3M’s legal battle over combat-grade earplugs

Former active duty U.S. Army infantry officer Nathan Frei says from 2011 to 2015, he underwent some of the most intense training the U.S. Army has to offer. With that, comes the loud noise – everything from weapons to helicopters to explosions.

To protect his hearing, Frei wears standard earmuffs made by 3M.

Now, he is one of more than 200,000 military members and veterans suing the conglomerate. Shares of 3M, which hit a 52-week low on Wednesday, have been among the industry’s best performers this year, down more than 16% in 2023, compared with 3M shares. XLI Industrials ETFwhich is down 1.5% year to date.

Plaintiffs claim 3M earplugs are “defective” and fail to protect against hearing loss and tinnitus.

“We used it [the earplugs] every time there’s a loud noise,” Frei, who lives in Seattle, told CNBC. “And I relied on hearing protection during that time.”

From 2003 to 2015, Aearo Technologies and its parent company, 3M, manufactured and supplied the US military with CAEv2 Combat Arms ear plugs. The plugs are standard issue for soldiers in Afghanistan and Iraq and are designed to protect service members’ hearing in military training and during combat.

Each ear plug has two ends: The green end is designed to block out all sounds. The yellow color, marking “whisper mode,” allegedly blocks out loud sounds — but allows users to hear quieter, conversation-like sounds.

“We were told that with ‘whisper mode’ we can still protect our hearing,” said Frei, who claimed he first noticed hearing problems in 2013.

“I heard a ring,” Frei recalled. “At first I thought the TV was on, so I searched and searched the house to find the source of the sound before I realized it was just in my head.”

As the years passed, the 35-year-old said, his hearing problems worsened. Department of Veterans Affairs records Frei shared with CNBC show he was later diagnosed with tinnitus.

“It’s constant,” he said. “It’s a loud ringing in the ears – almost like a buzzing sound.”

He said the ringing was so annoying that it sometimes woke him up.

“I’m not the kind of person who might have a hearing loss at my age,” he said.

Eric Rucker, a lawyer for 3M, told CNBC that the company has great respect for the men and women in the military and that safety is always a priority.

“The purpose of creation [the Combat Arms earplugs] “Collaborating with the military to solve one of our longest-standing problems, which is that soldiers won’t wear hearing protection in loud noises and in combat,” Rucker said.

Rucker said the plug was designed in collaboration with the US military and tested by the Air Force, Army, National Institute for Occupational Safety and Health, and others.

“All of these tests show Combat Arms earplugs, when fitted correctly and when used according to the instructions, can protect people’s hearing,” he said.

Rucker acknowledged that military audiologists “are well trained in how to train people and fit people to use earplugs,” but maintained, “they have to be able to use and protect their hearing in the appropriate environment to use these earplugs.”

After a whistleblower lawsuit was filed in 2016, accusing 3M of selling “dangerously defective” earplugs, the company agreed to pay $9.1 million to the Department of Justice to settle the allegations without admitting liability.

Soon, there was a flood of new coats from hundreds of thousands of other service members.

Today, the lawsuits have been consolidated in Florida federal court, creating what some say are the largest mass torts in U.S. history, beyond the multidistrict litigation involved. Johnson & Johnson’s talc products.

3M has lost 10 of the 16 cases it has tried so far, with a total of $265 million awarded to 13 plaintiffs so far.

“There are several bellwether trials. And unfortunately, Aearo and 3M have not been able to present all the evidence related to the original design of the product, the involvement of the military in the design of the product, all the problems regarding the instructions. , and how to use the product, and how the product performs, including some test information is excluded from certain trials,” Rucker said.

“Everything is on appeal. And we hope that the decision on the appeal will lead to more information coming forward,” he added.

3M recently released new data showing 90% of its group of 175,000 plaintiffs did not have hearing loss according to medically accepted standards, according to US Department of Defense records. The lead attorney for the plaintiffs called the data a “misrepresentation.”

“3M deliberately skewed this data by relying on hearing standards that did not measure the frequencies most affected by noise, hiding the hearing damage experienced by veterans,” said Bryan Aylstock and Chris Seeger, lead counsel for service members and veterans, in a joint statement.

3M disagrees with that claim, telling CNBC: “The data supports what 3M has argued during this litigation: Both versions of Combat Arms Earplugs are safe and effective to use. This has been confirmed by every independent third-party organization that has tested the product, including the Army Research Laboratory , Air Force Research laboratories, NIOSH, and others.

Mizuho executive director Brett Linzey wrote in a note to clients that “even if the Combat Arms lawsuit that was settled before (or even half that amount) equals some pretty healthy liabilities that 3M has to deal with.”

According to one Wall Street analyst, 3M’s liability risk could run into the billions.

“Do the math on the number of plaintiffs, which is north of 200,000 and you take the average settlement value — simple math puts you north of $10 billion to $20 billion,” JPMorgan analyst Stephen Tusa told CNBC. 3M told CNBC that the estimate is “completely speculative.”

“We will continue to defend the case. But the majority of these claims do not have complete information,” said Rucker.

In a legal maneuver that will indemnify 3M, the company’s lawyers are trying to put its subsidiary Aearo Technologies into bankruptcy protection, and set aside $1 billion in trust to settle the suit. Service members suing 3M accused the company of using bankruptcy to protect itself and asked the judge to dismiss it.

A ruling on the potential dismissal is scheduled for April. Oral arguments for the appeal from the initial bellwether trial are scheduled for May 1.

As for Frei, he expects the case to go to trial by the end of the year.

“It makes me angry,” Frei told CNBC, accusing 3M of “trying to plan through bankruptcy or through these arguments to try and avoid responsibility for what they’ve done.”