Dow Jones Industrial giant 3M reached a tentative $5.5 billion settlement to resolve more than 300,000 lawsuits regarding defective military combat earplugs, Bloomberg first reported late Sunday. 3M stock rallied Monday.
The earplug lawsuit is reportedly the largest mass tort in U.S. history with more than 300,000 claims, according to the Wall Street Journal. Military veterans allege that faulty earplugs produced by 3M and subsidiary Aearo Technologies and issued by the U.S. military failed to protect them from hearing loss. 3M acquired Aearo in 2008 and is contesting the cases. The litigation-plagued company has alleged that the earplugs work correctly with proper training.
The reported agreement amount would be substantially less than the $10 billion to $15 billion some analysts expected. Negotiations are ongoing and a final payment amount hasn't been established. In addition, 3M's board has yet to vote on the proposed settlement.
In 2018, 3M agreed to pay $9.1 million to the U.S. government to resolve claims the earplugs were defective because they could imperceptibly loosen during use. Last summer, Aearo filed for bankruptcy as a separate company and accepted responsibility for all liability claims. The move was intended to give Aearo leverage in bankruptcy court to craft a settlement with the plaintiffs. 3M pledged to pay for the settlement that Aearo reached.
A U.S. Bankruptcy Court judge in Indianapolis dismissed the bankruptcy filing in June, claiming Aearo didn't qualify for bankruptcy protections as long as 3M pledged to pay for the settlement. Aearo plans to appeal that ruling, according to the WSJ.
3M reached a $10.3 billion settlement agreement in June for contaminating drinking waters in cities across the U.S. with "forever chemicals."
3M Stock
MMM shares rallied 5.3% to 104.14 on Monday. 3M stock carved 13% lower this year through Monday's close, despite a 22% rally in June and July.
Heading into the end of August, 3M is one of the worst performers on the Dow in 2023. Shares hit their year-low of 92.38 at the beginning of June, marking its lowest level since late 2012.
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