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Business Crimes Hotline
3M Settles False Claims Act Lawsuit over Defective Military Earplugs
On July 26, 2018, the U.S. Department of Justice (DOJ) announced a False Claims Act settlement linked to defective ear plugs manufactured by 3M Company (3M), a the multinational manufacturing company headquartered in St. Paul, Minnesota. As noted in the DOJ's press release, without a finding of liability, 3M agreed to pay $9.1 million dollars based on whistleblower allegations that the company knowingly sold the Defense Logistics Agency, the combat logistics support branch of the Department of Defense, defective dual-ended Combat Arms Earplugs, Version 2 (CAEv2). The DOJ indicated that, in distributing this product, 3M — including through its predecessor entity, Aearo Technologies Inc. — failed to reveal that defects lessened its hearing protection effectiveness. Specifically, the ear plugs were too short for a user's ears and, over time, loosened, causing performance issues.
The 3M settlement results from the whistleblower (qui tam) provisions of the False Claims Act, which permit individuals and companies to make claims when there is evidence of fraud against the U.S. government. The whistleblower provisions afford individuals the right to file suit under seal in a United States District Court on behalf of the government and share in approximately 15% – 30% of the profits. In fiscal year 2017, the DOJ recovered over $3.7 billion from False Claims Act settlements and judgments, with $3.4 billion resulting from lawsuits filed under the whistleblower provisions. As a result of these settlements and judgments, the DOJ paid out $392 million to whistleblowers. 3M's competitor and ear plug manufacturer, Moldex-Metric Inc. filed the lawsuit in 2016 and will receive over $1,911,000 million. See, United States ex rel. Moldex-Metric v. 3M Company, Case No. 3:16-cv-1533-MBS (D.S.C.). The settlement was the result of coordination between the DOJ's Civil Division, the U.S. Attorney's Office for the District of South Carolina, the Army Criminal Investigation Command, and the Defense Criminal Investigative Service.
In announcing the settlement, the Acting Assistant Attorney General, Chad A. Readler of the DOJ's Civil Division, stated: “The Department of Justice is committed to protecting the men and women serving in the United States military from defective products and fraudulent conduct …. Government contractors who seek to profit at the expense of our military will face appropriate consequences.”
— Colleen Snow, Mayer Brown
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