By Dietrich Knauth

NEW YORK A U.S. judge on Friday dismissed the bankruptcy of 3M subsidiary Aearo Technologies, rejecting an effort to resolve nearly 260,000 lawsuits alleging that 3M military earplugs caused hearing loss for veterans and U.S. service members.

U.S. Bankruptcy Judge Jeffrey Graham ruled that Aearo, as a well-supported subsidiary of 3M, enjoys a "greater degree of financial security than warrants bankruptcy protection."

The litigation against 3M and Aearo did not create any "impending" risk of insolvency, and there was no evidence that a settlement could not be reached outside of bankruptcy, Graham ruled.

3M and Aearo had argued that earplug litigation had spiraled out of control and could only be resolved in bankruptcy.

(Reporting by Dietrich Knauth; Editing by Kirsten Donovan)