Liability lawsuits hitting 3M Co. spotlight U.S. tort liability law, illuminating features of both jurisprudence and economics. Our law differs significantly from the rest of the world and thus poses illuminating comparisons. However, both the law and economics are complicated, so they must be examined over two weeks.
Start with these cases themselves. A company called Aearo Technologies developed a higher-tech two-ended earplug. Inserting one way blocked damaging loud noises from weapons muzzle blasts or explosives. The other way dampened such noises but allowed soldiers to hear lower sounds including speech. In 2003, Aearo started selling these “Combat Arms Earplug version 2,” or “CAEv2,” to U.S. armed forces, primarily the Army.
3M bought Aearo in 2008 and, through 2015, continued to sell the Department of Defense hundreds of thousands of CAEv2 plugs used in training and by all serving in Iraq, Afghanistan or other combat areas. 3M continues to produce, and DOD continues to buy, many thousands of an improved version, “CAEv4.”
However, in 2016, Moldex-Metric, a competing hearing-protection manufacturer, filed suit against 3M asserting the CAEv2 was defective and had been misrepresented. This led to a settlement with the U.S. Justice Department in June 2018, in which 3M paid $9.1 million to settle a whistleblower False Claims Act lawsuit that it knowingly sold defective earplugs. 3M says it settled solely to avoid expensive litigation, that there were no defects in the plugs, and that they fully met all contract specifications.
Nevertheless, many individuals now have joined groups filing civil suits against 3M for hearing damages caused by a defective product. Most of these are being clustered in a Federal District Court in Florida. Some have gone to trial with mixed results. The majority ruled against 3M and ordered multimillion-dollar damages payments.
Now a bit of law. The idea that if one person harms another, unintentionally as well as intentionally, such harm must be made up for, is basic fairness. It goes back to Old Testament scriptures as well as the 4,000-year-old Code of Hammurabi.
The legal systems of every country in the world, whether based on common case law as in most English-speaking countries or Roman-tradition codified law, have procedures for determining whether harm took place and how it should be compensated. This is “torts,” a hurdle for every beginning law student.
However, though basics of determination and compensation cross all countries, U.S. law has unusual and highly controversial features.
The first is contingent fees for attorneys representing plaintiffs. Lawyers may charge no fee for accepting cases. None need be due unless the case is won. Then they get a percentage, often very substantial, of the awarded damages. If lost, they get nothing.
Contingent fees are illegal in Europe and most other countries. However, some do allow “conditional” damages in which an additional amount, based on costs accrued rather than on damages won, may be added to hourly fees in successful cases.
The second feature of U.S. law is “punitive damages.” “Punitive” means “punishing.” In U.S. tort law, they are amounts imposed that exceed the “actual damages” ruled as suffered by the plaintiff. Punitive damages can be awarded only in cases involving overt dishonesty, bad faith, harmful intent or continuing to act even after harm became apparent. Such bad faith need not rise to the level where criminal statutes were broken to an extent that could be proven in a criminal trial.
The third distinctive aspect of U.S. tort law is the “class-action suit.” A development of the mid-20th century, it allows a group or “class” of people who have suffered harm to sue as a group represented by one set of attorneys examining a common set of witnesses and evidence in one trial. If damages are awarded, they are split among all members of the class following some formula.
In strict terms, “class action” refers to a case in which a court rules that all persons harmed will be members of the class. The train leaves the station. Once the case is settled, additional suits filed, perhaps by holdouts, are not accepted.
However, without seeking to form a “class,” people can sue in groups that may be awarded damages. But such decisions do not impose settlements on any other pending set of plaintiffs.
So far, there have been four CAEv2 cases decided. 3M lost three, but damages varied in both actual and punitive categories. Many other cases are being prepared. Legal firms that specialize in such group or class liability cases are feverishly recruiting veterans. Search “3M earplug lawsuit” to sample the hubbub yourself.
In recent years, such early cases with subsets of plaintiffs from a much larger group may be deemed “bellwether” cases that will orient future litigation, particularly in terms of damage amounts. A “bellwether” is a castrated male sheep with a bell around his neck that leads a much larger flock toward forage and water.
These early cases covered only a small fraction of the hundreds of thousands of earplug users. Yet how the trials played out on both sides, the juries’ findings and the judges’ rulings all will influence future litigation. This may lead to a negotiated out-of-court settlement.
Understand these cases are highly unusual in that military training and warfare have caused hearing loss for centuries, especially since invention of gunpowder. Aircraft engines, piston and turbine both, accentuated the dangers. Harm to hearing is the most common service-connected injury in the U.S. military. As someone with 32 years of active and reserve U.S. Army service, including both infantry and artillery units, and with a good friend who flew in 1950s “six turning and four burning” 10-engined B-36 bombers, I’m personally well informed!
It long has been recognized that armed forces bear responsibility for health damages caused by service, regardless of defects in a particular device purchased by the Department of Defense. Individual vets didn’t sue manufacturers. People harmed by defective ear plugs will remain eligible for the same, admittedly often imperfect, Veterans Administration hearing devices and services. Most veterans with hearing loss have no one to sue.
All this is background. How it intersects with economics must be left for next week.
St. Paul economist and writer Edward Lotterman can be reached at stpaul@edlotterman.com.
Real World Economics: 3M earplug suits have all features of U.S. tort law - TwinCities.com-Pioneer Press
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