3M Earplug Lawsuit: What will be the in store for 3M and what can history teach us?

3M is being sued for manufacture of faulty ear plugs leading to hearing loss amongst veterans. Currently there are approximately 270,000 individuals seeking damages.

So far,16 bellweather cases have gone through trial. In 6 cases, the judge ruled in favor of 3M (no payout). In 10 cases, the judge ruled in favor of the plaintiff (1.1 million to 77 million).

Miller and Zois, the law firm representing some of the veterans, estimate settlement payout between 25,000 and 300,000 dollars. Assuming 25,000 payout per case, that adds up to 6.7 billion. In addition, an unknown portion of those effected may opt out of any settlement, preferring to pursue their individual case especially given the large sums awarded in the bellweather cases.

Now, I want to look at the Roundup lawsuit because this is another case where a product (a herbicide trade-named Roundup) has harmed consumers (causing cancer). The first case was filed in 2015. Bayer, the parent company of Monsanto (producer of Roundup), has paid out over 11 billion dollars since to settle 80% of the approximately 100,000 initial cases. However, with new individuals joining in daily, it was confirmed in a Bayer earnings call that 31,000 suits remain active in 2022.

My take on the 3M situation is that this is not over even if a settlement is reached this year. Those who believe they are entitled to high payout will forge ahead with individual suits. Taken together, the earplug debacle will weigh on 3M stock well into 2023 (they tried to escape punishment by declaring bankruptcy of their earplug subsidiary but it failed). Now enough with the negatives lets look at the positives.

NHL (non Hodgkin's lymphoma) is an aggressive cancer that is fatal in 40% of cases within 10 years. Millions were exposed (essentially unknown maximum number) and Bayer is on the hook every time another exposure turns into NHL. With the 3M situation, we know 300,000 were exposed before the earplugs were pulled. Therefore, 3M does not have this massive tail risk of new cases constantly cropping up.

I will not personally invest in a company that I know destroyed tens of thousands of lives (disability from hearing loss and tinnitus is serious). However, history seems provide context that 3M will move on from their earplug debacle in 2023 (working towards settlement this year and I have no reason to believe that cannot be reached). They are a solid company and at this price is an absolute steal.