3M earplug MDL judge adds to bankruptcy tangles with injunctive order

The 3M logo is seen at the 3M factory in Tilloy-Lez-Cambrai, France, August 18, 2019. REUTERS/Pascal Rossignol

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(Reuters) – The Florida federal judge overseeing multidistrict litigation alleging 3M Co earplugs caused hearing loss to more than 200,000 veterans issued a highly unusual order on Tuesday, barring 3M from challenging its decisions MDL in bankruptcy court.

If 3M, according to the new ruling, attempts to challenge MDL Judge’s orders in the bankruptcy case brought by its subsidiary Aearo Technologies LLC – or even if 3M is simply providing Aearo with funding to challenge MDL’s rulings – the The company faces the prospect of a contempt hearing before MDL Judge, U.S. District Judge Mr. Casey Rodgers of Pensacola.

You wonder, of course, exactly how this order will affect 3M’s stated goal of using Aearo’s bankruptcy to resolve veterans’ claims. The company, as you know, said it believed bankruptcy court would provide a “more efficient and fair” route to resolution than the MDL, which Aearo has mercilessly criticized in bankruptcy court filings.

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One caveat before we dive deeper: 3M, which denies its earplugs are defective, may well appeal Rodgers’ new order. A company spokesperson simply told me via email that they are “reviewing the order and will take the next appropriate action.”

Aearo asked U.S. Chief Bankruptcy Judge Jeffrey Graham of Indianapolis to stay litigation against its parent company, 3M, to facilitate an epic bankruptcy case to decide how much, if anything, the companies owe MDL veterans. Lawyers for the veterans, meanwhile, told Graham in hearings this week that he should reject the companies’ naked attempt to evade liability in the MDL and allow them to continue to sue 3M.

What does this mean that 3M can no longer challenge Rodgers’ underlying MDL evidence rulings before Graham in bankruptcy court? And what does that mean that Aearo, which was a non-operating subsidiary until 3M relaunched it earlier this month on the eve of its bankruptcy filing, can’t rely on 3M’s money? to challenge the assets of the MDL judge?

I posed these questions Wednesday morning to six law professors considered experts on the intersection of MDLs and bankruptcy. I wish I could say that their interpretations clarified the impact of the new ruling. Alas, this case is so novel and complex that even the experts cannot agree on the meaning of Rodgers’ restraining order.

So while Samir Parikh, a professor at Lewis & Clark Law School, said Rodgers had exceeded his authority under the All Writs Act and that his decision “may ultimately cause a lot of ado about nothing”, Professor Zachary Clopton of Northwestern Pritzker School of Law told me that the injunction “keeps the MDL judge squarely in the action” even if the bankruptcy judge stays the MDL litigation against 3M. Usually, Clopton explained, it is up to the judges of the bankruptcy to decide whether the disputed issues have already been resolved in previous decisions.But now, he says, “the MDL judge can rule on this issue within the framework of the injunction”.

At the very least, said Lindsey Simon of the University of Georgia Law School, it appears Rodgers’ injunction will add to the complications of the bankruptcy case by forcing Aearo to account for his funding for items. key to the procedure. And if Aearo’s bankruptcy ultimately leads to a lawsuit to assess the value of veterans’ claims, Adam Levitin of Georgetown Law said, Aearo will have to find “uncontaminated” funds from a source other than 3M to pay for a lawsuit. estimate that will likely cost millions of dollars.

Rodgers issued Tuesday’s order in response to a motion by Keller Postman on behalf of an MDL plaintiff whose case has been placed on hold for trial. The motion asked Rodgers to issue an injunction under the All Writs Act, which allows federal district courts to enjoin intrusions into their jurisdiction, to prevent 3M from backing Aearo’s bid for a stay. bankruptcy and prevent 3M from asking the bankruptcy court to reconsider the MDL. judge’s decisions. 3M, as I reported, urged Judge MDL not to intervene in the bankruptcy case. (The MDL judge on Sunday denied a separate motion that could have allowed the MDL plaintiffs to continue to sue 3M by amending their main complaint to drop Aearo as a defendant.)

In Tuesday’s order, Rodgers said she would defer to Graham, the bankruptcy judge, to determine whether 3M was “using its subsidiaries’ bankruptcy petition as a bad-faith subterfuge to defeat the jurisdiction of this court.” “. But she said Aearo’s “substantive challenges to this tribunal’s numerous legal and evidentiary decisions in the MDL” posed a “specific threat to the jurisdiction previously exercised by this tribunal.” [that] cannot and will not be tolerated.

According to professors Alexandra Lahav of Cornell Law School and Melissa Jacoby of the University of North Carolina Law School, it’s not entirely clear under the new order which MDL decisions are now prohibited for 3M’s challenges in bankruptcy court. Lahav said she interprets the order only to prohibit challenges to Rodgers’ decisions in landmark cases that have already been litigated to a conclusion in the MDL court. Jacoby said there remained open questions about whether an estimation process for claims that were not litigated in the MDL could proceed without involving Rodgers’ order.

But what’s abundantly clear, after Rodgers’ two rulings this week, is that the MDL judge is deeply skeptical of 3M’s motives for resurrecting its once outdated subsidiary – saddled Aearo with all the MDL debt thanks to a last-minute financing and indemnification agreement, then sending Aearo to bankruptcy court to seek a stay of all litigation in the MDL. The subtext of Rodgers’ latest order, Lahav said, is a call for the bankruptcy court to respect and defer decisions it has made in more than three years of bitter litigation.

Indeed, Judge MDL’s orders appear intended to remind Graham that, in her view, 3M and Aearo pitted their courts against each other — and that’s important context, Georgia professor Simon said. 3M and Aearo are “saying the quiet part out loud,” calling on the bankruptcy court to resume the process of determining the value of veterans’ claims and preside over a comprehensive settlement.

The action is currently before Graham, who will soon decide whether to stay the litigation against 3M. After that, who knows?

Read more:

Florida judge won’t stop 3M from asking bankruptcy judge to stop earplug suits

3M wins early skirmish over MDL earplug retention, but two-court war rages on

Is the 3M earplug bankruptcy the beginning of the end for mass tort MDLs?

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Alison Frankel

Thomson Reuters

Alison Frankel has covered high-stakes commercial litigation as a columnist for Reuters since 2011. A graduate of Dartmouth University, she worked as a journalist in New York covering the legal industry and law for more than three decades. Before joining Reuters, she was an editor and editor at The American Lawyer. Frankel is the author of Double Eagle: The Epic Story of the World’s Most Valuable Coin.

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