On July 26, 3M announced that its Aearo Technologies subsidiary, which actually manufactured the defective earplugs, has filed for bankruptcy. Aearo is a defendant in some of the lawsuits consolidated in the MDL. Aearo Technologies filed its bankruptcy petition in bankruptcy court in Indiana; it is a separate proceeding which is not coordinated in the MDL. Through this filing, 3M is seeking to end the MDL and instead seek to process all claims through a bankruptcy proceeding. Typically, when an entity like Aearo files bankruptcy, there will be a “stay” on the litigation as to that entity. You can think of a stay as hitting the pause button. The litigation essentially comes to a halt until a bankruptcy judge assesses the situation.
If this bankruptcy is permitted to proceed, it will significantly extend the length of this litigation. Moreover, it would provide pennies on the dollar for any veteran’s settlement. Rest assured — leadership is doing everything in its power not to let that happen.
3M Unilaterally Cancels All Scheduled Depositions
In a calculated decision, 3M tried to hit the pause button in those cases where Aearo Technologies was not named as a defendant, canceling multiple plaintiff and witness depositions that had been on calendar for more than a month, arguing that it should benefit from the “stay” as a result of Aearo’s bankruptcy filing.
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The following day, July 27, Judge Rodgers, the judge overseeing the multi-district litigation of more than 200,000 veterans’ claims against 3M, held a “show cause” hearing. At a “show cause” hearing, a party is directed to appear and explain itself for some action that it took in a litigation. Here, a very angry Judge Rodgers demanded an explanation from 3M as to what authority it had to unilaterally cancel depositions and interfere with the Court imposed discovery schedule.
During the 30-minute hearing, Judge Rodgers said flatly that 3M cannot attempt to seek a “safe haven” in bankruptcy court when 3M is a “perfectly solvent defendant.” In other words, 3M is not entitled to hit the pause button. Judge Rodgers further chastised 3M for canceling depositions at the last minute and trying to deprive plaintiffs of their right to have their cases resolved by a United States district court. Seeing through the ruse, she stated adamantly that another hearing will be held to determine if 3M has been acting in bad faith. Judge Rodgers then ordered 3M to pay plaintiffs’ attorney’s fees and expenses associated with its unilateral, eleventh-hour cancellation of the depositions that were set for this week.
The First Bankruptcy Hearing
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Following the hearing with Judge Rodgers, on the same day, at the bankruptcy hearing in Indiana district court, US Bankruptcy Judge Jeffrey J. Graham warned lawyers for 3M and Aearo that there was insufficient evidence to block litigation against 3M, with the judge pointing out that 3M did not file for bankruptcy and is not bankrupt. A second hearing is set for August 15.
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So, what are the takeaways here? Well, first, 3M is not entitled to a pause; the litigation will continue to move forward. Second, 3M has deeply angered someone you never want to anger—the judge who controls your case. Since her ruling yesterday, Judge Rogers has issued several orders in favor of the plaintiffs. Always good news there.