(Bloomberg) -- 3M Co., facing more than 200,000 lawsuits accusing it of harming soldiers with defective combat earplugs, opens a new round of mediation Thursday overseen by the same federal judge the industrial conglomerate has been feuding with since July.
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The company blames US District Court Judge M. Casey Rodgers for letting a multibillion-dollar legal problem become so intractable that one of 3M’s units filed bankruptcy in a failed effort to get the suits away from her. Rodgers accuses 3M of trying to undermine the biggest multi-district litigation (MDL) in US history and pledged to investigate the company’s motives.
The unusual legal feud will hang over two days of negotiations led by a mediator in Florida who was appointed by Rodgers just seven weeks after she questioned whether 3M made a good faith effort in a previous round of failed mediation. Refusing to negotiate in good faith during a court proceeding can lead to sanctions.
Rodgers, based in Pensacola, Florida, and 3M both declined to comment on the conflict. The company reiterated its view that the lawsuits should be resolved by a different federal judge in Indianapolis, where a key 3M unit is based.
“We continue to believe that the Chapter 11 process is the most efficient, expeditious, and equitable way forward, and we remain confident in our legal strategy,” a representative for 3M, based in St. Paul, Minnesota, said in statement. “As always, we will productively engage in mediation discussions.”
Rodgers is preparing hundreds of thousands of suits for trials across the US in which 3M would face claims it sold faulty earplugs to soldiers, causing hearing damage. Losses in 10 test trials already have resulted in $300 million in jury awards and tens of millions more in legal fees.
Rodgers served in the US Army from 1985 through 1987 and was appointed to the federal bench in 2003 by President George W. Bush. After graduating from law school in 1992, she worked in private practice before becoming chief counsel for West Florida Medical Center in Pensacola for two years.
She served as chief federal judge in Pensacola from 2011 through 2018.
3M said in court papers Rodgers’ rulings over the last three years made it impossible to settle the suits or defend itself. Rodgers blocked one of 3M’s potential defenses that is sometimes used by milita ry contractors and then refused to allow the company to immediately appeal that decision, according to court records.
In July -- one day after the last round of settlement talks failed --3M launched a new legal strategy that would have taken the cases away from Rodgers and shifted them to US Bankruptcy Judge Jeffrey Graham, who is overseeing the Chapter 11 case of 3M’s earplugs unit, Aearo Technologies.
The dispute reflects an increasingly popular strategy in which profitable companies use insolvency proceedings to force settlement talks with victims of allegedly harmful products. Johnson & Johnson and lumber giant Georgia-Pacific have also put units into bankruptcy with the same goal of ending their mass-tort litigation woes in one place instead of fighting thousands of trials around the country.
On Aearo’s first day in bankruptcy court, company lawyer David Bernick accused Rodgers of overseeing an “out-of-control docket that cannot be managed.”
“I don’t think that there’s a single MDL in history that is as broken as this one is,” Bernick told Graham in an attempt to persuade the Indianapolis-based judge to halt all action in the earplug suits. “I am blaming the district judge in the sense that there was a departure from the case management standards that are used in other cases.”
That same day, in a hearing in Florida, Rodgers accused 3M of employing legal tactics to “unilaterally to take over” the suits. Rodgers vowed to hold a hearing on whether 3M had previously negotiated in good faith since it appeared to be plotting a strategy to use bankruptcy to move the suits out of the MDL. Under that system, cases are consolidated for pre-trial information exchanges and test trials.
Ahead of the current round of mediation, 3M and soldiers advocates jockeyed for advantage in competing filings in the bankruptcy court in Indianapolis.
“3M hates Judge Rodgers because she designed her trial schedule to actually have juries hear cases against the company,” said Mikal Watts, a Puerto Rico-based lawyer representing ex-soldiers. “That’s a problem for the company, because the executives know that any jury reviewing their conduct will punish 3M.”
3M counters its bankruptcy strategy is the best way to quickly get money into the hands of soldiers through a negotiated settlement. The company has proposed setting up a $1 billion trust fund in bankruptcy to resolve the earplugs suits. Critics say that figure is woefully low.
The company faces a fresh challenge before Rodgers next month, when veteran litigator Mark Lanier represents the plaintiff in the next earplug trial. The Texas-based attorney has racked up a string of multi-billion-dollar verdicts over the last 20 years. Plaintiff David George served in the US Army Reserves over a six-year-period starting in 2008, according to court filings. He was left with hearing damage after using the 3M unit’s faulty ear plugs during his military service, the filings show.
Lanier is best known for his $4.7 billion verdict against Johnson & Johnson in 2018 on behalf of nearly two dozen women who blamed the companies’ talc-based baby powder for causing ovarian cancer. A judge cut the verdict to $2.1 billion in 2020 and a year later, the US Supreme Court refused to hear J&J’s appeal. The world’s largest maker of health-care products ultimately paid $2.5 billion with interest.
Lawyers for a J&J unit cited that mammoth verdict to justify seeking Chapter 11 protection to deal with the growing number of talc-cancer suits. A federal appeals court will hear arguments Sept. 19 on whether the LTL unit’s bankruptcy case should be thrown out as a bad-faith filing.
The decision to let the ear-plug litigation proceed puts “3M between the rock and the hard place,” said Andy Taylor, managing director of Carronade Capital Management, a $900 million multi-strategy credit hedge fund that is up approximately 9% through end of August.
He’s expecting a wave of new ear-plug cases to come rolling in at a time when 3M’s settlement leverage has been weakened by the bankruptcy judge’s ruling and losses in test cases. “They are really in a bad spot,” according to Taylor, who said he’s been taking a short position in 3M’s shares for years.
The 3M bankruptcy case is Aearo Technologies LLC, 22-02890, United States Bankruptcy Court for the Southern District of Indiana (Indianapolis).
(Updates with fund manager’s quotes starting in 21st paragraph)
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