3M 2013 Annual Report Download - page 109

103
trial, including seven of the eight cases tried to verdict (such trials occurred in 1999, 2000, 2001, 2003, 2004, and 2007), and
an appellate reversal in 2005 of the 2001 jury verdict adverse to the Company. The ninth case, tried in 2009, was dismissed
by the Court at the close of plaintiff’s evidence, based on the Court’s legal finding that the plaintiff had not presented
sufficient evidence to support a jury verdict. The plaintiffs appealed, but in February 2012 the California Court of Appeals
granted the plaintiff’s voluntary dismissal of the appeal.
The Company has demonstrated in these past trial proceedings that its respiratory protection products are effective as
claimed when used in the intended manner and in the intended circumstances. Consequently the Company believes that
claimants are unable to establish that their medical conditions, even if significant, are attributable to the Company’s
respiratory protection products. Nonetheless the Company’s litigation experience indicates that claims of persons with
malignant conditions are costlier to resolve than the claims of unimpaired persons, and it therefore believes the average cost
of resolving pending and future claims on a per-claim basis will continue to be higher than it experienced in prior periods
when the vast majority of claims were asserted by the unimpaired.
As previously reported, the State of West Virginia, through its Attorney General, filed a complaint in 2003 against the
Company and two other manufacturers of respiratory protection products in the Circuit Court of Lincoln County, West Virginia
and amended its complaint in 2005. The amended complaint seeks substantial, but unspecified, compensatory damages
primarily for reimbursement of the costs allegedly incurred by the State for worker’s compensation and healthcare benefits
provided to all workers with occupational pneumoconiosis and unspecified punitive damages. While the case has been
inactive since the fourth quarter of 2007, the court held a case management conference in March 2011. In November 2013,
the Attorney General of the State of West Virginia filed a motion to bifurcate the lawsuit into separate liability and damages
proceedings. A hearing on that motion is expected to occur in the first quarter of 2014. No liability has been recorded for this
matter because the Company believes that liability is not probable and estimable at this time. In addition, the Company is not
able to estimate a possible loss or range of loss given the lack of any meaningful discovery responses by the State of West
Virginia, the otherwise minimal activity in this case and the fact that the complaint asserts claims against two other
manufacturers where a defendant’s share of liability may turn on the law of joint and several liability and by the amount of
fault, if any, a jury might allocate to each defendant if the case is ultimately tried.
Plaintiffs have asserted specific dollar claims for damages in approximately 50% of the 1,321 lawsuits that were pending
against the Company at the end of 2013 in all jurisdictions. A majority of states restrict or prohibit specifying damages in tort
cases such as these, and most of the remaining jurisdictions do not require such specification. In those cases in which
plaintiffs choose to assert specific dollar amounts in their complaints, brought in states that permit such pleading, the
amounts claimed are typically not meaningful as an indicator of the Company’s potential liability. This is because (a) the
amounts claimed typically bear no relation to the extent of the plaintiff’s injury, if any; (b) the complaints nearly always assert
claims against multiple defendants with the typical complaint asserting claims against as few as a dozen different defendants
to upwards of 100 different defendants, the damages alleged are not attributed to individual defendants, and a defendant’s
share of liability may turn on the law of joint and several liability, which can vary by state, and by the amount of fault a jury
allocates to each defendant if a case is ultimately tried before a jury; (c) many cases are filed against the Company even
though the plaintiffs did not use any of the Company’s products and, ultimately, are withdrawn or dismissed without any
payment; and (d) many cases are brought on behalf of plaintiffs who have not suffered any medical injury, and, ultimately,
are resolved without any payment or a payment that is a small fraction of the damages initially claimed. Of the 667 pending
cases in which purported damage amounts are specified in the complaints, 391 cases involve claims of $100,000 or less (9
of which also allege punitive damages of $75,000, 27 of which also allege punitive damages of $10 million, and 3 of which
also allege punitive damages of $20 million); 53 cases involve claims between $100,000 and $3 million (45 of which also
allege punitive damages of $250,000, 3 of which also allege punitive damages of $1 million, and 1 of which also alleges
punitive damages of $4 million); 10 cases involve claims between $3 million and $7.5 million (all of which also allege punitive
damages of $5 million); 1 case involves a claim of $10 million; 170 cases involve claims of $10 million to $50 million (159 of
which also allege punitive damages of $13 million, 1 of which also alleges punitive damages of $15 million, 2 of which also
allege punitive damages of $20 million, and 8 of which also allege punitive damages of $90.5 million); 6 cases involve claims
of $50 million (all of which also allege punitive damages of $50 million); and 36 cases involve claims of over $50 million (all of
which allege punitive damages of $100 million). Some complaints allege that the compensatory and punitive damages are at
least the amounts specified. As previously stated, the Company’s experience and the other reasons cited indicate that the
damage amounts specified in complaints are not a meaningful factor in any assessment of the Company’s potential liability.
Respirator Mask/Asbestos Liabilities and Insurance Receivables: The Company estimates its respirator mask/asbestos
liabilities, including the cost to resolve the claims and defense costs, by examining: (i) the Company’s experience in
resolving claims, (ii) apparent trends, (iii) the apparent quality of claims (e.g., whether the claim has been asserted on
behalf of asymptomatic claimants), (iv) changes in the nature and mix of claims (e.g., the proportion of claims asserting
usage of the Company’s mask or respirator products and alleging exposure to each of asbestos, silica, coal or other
occupational dusts, and claims pleading use of asbestos-containing products allegedly manufactured by the Company),
(v) the number of current claims and a projection of the number of future asbestos and other claims that may be filed