Aearo’s exclusivity motion draws objection from CAEv2 claimants

By Sarah Lizee

Olympia, Wash., Jan. 18 – 3M subsidiary Aearo Technologies’s second motion seeking an exclusivity extension to file and solicit acceptances of a Chapter 11 plan drew an objection from a group of plaintiffs in a multi-district litigation with 3M as defendant, according to documents filed with the U.S. Bankruptcy Court for the Southern District of Indiana.

The objecting group said it represents about 57% of claimants related to use of Combat Arms version 2 earplugs (CAEv2).

Aearo hopes to extend its filing exclusivity period through March 31 and the solicitation exclusivity period through May 30, as previously reported.

In its motion, the company had said the relief sought is consensual, based on agreement with an official committee of unsecured creditors for CAEv2 tort claimants.

Missing from the second exclusivity motion, however, is that on Dec. 22, an order was entered that granted summary judgment in favor of CAEv2 claim plaintiffs against 3M regarding its full and independent liability for CAEv2 injuries.

The objecting group said the summary judgement provides that 3M is precluded from trying to avoid liability for CAEv2 claims by shifting blame to Aearo.

“It is stunning for the debtors to wholly omit even mentioning the summary judgment order in the second exclusivity motion,” the objection said.

“And it is equally stunning that the debtors fail to acknowledge that, despite being previously asked to support the plaintiffs’ efforts to hold 3M fully and independently liable for any asserted CAE claims in the [multi-district litigation], which will massively benefit the debtors’ estates, the debtors chose not to do so.”

The group said the effect of the court’s decision means that, under any scenario, Aearo does not need to incur tens of millions of administrative expenses in these Chapter 11 cases – above the more than $20 million already incurred in the last three months – and a plan that unimpairs all claims can be proposed.

As the court found that 3M is fully and independently responsible for 100% of all CAEv2-related claims, it is pointless to force CAEv2 claimants to file proofs of claim in Aearo’s case, or for there to be extensive litigation over estimation, because it will have no effect on the debtors’ estates or on 3M’s liability, the objectors said.

“The debtors have absolutely no reason to want to litigate CAEv2 claims in this court because, under any circumstances, 3M is 100% directly and independently liable and cannot attempt to shift liability to the debtors,” the group added.

The group noted that if the summary judgment order is reversed, and the debtors have some co-liability, a funding agreement ensures that 3M pays for 100% of all of the debtors’ liabilities, whether in bankruptcy or outside of bankruptcy, without any cap.

“Either way, attempting to force CAEv2 claimants to participate in any part of these Chapter 11 cases via proofs of claim or estimation will not affect the debtors’ estate except to drive up administrative expense fees and costs,” the group said.

“Given the summary judgment order, the debtors have no excuse now to delay moving to confirmation or to further delay these cases or threaten irrelevant actions in order to further ‘mediate’ bankruptcy law issues with CAEv2 claimants.”

A hearing is slated for Jan. 25.

Aearo, the St. Paul-based 3M subsidiary, designs and manufacturers materials for noise, vibration, shock, thermal and cushioning solutions for commercial vehicles, heavy equipment, medical equipment, electronics and aircraft. The company filed bankruptcy on July 26, 2022 under Chapter 11 case number 22-02890.

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