3M agrees to pay more than $5.5B over combat earplugs made in Indianapolis

3M has tentatively agreed to pay more than $5.5 billion to resolve over 300,000 lawsuits claiming it sold the U.S. military defective combat earplugs, people familiar with the deal said. The earplugs were made by Indianapolis-based Aearo Technologies LLC, which is owned by 3M.

The settlement would avert a potentially much larger liability that 3M sought to curb through a controversial bankruptcy case that ultimately collapsed. The sum is about half the roughly $10 billion some financial analysts predicted 3M could end up paying over allegations that the earplugs didn’t adequately protect the hearing of service members.

“Sounds like 3M negotiated a pretty good deal for itself, given this litigation has been weighing on them for the better part of a decade,” said Carl Tobias, a University of Richmond law professor who teaches about product liability cases.

A 3M representative said the company doesn’t comment on rumor or speculation.

Analysts at Barclays had estimated that the company’s potential liability was about $8 billion. Bloomberg Intelligence calculated it could be as much as $9.5 billion. While the settlement was at the low end of BI’s estimates, “it may accelerate negative rating activity as S&P and Moody’s have not fully accounted for the legal overhangs,” BI analysts Joel Levington and Michael Doto wrote. They added that 3M’s pro-forma net leverage “could land between 3.3-4.2x – higher than raters’ targets.”

The accord would end a torrent of litigation facing the St. Paul, Minnesota, company even as it faces thousands of other lawsuits over PFAS “forever chemicals” likely to cost several times more than the earplug deal to resolve. 3M has lost 10 of 16 early trials over the earplugs so far, with over $250 million awarded to more than a dozen service members.

In the most recent trial, a Florida jury ordered the manufacturer in 2022 to pay U.S. Army veteran James Beal $77.5 million in damages over his hearing loss from the earplugs. Beal, who tested weapons over a four-year period starting in 2005, said he developed hearing loss and tinnitus, a buzzing or hissing sensation in the ears.

The hundreds of thousands of lawsuits have been consolidated in a multi-district litigation before a federal judge in Florida for pretrial information exchanges and test trials, according to federal court records. In the suits, current and former service members allege 3M knew its earplugs were too short to work effectively and that it failed to warn the U.S. government or users, or to take steps to fix the product.

Under the terms of the settlement, the maker of popular consumer products such as Scotch tape and Post-it notes would pay out the money over five years, said the people, who requested anonymity because they weren’t authorized to speak publicly about the accord. They said 3M’s board still must sign off on the deal.

3M had sought to limit its liability by having its Aearo Technologies unit seek Chapter 11 protection from creditors in 2021 to corral the cases. Critics including law professors and consumer advocates attacked the maneuver as an example of profitable companies using the process as a shield without filing for bankruptcy themselves.

In June a bankruptcy judge threw out Aearo’s case, finding that 3M wasn’t in the kind of financial trouble that warranted using the bankruptcy system to manage litigation. Aearo has appealed the ruling. A similar move by Johnson & Johnson to resolve cancer cases filed over its baby powder through bankruptcy was rejected this year.

As 3M’s bankruptcy strategy languished, lawyers for the company and the service members pursued a settlement in mediation required by the judge overseeing the earplug litigation, U.S. District Judge Casey Rodgers. Rodgers, who served in the Army from 1985 through 1987, ordered 3M Chief Executive Officer Mike Roman in May to travel to Florida for negotiations.

According to the lawsuits, the earplugs were defective over a 12-year period starting in 2003. In 2012, there were 971,990 tinnitus claims lodged with the U.S. Veterans Administration, government records show. Experts estimate such claims are rising 15% annually.

The earplug accord isn’t 3M’s first. In 2018, after a whistleblower lawsuit, the company agreed to pay $9.1 million to settle civil allegations by the U.S. Justice Department that it failed to disclose defects it knew about to the military.

As for the forever-chemicals litigation, 3M has agreed to pay as much as $12.5 billion to clean up drinking water supplies across the U.S. that are tainted with the substances.