all the wrong reasons. The healthcare and consumer goods group, famous for its face masks, can no longer hide its troubled legal woes and it has now been denied a new trial, after a jury awarded a veteran Green Beret $50m (£43bn) in his lawsuit against 3M.

On 25 October, a Florida federal judge Roy B. Dalton Jr. rejected 3M’s motion for a new trial, alongside its alternative request for a remittitur, Judge Dalton disagreed with 3M’s argument that veteran Luke Vilsmeyer’s injuries are mild and treatable.

Judge Dalton stated that Vilsmeyer’s testimony was “extremely effective and compelling” and demonstrated the emotional impact that his tinnitus and hearing loss has had on his life.

The ruling, however, failed to move 3M’s stock price on Tuesday – the day of the verdict. In fact, over the last week 3M shares rose by 8%.

3M can’t mask its problems any longer

Meanwhile, the group’s third-quarter earnings were published on the day as the verdict. Indeed, the stronger-than-expected quarterly results saved the day for the 3M share price.

Its profit more than doubled to $3.86bn, from $1.43bn for the same period last year. However, 3M adjusted its 2022 earnings target to between $10.10 to $10.35 per share, from its previous target of $10.30 to $10.80.

But despite 3M’s stock price surviving the latest ruling and its mixed earnings result, it is still not out of the woods.

There are more than 230,000 lawsuits from veterans who complained about MMM Combat Arms Earplugs Version 2, which left many service members with tinnitus and hearing loss.

Starting in 2018, the litigation came about after a whistle-blower filed a lawsuit against 3M revealing allegations that the company and its subsidiary Aearo Technologies had knowingly sold defective dual-ended Combat Arms earplugs to the US Military. This case resulted in a $9.1m (£8m) settlement with the Department of Justice.

On 20 May 2022, a jury in Pensacola, Florida ordered MMM to pay $77.5m to a US Army veteran named James Beal, who claimed he had suffered hearing damage due to the earplugs.

3M then looked to put Aearo Technologies, the company that made the earplugs, into voluntary chapter 11 bankruptcy. This would allow Aearo a chance to settle the claims, while shielding 3M from a long and costly legal battle.

Aearo Technologies announced on 26 July that it will be filing for bankruptcy protection, as it seeks to settle the lawsuits.

But those plans were scuppered in August, when Judge Jeffrey Graham of the US Bankruptcy Court in Indianapolis ruled that the company would not get any protection against the lawsuits from the Aearo bankruptcy.

“We are disappointed in the court’s ruling today and will be filing an appeal. Further litigation in the multi-district litigation court benefits no one,” 3M said in a statement.

3M (MMM) still has a high dividend yield

On Thursday 13 October it was announced that 3M had been given another chance to protect itself against the lawsuits. The federal appeals court in the US has agreed to hear 3M’s appeal following the legal defeat in August.

Now the federal appeals court has granted 3M’s request to review the bankruptcy judge’s refusal to stop the mass lawsuits from proceeding, following the chapter 11 filing of its earplug manufacturing unit.

Some experts believe that bankruptcy is coming next for 3M, however. Testifying before the court in August, corporate solvency expert J.B. Heaton said he believes the lawsuits could eventually force 3M into bankruptcy.

“It is more and more likely within the next several years we’ll see a 3M bankruptcy,” Heaton said before the court, according to reporting from Bloomberg.

Analysts believe that 3M’s only hope is to settle these cases.

“3M (MMM) has every incentive to seek a settlement in that scenario. Litigating these cases is not a realistic scenario,” Nigel Coe, an analyst at Wolfe Research said.

So, just when 3M may be thinking it is finally in the clear, another curve ball is thrown. Alongside its veteran lawsuits, 3M announced in September that the group, alongside Wolverine World Wide (WWW), will pay $54m (£49m) to Michigan property owners after a class action case was filed, claiming the companies were responsible for the release of PFAS chemicals into the environment in Kent County, Michigan.

With that said, for investors there is still some good news, the company has a 4.71% annual dividend yield, which may lead many investors to stay put, see how the legal challenges go before running for the hills due to its growing lawsuits.

 Read the full article at Capital