Dec 20 – The U.S. Chamber of Commerce and the American Tort Reform Association told the 7th U.S. Circuit Court of Appeals on Monday that bankruptcy is often the only way for an otherwise healthy company to resolve “catastrophic” mass torts exposure because Chapter 11 promotes fast, fair and global claims resolution.
The pro-business groups urged the 7th U.S. Circuit Court of Appeals in an amicus brief to overturn a federal bankruptcy court ruling that allows tens of thousands of U.S. military veterans to continue litigating their hearing loss claims against 3M Co despite the Chapter 11 bankruptcy of the 3M subsidiary that manufactured allegedly defective earplugs. (Procedurally, the brief must still be accepted by the appeals court but was attached to a motion for leave to file.)
The consolidated multidistrict litigation against 3M, the Chamber argued, has succeeded only in attracting more than 200,000 lawsuits of dubious merit that will take untold years to wend their way through the federal court system. It’s vastly preferable, the brief insisted, to use the tools of bankruptcy — including a claims estimation process to determine who is eligible for a payout and a settlement trust to assure orderly payments — to resolve 3M’s liability. That way, the brief said, the company can continue to “contribute to society” by manufacturing its products, providing jobs and paying taxes.
This stance is hardly a surprise: The Chamber’s Institute for Legal Reform issued a report earlier this month extolling the virtues of bankruptcy as an alternative to class actions and MDLs to resolve mass torts claims. The amicus brief backing 3M even quotes, self-referentially, from the report by the Chamber’s affiliated group.
Moreover, as leaders of the plaintiffs’ steering committee in the gigantic earplug MDL pointed out in an email to me, a 3M executive, Eric Hammes, is on the U.S. Chamber’s board. (Hammes, a 3M executive vice president is also on the board of the National Association of Manufacturers, which also filed an amicus brief backing 3M. That brief was not immediately available on the public docket.)
In an email, MDL co-leaders Christopher Seeger of Seeger Weiss and Bryan Aylstock of Aylstock, Witkin, Kreis & Overholtz called 3M’s amici “America’s leading corporate front groups.”
The lead lawyer on the Chamber and ATRA brief, Ilana Eisenstein of DLA Piper, did not respond to my email query about the 3M executive on the Chamber’s board.
A 3M spokesperson sent an email statement in response to my query about Hammes’ board membership. “The Chamber of Commerce determined what content to include in the brief,” 3M said. The company said it “remains committed to efficiently, equitably, and expeditiously resolving” earplug claims through a global resolution.
Here’s what I still don’t get after reading the 3M amicus brief and the Institute for Legal Reform report: What’s the justification for companies’ insistence that bankruptcy is a more effective way than litigation to distinguish between legitimate and meritless cases?
Put aside the technicalities of the 3M appeal, which seeks to extend the automatic stay on litigation against the bankrupt 3M subsidiary Aearo Technologies LLC to halt MDL litigation against the parent company as well. I told you last week about 3M’s deep-in-the-weeds legal arguments for why U.S. Bankruptcy Judge Jeffrey Graham of Indianapolis erred in refusing to allow the parent company to use its subsidiary’s bankruptcy as an MDL escape hatch.
Let’s also concede the Chamber’s point that more than 100 companies — most, though not all of which were facing asbestos liability — have used bankruptcy to resolve mass tort liabilities by channeling present and future mass tort claims into a separate trust. The Chamber, I’ll note, has been complaining for years about abuses in the asbestos trust claim process, but its report argues that for all of its acknowledged flaws, claims trusts can still be the most efficient way for a viable company to disentangle themselves from mass tort liability.