3M (NYSE:MMM) shares rallied Monday after Bloomberg News reported the company tentatively agreed to resolve more than 330,000 lawsuits related to its defective earplugs. The company will pay more than $5.5 billion in the settlement, according to the report.
The settlement news comes after 3M had its subsidiary Aearo, which manufactured the earplugs, file for bankruptcy protection last year—a judge later called the attempt a "brazen abuse of the litigation process" and allowed plaintiffs to sue 3M directly.
3M has said the CAEv2 earplugs, which were designed in the late 1990s so soldiers could carry only one set of earplugs in multiple types of combat, aren’t faulty unless they are worn incorrectly and 3M said it worked in “close coordination” with the U.S. military to develop the design.
3M competitor Moldex-Metric, Inc. in 2016 filed a whistleblower lawsuit against 3M claiming the company knew the CAEv2 earplugs it sold to the government between 2003 and 2015 did not meet the standards for ear protection required by the military. 3M agreed to pay $9.1 million to the Department of Justice to resolve the allegations without admitting liability, but what followed were hundreds of thousands of individual complaints from veterans who said they now believed the hearing loss or tinnitus they experienced while serving is the fault of the dual-sided CAEv2 earplugs.
MMM shares popped $6.31, or 6.4%, to $105.26.
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