Yesterday, the Judge in the 3M Earplug MDL (Hon. Casey Rodgers) ruled that 3M will not be allowed to avoid liability for the earplug lawsuits and pull the MDL into bankruptcy court.
This ruling was imposed by Judge Rodgers as an unprecedented judicial sanction as punishment for 3M’s blatant misconduct and abuse of the litigation process. But on a more basic level, it applied the principle of estoppel – you cannot take one position for years in litigation and then take a contradictory position when you come up with a new litigation tactic.
This ruling has far-reaching implications for the thousands of earplug lawsuits because it effectively nullifies 3M’s bankruptcy play, regardless of how the court rules on appeal. Does all of this slow down justice in the 3M class action? It does. But it also boxes 3M into a corner where it can choose a global settlement or it can continue to be slammed by juries.
This post will provide a detailed summary of yesterday’s major ruling by Judge Rodgers.
- Read the Court’s 3M Sanctions Order
In August 2022, after 4 years of litigation and 16 bellwether trials, it seemed like the massive 3M earplug class action might finally be moving into the settlement phase. Judge Rodgers had recently required both sides to participate in a settlement mediation session. Then 3M shocked everyone by unveiling a new controversial legal strategy. 3M claimed that the party responsible for the earplug claims was Aearo Technologies (“Aearo”), and then 3M had Aearo file bankruptcy to stay the earplug lawsuits and force them to be resolved in bankruptcy.
Aearo was the company that originally designed and made the Combat Arms earplugs at the heart of the litigation. But 3M acquired Aearo back in 2008 and since that acquisition, Aearo had essentially ceased to exist. Aearo’s products, employees, offices, and everything else became 3M’s products and employees. Aearo continued to exist only on paper. It had no assets or employees or anything. Plaintiffs’ lawyers sued Aearo just because – you know – we sue everyone to be safe.
During the litigation, 3M never suggested that Aearo was a separate, independent entity. 3M never claimed that Aearo, and not 3M, was the party with liability for the earplug lawsuits. Why? They hadn’t come up with the bankruptcy idea. Then in a desperate effort to avoid a massive settlement, 3M suddenly changed its tune. 3M claimed that Aearo was a separate company and was responsible for the earplug claims. Then 3M had Aearo file bankruptcy.
Bankruptcy Court Rejection
The problem with the bankruptcy gambit was that it was such a transparent strategy for a very large company to avoid paying the damages that a jury said that it should – and from paying an appropriate settlement based on what the bellwether trials suggested that it should. So it was just not victims and their lawyers who saw it for what it was. So did the bankruptcy judge and Judge Rodgers.
The bankruptcy court in Indiana promptly denied 3M’s effort to pull the earplug cases into the Aearo bankruptcy proceeding. The bankruptcy Judge held that the automatic stay in Aearo’s bankruptcy did not extend to 3M. 3M immediately filed an appeal of this ruling, which was expedited to the Third Circuit. That appeal is still pending, but as discussed below, yesterday’s action by Judge Rogers makes it a moot point if it holds up on appeal.
Order Sanctioning 3M
Yesterday’s ruling by Judge Rogers was prompted by a motion filed by the earplug plaintiffs asking Rodgers to rule that 3M was precluded from claiming that it had no liability for the earplug claims and shifting blame to Aearo. That motion offered several different legal grounds which gave Judge Rodgers the authority to make this ruling. These included judicial estoppel, waiver, the federal rules of civil procedure, and sanctions for bad faith conduct.
Judge Rodgers decided to base her ruling on the inherent power of the courts to impose sanctions for bad faith conduct. She devotes the first several pages of her 22-page Order to laying out the law of judicial sanctions and making it very clear that she is well within her authority.
Federal courts possess certain inherent powers, not conferred by rule or statute, to manage their affairs to achieve the orderly and expeditious disposition of cases.” Goodyear Tire, 137 S. Ct. at 1186 (internal citations omitted). “That authority includes the ability to fashion an appropriate sanction for conduct which abuses the judicial process.” Id.
Order at 3.
Next, Judge Rodgers went out to explain in great detail the story of 3M’s bad faith in the earplugs MDL. She explains how 3M spent the last four years aggressively defending the earplug cases, but never made any mention of Aearo being the real responsible party, or a party at all:
Scorched earth battle was waged against every theory of liability alleged in this litigation, yet there was nary a whisper that Aearo, and not 3M, was the only proper target, or even a target at all.
Order at 6.
Rodgers describes how 3M’s dissatisfaction with the 16 bellwether trials (resulting in almost $300,000,000 in jury verdicts) ultimately prompted it to devise the strategy for getting out of the MDL recasting Aearo as the “real party defendant” for the first time. Then, instead of actually filing bankruptcy, 3M had Aearo file bankruptcy.
The next few pages of the Order recite the numerous instances in which 3M took actions in the MDL litigation which held itself out as the real party, and were totally inconsistent with its current position regarding Aearo:
all 16 bellwether trials went forward with no suggestion from 3M that it had anything but exclusive liability for alleged CAEv2-related injuries. 3M sent a corporate representative to every trial (ironically now, Mr. Rucker). Aearo sent no one. Defendants were referred to collectively as “3M” for purposes of liability and damages by both sides and the Court, with no objection from 3M. In cases involving apportionment of fault, the parties agreed to jury instructions and verdict forms allowing fault to be apportioned to a single defendant, 3M, and 3M never once argued that the relative fault of any other defendant should be considered in connection with the plaintiffs’ injuries, even in cases involving CAEv2 use that occurred solely before 3M acquired Aearo.
Order at 13.
Finally, Judge Rogers vented her frustration with 3M’s conduct and laid out her sanctions:
This simply is not a situation where a litigant made an offhand comment about potential liability once, twice, or even thrice. Rather, 3M purposely engaged in a nearly four-year campaign to establish itself as the sole responsible party for CAEv2 claims, then abruptly reversed course when that narrative no longer suited its strategic objectives, to the detriment of both the Plaintiffs and the administration of justice in this MDL.