Why Veterans won’t benefit from the $9 million 3MTM defective earplug lawsuit
In July 2018, 3MTM entered into an agreement with the federal government to settle a whistleblower lawsuit that alleged that it knowingly provided defective combat earplugs to the government. The company paid over $9 million to settle this legal action. However, the amount that 3MTM paid will not benefit the veterans or current military service members who were affected by the defective earplugs. Instead, it will compensate the federal government for the fact that it was defrauded.
This suit was not brought on behalf of the veterans who have alleged that they suffered harm due to the defective earplugs. The legal action was brought as a qui tam suit on behalf of the United States Government. When that happens, the proceeds of the settlement are split two different ways. The whistleblower who brought the lawsuit of behalf of the government is entitled to a certain percentage of the settlement. The balance of the proceeds becomes property of the United States Government. Depending on whether certain conditions apply, the proceeds either go to the revolving fund of the defrauded agency or to the Treasury.
Who was the 3mTM Military earplug lawsuit whistleblower?
Interestingly, the whistleblower was Moldex-Metric, Inc., a 3MTM competitor. Perhaps, Moldex- Metric was bitter or jealous that 3MTM obtained the lucrative earplug military contract. Moldex may have just wanted some extra cash in their pocket and to deliver an economic and public relations nightmare for one of their competitors. In any event, no matter their motive, Moldex did what is just and right to the benefit of military service members who may be compensated for their injuries as a result.
In order to understand why the proceeds of the settlement do not get distributed among veterans, it is important to understand how the laws work when the government purchases a defective product. When a company is selling to the federal government, there are a large number of laws and regulations that apply. Doing business with the federal government is unlike selling to any other business partner in the U.S. Since the federal government is spending taxpayer dollars, it insists on having a variety of different protections in case it does not get what it pays for in a transaction.
Here, the applicable law that became the grounds for this settlement is the False Claims Act. Anyone who has filed a claim for payment with the federal government is subject to this law. This includes contractors and anyone else who sells anything to the government. The False Claims Act is actually a very powerful statutory weapon that the United States Government has in its arsenal to right a wrong if it was defrauded in any way.
The applicable provision of the False Claims Act is that anyone who “knowingly presents…a false or fraudulent claim for payment or approval” is subject to certain penalties. When a party submits an invoice for payment for goods that are knowingly defective, there is the necessary intent to defraud the government. In other words, 3MTM knew that it was selling earplugs that would come out of their proper place and could cause damages to soldiers’ hearing. 3MTM had the obligation to warn the federal government of this possibility before selling these earplugs and requesting payment.
The False Claims Act is a statute that protects the federal government in its role as a purchaser. It is not a consumer protection statute that benefits the general public. It is intended the remedy the damages that are suffered by taxpayers as a whole as opposed to individual taxpayers. When there are damages, the contractor is liable to pay a certain amount for each false claim as well as three times the amount of the damages that the government has suffered.
While the federal government can act on its own to enforce the False Claims Act, there is also a unique provision in the statute that allows individuals to act on behalf of the United States. Some of the factual predicates may not be known to the government, but instead may only be known to those with a unique vantage point. In order to encourage whistleblowers to come forward, the False Claims Act allows suits to be brought on a “Qui Tam” basis. This is roughly translated as “he who brings an action for the king as well as for himself.”
When a whistleblower files a qui tam suit, they become known as the relator. At some point, the federal government will decide whether they want to take over the case. If the government makes that decision, it assumes control of the litigation. If it does not, the relator continues the lawsuit on their own to conclusion. Regardless of who wages the suit, the relator is entitled to a percentage of the recovery which is usually between 15 and 25 percent.
Not only will the settlement monies not benefit the veterans, but the settlement also did not require 3MTM to admit any wrongdoing. Therefore, evidence of this settlement will not be sufficient to prove 3MTM‘s liability when these cases go to civil trial. The good news is that, while 3MTM cannot be criminally prosecuted for this violation, there is nothing that bars a civil suit on behalf of those who were damaged by the defective ear plugs.