3M’s legal battle over combat-grade earplugs

Former active duty US Army infantry officer Nathan Frei says that from 2011 to 2015 he went through some of the most intense training the US military had to offer. With it, came the loud noises – everything from weapons to helicopters to explosions.

To protect his hearing, Frey wore standard-issue earplugs. 3m,

Today, he is one of more than 200,000 military service members and veterans suing the group. 3M stock, which hit a 52-week low on Wednesday, is one of the worst-performing industrial stocks this year, down more than 16% in 2023, versus XLI Industrials ETFWhich is 1.5% less till date.

The plaintiffs claim that the 3M earplugs were “defective” and failed to protect against hearing loss and tinnitus.

“we used [the earplugs] “Every time we were around loud noises,” Frei, who lives in Seattle, told CNBC. And I used to rely on hearing protection at the time.

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

Each earplug had two ends: The green end was designed to block out all sound. The yellow end indicates “whisper mode,” purported to block out loud sounds—but allow the user to hear quieter noises like a conversation.

“We were told that by wearing ‘whisper mode’ we could still protect our hearing,” said Frey, who claims she first noticed issues with her hearing in 2013.

“I was hearing ringing,” Frei recalled. “At first, I thought it was a TV that was on. And so I searched and scoured the house, seeing where the noise was coming from, before realizing it was all in my head.”

As the years passed, the 35-year-old said, his hearing problems got worse. Records from the Department of Veterans Affairs shared by Frei with CNBC show that he was later diagnosed with tinnitus.

“It’s stable,” he said. “It’s a loud ringing in my ears—very similar to a buzzing sound.”

He said the ringing is so disruptive that it sometimes keeps him awake.

He said, “I don’t look like someone who might be hearing impaired at my age.”

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

“the purpose of making [the Combat Arms earplugs] Collaborating with the military, Rucker said, was to solve one of the most long-standing problems they had, that soldiers would not wear their hearing protection to loud noises and in combat.

Rucker said the plugs were designed in collaboration with the US military and tested by the Air Force, the Army, the Occupational Safety and Health Institute and others.

“All of that testing shows that Combat Arms earplugs, when properly fitted and when used according to its directions, work to protect people’s hearing,” he said.

Rucker acknowledged that military audiologists were “well trained in how to train and fit people for earplug use,” but maintained, “It should work in those environments and protect their hearing.” Where it was appropriate to use these earplugs.”

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

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

Today, the lawsuits are consolidated in Florida federal court in what some are calling the largest mass tort in US history, even involving multi-district litigation. Johnson & Johnson talc products.

3M has lost 10 of the 16 cases that have gone to trial so far, with a total of $265 million awarded to 13 plaintiffs so far.

“There have been many bellwether trials. And unfortunately, Arrow and 3M have not been able to present all of the evidence related to the original design of the product, the military’s involvement in the design of the product, all of the issues related to the instructions, and how to use the product.” , and how well the product performed, including some test information that has been excluded from some tests,” Rucker said.

“That’s all on appeal. And we’re hoping that more information will come out from the decision on the appeal,” he said.

3M recently unveiled new data that shows 90% of a group of 175,000 plaintiffs have no hearing loss under medically accepted standards, according to US Department of Defense records. The lead attorney for the plaintiffs calls the data a “misrepresentation”.

“3M purposefully skews this data by relying on hearing standards that do not measure the frequencies most affected by noise,” said Brian Aylstock and Chris Seager, co-lead counsel for service members and veterans. a joint statement.

3M disagreed with those claims, telling CNBC: “The data supports what 3M has asserted during this litigation: Combat Arms earplug versions two were safe and effective to use. This was confirmed by each independent, third by the third-party organization that has tested the product, including the Army Research Laboratory, the Air Force Research Laboratory, NIOSH and others.”

Mizuho executive director Brett Linzey wrote in a note to customers that “even the low end of the previously settled Combat Arms lawsuits (or even half the amount) would result in some very healthy liabilities.” is equivalent to one that 3M may need to address.”

According to one Wall Street analyst, 3M’s exposure to liability could potentially be in the billions.

“Do the math on the number of plaintiffs, which is north of 200,000 and you take the average settlement price — simple math on that gets you well north of $10 billion to $20 billion,” JPMorgan analyst Stephen Tusa told CNBC. get from.” 3M told CNBC that the estimate was “purely speculative”.

Rucker said, “We will continue to defend the cases. But most of these claims don’t have the full details.”

In a legal maneuver that would indemnify 3M, the company’s lawyers attempted to put its subsidiary Aairo Technologies into bankruptcy protection, and set aside a $1 billion trust to settle the suit. The service members suing 3M are accusing the company of using bankruptcy to protect itself and have asked a judge to dismiss it.

A decision on that possible dismissal is set for April. Oral arguments for the appeal of the preliminary Bellwester trials are scheduled for May 1.

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

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