3M's legal troubles aren't over despite $18.5 billion in settlements

3M (MMM) is trying to put the country’s largest-ever mass tort case behind it. Even if it does, its legal problems are far from over.

The Minnesota conglomerate announced Tuesday it had agreed with plaintiffs attorneys to a $6 billion settlement that would end thousands of lawsuits from more than 260,000 veterans alleging earplugs made by a subsidiary caused hearing loss.

3M would make the payments between 2023 and 2029, splitting it between $5 billion in cash and $1 billion in stock, so long as the equity commitment is approved by the court.

Payments would trigger based on the number of claimants who agree to participate in the agreement, with 98% participation required for full payment. The total settlement is less the $10 billion that analysts projected.

The potential resolution comes just two months after 3M reached a separate tentative settlement over a bulk of claims alleging its so-called forever chemicals contaminated public drinking water. That pact could require it to pay $10.5 billion to $12.5 billion.

On a call with analysts Tuesday, 3M's chief legal affairs officer Kevin Rhodes said the company had resolved objections to the accord raised by a group of state attorneys general.

Its stock rose more than 5% Monday following a report about the new earplug settlement and was up another 2% Tuesday morning in early trading following the official announcement.

3M said Tuesday that "this agreement is not an admission of liability," and that "the products at issue in this litigation are safe and effective when used properly." It also said is "prepared to continue to defend itself in the litigation if certain agreed terms of the settlement agreement are not fulfilled."

It will record a pre-tax charge of roughly $4.2 billion in the third quarter of 2023 related to the settlement.

The company has been trying to show movement in efforts to resolve a mountain of litigation dragging down its shares. Year to date, its stock is down roughly 15%. In July it reported a quarterly loss due largely to a charge associated with the forever chemicals settlement.

"We don’t like the overhang on the stock and we want to manage it, but we’ve got to, as we move forward, do what’s in the best interest of the company for the long term," chief executive Mike Roman told analysts in July.

Its own filings make it clear the company has more work to do on the legal front. Here is a look at what it still faces:

Forever chemicals

3M has not yet eliminated all exposure to lawsuits pertaining to its PFAS products, known as per- and polyfluoroalkyl substances.

According to the Agency for Toxic Substances and Disease Registry (ATSDR), studies suggest certain PFAS exposure is associated with increased risk for kidney and testicular cancer, fertility complications, pregnancy-induced hypertension/preeclampsia, fetal and child development changes, liver damage, thyroid disease, asthma, heightened cholesterol, and immune system changes.

These forever chemicals got their name because they don’t break down in the environment; they were widely used for decades in everything from nonstick cookware to firefighting foam. The claimants who were part of the settlement announced in June alleged injuries from a PFAS fire suppressant product manufactured by 3M called aqueous film forming foam (AFFF). 

But outside of that settlement, there are suits from other people, states, municipalities, and governments in other countries alleging personal injuries and property claims from firefighting foam, as well as injuries caused by other products: perfluorooctanoic acid (PFOA) and perfluorooctane sulfonic acid (PFOS).

Those cases, Rhodes said, are not as advanced.

"It'd be premature at this point to talk about, you know, how those [cases] might be resolved, or when. But what we can say is that we'll continue to address the remainder of the PFAS docket by defending ourselves in court or through negotiated resolutions," he said.

The company said in its annual report that it also faces cases alleging that it, and other defendants, failed to warn customers of disposal hazards posed by the chemicals.

At the time of 3M’s annual report, the cases included 40 individual filings in New York state, as well as cases in Michigan, Alabama, Georgia, North Carolina, Delaware, New Jersey, South Carolina, Massachusetts, Maine, and Ohio.

3M said in its filing that as of Dec. 31 there were nine actions pending in Belgian civil courts against the company's subsidiary, 3M Belgium, and the Flemish government had taken action to force the company to perform remediation at its Zwijndrecht facility.

The Netherlands government was separately investigating potential claims of PFAS contamination in a river that flows between the country and Belgium.

Masks and respirators

3M has for decades defended lawsuits from plaintiffs across the US that allege use of its masks and respirators led to workplace asbestos, silica, and coal mine dust exposures.

As of December 2022, the company reported 4,028 pending mask claims, up from 3,876 in the prior year.

In 2022, mask case costs totaled $67 million for legal defense and settlements. 3M said as of that date it had recovered $4 million through insurance claims.

Regulation

Global regulators, including in the US and European Union, are taking steps to reduce acceptable levels of PFAS in drinking water.

“If such activity continues and regulations become final and enforceable, 3M may incur material costs to comply with new regulatory requirements or as a result of litigation or additional enforcement actions,” 3M said in its annual report.

3M said last year it would stop making the forever chemicals and work to discontinue their use by the end of 2025.

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