U.S. District Judge Robert R. Merhige Jr. today held a lawyer for Dalkon Shield plaintiffs in contempt of court for filing suit against A. H. Robins Co. after it entered bankruptcy.
Merhige also expressed impatience over the pace of the bankruptcy case and threatened to consolidate the lawsuits filed throughout the country by women who claim they were injured by Robins' Dalkon Shield intrauterine contraceptive device.
Merhige ruled that the plaintiffs' lawyer, Sidney L. Matthew of Tallahassee, Fla., violated the stay on litigation that took effect automatically after Robins entered bankruptcy on Aug. 21.
Matthew and Robins had settled a shield case, and Aetna Casualty & Surety Co., the former product-liability insurer for the IUD, had prepared a check for $150,000 to be given to Matthew. But before he got the check, Robins filed for reorganization under Chapter 11 of the bankruptcy code.
Aetna then refused to release the check to Matthew, claiming that it hadn't been legally "issued," so Matthew sued Robins in U.S. District Court in Miami. Merhige told Matthew this move was in contempt, because he had sought relief in a court other than the federal bankruptcy court in Richmond, where Merhige presides in the Robins case.
Merhige did not specify whether the contempt was civil or criminal, but ordered a presentence report and set March 28 for sentencing. Matthew said he will appeal.
In another development, shield plaintiffs' lawyer Dennis B. Conklin of San Francisco charged that Robins went into Chapter 11 solely to spare Vice President and General Counsel William A. Forrest Jr. and other unnamed executives from going to jail for "obstruction of justice, perjury, and subornation of perjury."
Merhige said he was "at a loss to understand" why Conklin didn't take his allegations to federal prosecutors. "Anyone who violated the laws ought to be prosecuted," the judge said.
Conklin made his accusation in arguing unsuccessfully for an end to Robins' voluntary bankruptcy. He said Robins was "in no financial distress" when it filed under Chapter 11 and that he can prove -- if Merhige would let pretrial discovery proceed -- that the Chapter 11 filing was "a sham and a fraud."
Robins lawyer Patrick A. Murphy of San Francisco told Merhige that the company is "ready, willing and able" to produce its top financial executive to testify "why it was a good-faith filing."
Conklin argued that the true purpose of the filing was to prevent pretrial discovery from finding evidence that would incriminate Robins officials. Conklin told the court that Forrest continues to draw a $400,000 salary as Robins' general counsel.
The discovery to which Conklin referred was being conducted by two special masters who were named by U.S. District Judge Frank G. Theis in Wichita, Kan., who has presided for a decade over discovery in numerous shield cases consolidated for that purpose.
Merhige indicated he will sign an order rejecting, on procedural grounds, Conklin's motion to dismiss the bankruptcy because of alleged bad faith by Robins.
Merhige, saying "I've had it, I've had it," with the slow pace of the case, promised to convert the shield litigation into a class action if the pace doesn't pick up.
Such a move -- once sought by Robins, but rejected by Merhige -- would result in a single trial in Richmond of shield lawsuits pending all over the United States.
All told, 5,100 U.S. shield cases were frozen by the litigation stay. The class action would bring to Richmond the large share of those cases in which punitive damages are sought, and possibly also the cases in which women seek only compensation for alleged shield injuries.
At the time of the Chapter 11 filing, Robins and Aetna had paid about $520 million to dispose of approximately 10,000 U.S. shield cases. On Jan. 6, Robins formally began a $5 million notification campaign in the more than 80 countries in which the shield was sold, announcing an April 30 deadline for filing claims. As a result of that campaign, about 150,000 claims have been filed.
Merhige announced he was creating an "overview committee" to speed up the proceeding.