In its opening brief to the 7th U.S. Circuit Court of Appeals, 3M claimed that the judge misunderstood precedent, ignored significant evidence, and adopted an unduly narrow construction of his inherent jurisdiction to block action against 3M.
It's now up to the appeals court, 3M claimed, to fix the mistakes, suspend current MDL action against 3M, and allow 3M and Aearo to use the bankruptcy process to find a fair settlement of the military veterans' claims.
After all, as 3M reminded the 7th Circuit, it is the procedure that many other federal appellate courts have supported in mass tort claims that were halted when a subsidiary defendant declared bankruptcy. W.R. Grace & Co, Pfizer-owned Quigley Corp, Georgia-Pacific LLC and its bankruptcy subsidiary Bestwall LLC, USA Gymnastics, Purdue Pharma LP, and, of course, Johnson & Johnson's LTL Management LLC are among the companies listed by 3M. (In a mirror-image of the 3M issue, the 3rd Circuit is considering a New Jersey bankruptcy court's decision to delay tort claims against J&J because to LTL's bankruptcy.)
You don't have to be a fortune teller to predict that if the 7th Circuit sides with 3M, joining other courts that have allowed viable parent companies to escape crushing mass tort litigation through the bankruptcy of a subsidiary, the Chapter 11 strategy will become an increasingly appealing play for MDL defendants.
That would be bad news for plaintiffs' attorneys. As expected, the plaintiffs' steering committee in the earplugs MDL stated in an email statement that 3M's appeal is without merit. According to the statement, the 7th Circuit should affirm the judge's detailed conclusion by rejecting non-debtor 3M's attempt to shelter itself through the bankruptcy procedure. The plaintiffs' attorneys are eager to hold 3M accountable for inflicting irreparable hearing impairment on hundreds of thousands of men and women who served our country.
The bankruptcy court, according to 3M's brief, made at least two critical errors in deciding that the automatic stay on action against Aearo, its insolvent company, should not apply to 3M. The judge, according to the brief, erred when he stated that the 7th Circuit has not recognised that an automatic stay for a corporate subsidiary might extend to the parent firm in certain situations.
According to the 3M brief, several of the appellate courts that have authorised an extension of the automatic stay have reasoned that action against the parent corporation will have an immediate, negative impact on the bankrupt subsidiary. The 7th Circuit has not explicitly joined that consensus, but 3M claims that the appeals court has not ruled out the possibility of extending the stay to protect a parent company - and that this case is an example of how litigation against the parent will harm the bankrupt subsidiary's overlapping and intertwined interests.
According to 3M, the judge also neglected to give enough weight to insurance plans shared by Aearo and 3M. If 3M is obliged to continue pursuing cases in the MDL, that pool of money, according to 3M, would dry up. According to 3M, the loss of the insurance money will reduce Aearo's insolvent estate. 3M claimed that the bankruptcy judge should have extended the automatic lawsuit stay to encompass them for that reason alone.
The jury placed a high value on 3M's promise to offer an unlimited backup for any Aearo liability arising from the earplug case. The jury effectively determined in that agreement that Aearo's capacity to discharge its obligations and restructure would be unaffected by pending action against 3M.
Even if the court rightly declined to prolong the automatic stay, 3M contended, he erred in refusing to utilise his inherent jurisdiction to enjoin MDL proceedings against 3M. He determined that he lacked authority to enjoin existing action against 3M since those lawsuits were unrelated to Aearo's bankruptcy. 3M contended that he misapplied 7th Circuit law by focusing on the actual impact of 3M's current suit against Aearo rather than the potential harm. According to 3M, this inaccuracy penetrated Graham's conclusion so profoundly that his decision must be reversed.
Courts enabling 3M to stop litigating in the MDL and reach a worldwide settlement through the bankruptcy process would best serve the public interest, according to 3M.
Meanwhile, the MDL is proceeding even as the 7th Circuit appeal heats up. The next bellwether case in the MDL has a trial date set for February, but it might be delayed. Both parties have filed requests for summary judgement on 3M's independent culpability. 3M has filed briefs in appellate court challenging certain of the MDL judge's evidentiary decisions. According to 3M, hundreds of new plaintiffs filed earplug lawsuits in October alone, joining over 200,000 military veterans who had previously filed claims.