A federal judge yesterday ordered a halt to thousands of lawsuits against the A. H. Robins Co. while he began to sort out a thicket of legal issues raised by the company's petition for reorganization under the bankrutpcy laws.
In a hearing before U.S. Judge Robert Merhige, lawyers for some of the women suing the Richmond-based firm over the Dalkon Shield birth-control device protested the bankruptcy filing and promised to challenge it. In addition, the National Women's Health Network, a Washington-based advocacy group, said it will petition Merhige's court today to block the bankruptcy filing on grounds of fraud because Robins, by its own admission, is not an insolvent company.
Some legal experts said yesterday that the bankruptcy filing could end up backfiring against the company. These experts said that, because of recent changes by Congress, the company ultimately will be unable to achieve the relief from huge punitive damage awards that it is seeking.
The move did have the initial effect of giving the pharmaceutical firm the breathing time it wanted, however.
"My understanding of the law is everything is stayed in every court," said Merhige, in a previously scheduled hearing on Dalkon Shield cases in Richmond.
"It was obvious this was coming," Merhige told about 24 lawyers at the hearing. "You knew it, you knew it, you knew it. I think it will turn out all right. It was inevitable."
Although it is otherwise financially healthy, Robins said on Wednesday it was filing for bankruptcy relief because it is unable to cope with an unrelenting onslaught of lawsuits from women who claim they suffered pelvic infections, sterility, involuntary abortions and other injuries from the Dalkon Shield.
Robins, a 119-year-old company that markets such well-known products as Chap Stick lip balm and Robitussin cough syrup, sold the Dalkon Shield to about 2.5 million women between 1970 and 1974, when it was withdrawn from the market.
Since then, the company and its insurer have paid out $378.3 million to settle 9,230 of the lawsuits. But another 5,100 suits are pending, and "the company anticipates a substantial number of new cases and claims in the future," the firm said in a statement.
Two Wichita, Kan., lawyers who have filed more than 200 lawsuits against Robins since 1975 said after Merhige's hearing that they would oppose the bankruptcy petition on the grounds that it is "totally unjustified."
"It's an attempt to prevent them from reaching into their corporate coffers," said lawyer Arden Bradshaw. "It's a sham."
Merhige is, for now, the key player in the Robins case because he has ultimate jurisdiction over the company's petition in bankruptcy court in Richmond. In what a company official said was a move to expedite the proceedings, Robins had moved on Wednesday that the bankruptcy case be transferred immediately into Merhige's courtroom.
Even before the bankruptcy filing, Robins' publicly expressed legal strategy was to have Merhige merge all the Dalkon Shield lawsuits into one class-action suit and then gain a single ruling on the question of punitive damages. The company had contended that the piecemeal awarding of punitive damages -- there have been 11 separate punitive damage awards against the company totaling nearly $24 million -- was a legal "wild card" that was unfair to the company.
Punitive damages are "the pot of gold at the end of the rainbow that every plantiff's counsel has always been seeking," said Robins spokesman Roscoe Puckett. "We think we are entitled to a single proceeding that will resolve this issue. We don't think Robins or any other company should be subjected to repetitive punitive damage awards."
But Robert J. Rosenberg, a bankruptcy expert who advised plaintiffs' lawyers in Manville Corp.'s bankruptcy case, said there was no legal basis to deny a plaintiff an individual trial on punitive damages merely because the company being sued has filed for bankruptcy. Rosenberg noted that changes in the bankruptcy laws enacted by Congress last year clarified that personal injury claimants are entitled to a jury trial even if a company is in bankruptcy.
"Robins will have to live with that," said Rosenberg, a New York lawyer. "The filing for bankruptcy should make no difference on the punitive damage issue."
The change in the bankruptcy law was a major factor that forced Manville Corp. to agree to a surprisingly generous settlement with thousands of plaintiffs suing it over alleged asbestos injuries, according to Rosenberg.
Manville, often cited as a precedent for the Robins case, had filed for bankruptcy protection three years ago in part to avoid paying out huge punitive claims. But earlier this month, the company agreed to a settlement that will provide an open-ended fund of $2.5 billion to pay off asbestos claimants. The fund is to be financed with up to 80 percent of the company's stock plus 20 percent of its annual profits indefinitely.