The A. H. Robins Co. has opened a battle to defeat a federal government attempt to replace its management with a trustee while it is in voluntary bankruptcy and to have a court find Robins in contempt for improperly spending about $7 million.
The government petition, filed March 12 by Assistant U.S. Attorney S. David Schiller, accused Robins of "wilful and knowing" violation of a consent order barring payments without approval by the court. U.S. District Judge Robert R. Merhige Jr. signed that order after Robins -- citing massive litigation brought by women who had used its Dalkon Shield contraceptive device -- filed last Aug. 21 for Chapter 11 protection.
Robins has acknowledged it made payments without permission to former officers and some creditors without obtaining court permission.
On Wednesday, less than an hour before the U.S. Bankruptcy Court in Richmond closed for the day, Robins counsel William R. Cogar filed a motion asking Judge Blackwell N. Shelley to appoint an independent examiner to investigate the government's allegations. He also requested a stay of all proceedings, particularly the taking of depositions and other legal discovery, until the examiner would make a report to Shelley.
Accompanying the Robins motion was a notice that the company would bring its stay request up for a hearing at 8:30 a.m. yesterday -- about 16 hours after the papers were filed. The notice was signed by James S. Crockett Jr., a colleague of Cogar in the Richmond firm of Mays, Valentine, Davenport & Moore, which has been Robins' general counsel for shield matters since 1977.
But in court yesterday, Shelley, who hadn't known of the notice, said court rules required at least seven days' advance notification of concerned parties. Cogar claimed he had simply wanted a meeting in chambers about an urgent aspect of the case.
Stanley K. Joynes III, counsel for certain Dalkon Shield users, said that under an order Robins itself had requested, Judge Merhige had jurisdiction over its motion. Shelley agreed and postponed the issue.
Cogar also asked for an order appointing a substitute for Mays, Valentine, who would represent Robins only on Schiller's motion, which is set for an April 28 hearing before Merhige.
Mays, Valentine "has advised Robins that it cannot represent Robins with respect to the trustee motion because members of the firm likely will be witnesses in this matter," Cogar said. Nine days after Schiller's motion, Robins fired its special bankruptcy counsel, Murphy, Weir & Butler of San Francisco. Robins is seeking a replacement, but is now "effectively . . . without counsel," Cogar said.
Schiller's motion alleged that counsel for Robins advised the company regarding the improper payments and suggested sanctions for any attorney who advised Robins to violate a court order in the bankruptcy case. In a later action, Schiller objected to payment of attorney fees to Mays, Valentine, saying that "substantial and serious questions have arisen concerning the general counsel's conduct in this bankruptcy case." Cogar said that Schiller also has said that he will seek depositions from Mays, Valentine attorneys.
Cogar said Robins "is confident that Schiller's vague allegations of improper conduct . . . will be proven baseless."