3M 2008 Annual Report Download - page 93

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liability is further limited by an agreement entered into between Aearo and Cabot on July 11, 1995. This agreement
provides that, so long as Aearo pays to Cabot an annual fee of $400,000, Cabot will retain responsibility and liability
for, and indemnify Aearo against, asbestos and silica-related product liability claims for respirators manufactured
prior to July 11, 1995. Because the date of manufacture for a particular respirator allegedly used in the past is often
difficult to determine, Aearo and Cabot have applied the agreement to claims arising out of the use of respirators
while exposed to asbestos or silica or products containing asbestos or silica prior to January 1, 1997. With these
arrangements in place, Aearo’s potential liability is limited to exposures alleged to have arisen from the use of
respirators while exposed to asbestos, silica or other occupational dusts on or after January 1, 1997.
To date, Aearo has elected to pay the annual fee. Aearo could potentially be exposed to additional claims for some
part of the pre-July 11, 1995 period covered by its agreement with Cabot if Aearo elects to discontinue its
participation in this arrangement, or if Cabot is no longer able to meet its obligations in these matters.
Developments may occur that could affect the estimate of Aearo’s liabilities. These developments include, but are not
limited to: (i) significant changes in the number of future claims, (ii) significant changes in the average cost of
resolving claims, (iii) significant changes in the legal costs of defending these claims, (iv) significant changes in the
mix and nature of claims received, (v) trial and appellate outcomes, (vi) significant changes in the law and procedure
applicable to these claims, (vii) significant changes in the liability allocation among the co-defendants, (viii) the
financial viability of members of the Payor Group including exhaustion of available coverage limits, (ix) the outcome
of pending insurance coverage litigation among certain other members of the Payor Group and their respective
insurers, and/or (x) a determination that the interpretation of the contractual obligations on which Aearo has
estimated its share of liability is inaccurate. The Company cannot determine the impact of these potential
developments on its current estimate of Aearo’s share of liability for these existing and future claims. If any of the
developments described above were to occur, the actual amount of these liabilities for existing and future claims
could be significantly larger than the reserved amount.
Employment Litigation
As previously reported, one current and one former employee of the Company filed a purported class action in the
District Court of Ramsey County, Minnesota, in December 2004, seeking to represent a class of all current and
certain former salaried employees employed by the Company in Minnesota below a certain salary grade who were
age 46 or older at any time during the applicable period to be determined by the Court (the “Whitaker” lawsuit). The
complaint alleges the plaintiffs suffered various forms of employment discrimination on the basis of age in violation of
the Minnesota Human Rights Act and seeks injunctive relief, unspecified compensatory damages (which they seek to
treble under the statute), including back and front pay, punitive damages (limited by statute to $8,500 per claimant)
and attorneys’ fees. In January 2006, the plaintiffs filed a motion to join four additional named plaintiffs. This motion
was unopposed by the Company and the four plaintiffs were joined in the case, although one claim has been
dismissed following an individual settlement. The class certification hearing was held in December 2007. On April 11,
2008, the Court granted the plaintiffs’ motion to certify the case as a class action and defined the class as all persons
who were 46 or older when employed by 3M in Minnesota in a salaried exempt position below a certain salary grade
at any time on or after May 10, 2003, and who did not sign a document on their last day of employment purporting to
release claims arising out of their employment with 3M. On June 25, 2008, the Minnesota Court of Appeals granted
the Company’s petition for interlocutory review of the District Court’s decision granting class certification in the case.
The Court of Appeals heard argument in the case on February 4, 2009. Under Minnesota rules, the Court has 90
days to issue a ruling. While the appeal is pending, all other activity on the case is stayed. No trial date or calendar of
pretrial proceedings has been set at this time.
A similar age discrimination lawsuit by a single former employee was filed in the District Court of Ramsey County,
Minnesota. As in the Whitaker lawsuit, the plaintiff claims he was subject to age discrimination in violation of the
Minnesota Human Rights Act (“MHRA”). He is also claiming he experienced gender discrimination in violation of the
MHRA. The plaintiff seeks unspecified monetary damages, including an award equal to three times his lost salary
and benefits, damages for emotional and mental distress, punitive damages (limited by statute to $8,500) and
attorneys’ fees. He also seeks injunctive relief. The case is assigned for trial before the district court judge who
certified the class in the Whitaker lawsuit and is set for trial in late March or early April 2009.
In addition, three former employees filed age discrimination charges against the Company with the U.S. Equal
Employment Opportunity Commission and the pertinent state agencies in Minnesota, Texas and California during
2005. Such filings include allegations that the release of claims signed by certain former employees in the purported
class defined in the charges is invalid for various reasons and assert age discrimination claims on behalf of certain
current and former salaried employees in states other than Minnesota and New Jersey. In 2006, one current
employee filed an age discrimination charge against the Company with the U.S. Equal Employment Opportunity
Commission and the pertinent state agency in Missouri, asserting claims on behalf of a class of all current and