3M Co. has tentatively agreed to pay more than $5.5 billion to resolve over 300,000 lawsuits claiming it sold the US military defective combat earplugs, people familiar with the deal said.
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.
Traders welcomed the resolution. 3M shares gained $5.17 Monday, closing at $104.12 on the news.
“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 US 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 US 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.