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3M legal team determined to unmask bogus N95 sellers

Dan Heilman//June 26, 2020

3M legal team determined to unmask bogus N95 sellers

Dan Heilman//June 26, 2020

A crisis tends to bring out of the woodwork people intent on exploiting that crisis, and that has been the case during the COVID-19 virus. But some local attorneys are every bit as intent on stopping them.

In-house counsel at 3M and outside counsel at Faegre Drinker Biddle & Reath in Minneapolis have been joining forces to find and quash profiteers who are selling 3M’s N95 face masks either without authorization or at inflated prices during the pandemic.

The Maplewood-based manufacturing giant has filed more than a dozen lawsuits against individuals and companies that are selling N95 masks at inflated prices, offering respirators that don’t exist and trying to pass counterfeit N95s.

“People come into the market who aren’t authorized 3M dealers,” said Haley Schaffer, 3M senior counsel. “These cases came to us at a time when the demand was far exceeding the supply. People from all over were looking for respirators, and before long we were getting queries about whether a certain seller was legitimate.”

N95 respirators and surgical masks are personal protective equipment used to protect the wearer from airborne particles and from liquid that could contaminate the wearer’s face.

Among the parties 3M has gone after in its effort to rein in unauthorized sales of the mask are:

  • KM Brothers Inc., a California company trading under several different business names, and “claimed to be reselling authentic N95 respirators, while actually selling damaged and fake goods at highly inflated prices,” according to 3M.
  • Preventative Wellness Consultants LLC, an Ohio company lied about ties to 3M to convince another business to act as its selling agent for 10 million 3M masks at $4.95 each.
  • Ron Romano, a New Jersey used car lot owner who promised to provide as a middleman 7 million masks to New York for $45 million — four times 3M’s list price.
  • A third-party seller on that used 3M’s trademark to sell $350,000 worth of masks at up to 20 times their suggested list price.

“People started reporting these outlets to us,” said Bill Childs, 3M senior counsel. “It became clear pretty early on that there were areas that were actionable either by us or by law enforcement.”

Childs said as the manufacturer, 3M typically wouldn’t have a private right of action to sue for price gouging.

“But we were able to go after people who were claiming to sell with our approval — claiming to be distributors of 3M products. Those are the bulk of the claims we’ve worked on.”

3M said it has won five temporary restraining orders and three preliminary injunction orders from courts across the country.

It has shut down more than 3,000 websites and 4,000 social media posts that try to expropriate the 3M brand for profit, the company explained.

Most of 3Ms N95 masks go to six primary health care distributors, according to Schaffer. Those companies work with FEMA and 3M to prioritize distribution to health care professionals and first responders who need them most.

Where the legal red flag pops up is when someone outside that network claims to have a surplus of the masks.

“Occasionally, a mom-and-pop shop will have inventory that’s left over from pre-COVID,” said Schaffer.

“But there aren’t big warehouses of respirators available for other parties to sell. That’s where we saw a vast majority of the illegal activity —people are claiming to have access to respirators, but they don’t.”

The 3M team fighting the bogus sellers was created by company general counsel Ivan Fong. The company’s legal department then formed a cross-functional team to bring its personal safety division, litigation attorneys, trademark attorneys, global security and compliance departments and teams from communications, business legal counsel and government affairs.

John Ursu of Faegre, which has filed a pair of legal actions related to the unauthorized sale of N95s, said he has been beyond impressed with how 3M has scored hit after hit on such a rapidly moving target.

“This is the best broken-field running I’ve seen from a group of in-house counsel,” he said. “They’ve been able to pivot into new areas of a massive gray market that popped up overnight and changes every day.”

Apart from the sellers who have been shut down, Childs said, 3M’s aggressive approach regarding its equipment seems to be having a deterrent effect.

“The goal is to pursue the people who are most egregious and also to deter others,” he said. “We’re seeing indications that people are being more cautious about claiming to be associated with us. We’re also seeing offers to sell where the prices aren’t as outrageous as before.”

That doesn’t mean the company is going to let up, though. Schaffer said the team doesn’t have an endgame in mind, preferring instead to keep the heat on bogus sellers as long as necessary.

“We’re going to continue to take action to stop counterfeiting, fraud, and price gouging so that the respirators will find their way to the people who need them most,” she said. “We don’t want people who need respirators to be sent down rabbit holes where there aren’t any.”

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