RICHMOND, JUNE 5 -- Financing for a $1.75 billion trust fund to pay Dalkon Shield claims could collapse if banks underwriting the package pull out rather than open their books, a court was told today.
But an attorney for women allegedly injured by the intrauterine birth-control device suggested the banks themselves might collapse under the weight of unpaid foreign loans, thus making their letters of credit for the trust fund worthless.
The dispute prompted U.S. District Judge Robert R. Merhige Jr. to lash out at attorneys in the A.H. Robins Co.'s Chapter 11 bankruptcy case.
"We have spent two years of lawyers fighting lawyers," said Merhige, who is presiding over the Richmond-based drug manufacturer's reorganization with U.S. Bankruptcy Judge Blackwell N. Shelley. " . . . I think we're getting somewhere now, and I'm not going to let it get off track."
Robins, which sold the Dalkon Shield in the early 1970s, has been under court protection from creditors since August 1975.
The company filed a reorganization plan in April and submitted amendments to the plan today to resolve some of the complaints about the original proposal.
The plan's suggested $1.75 billion trust fund for Dalkon Shield claims would be financed through a letter of credit from a group of banks headed by Manufacturers Hanover Trust Co. and Chemical Bank.
The judges listened to motions filed by the two New York banks to quash efforts by the Dalkon Shield Claimants' Committee to obtain numerous bank records.
Attorneys for the banks said the claimants' lawyers went beyond what is reasonable in trying to get private records to establish the institutions' ability to fulfill their commitment.
"This is an attempt to scare us out of this transaction," said William J. Manning, Manufacturers Hanover's lawyer.
"They want to pry," said Manning, who added that his bank would withdraw its credit offer without some protection of its records.
"They want information that's none of their business," Manning said.
Harold Novikoff, representing Robins' trade creditors, said a pullout by the banks "will effectively destroy the plan."
But John Walsh of the claimants' committee said he would be doing Dalkon Shield victims a disservice by not ensuring that promised compensation can be paid.
He said loans made by Manufacturers Hanover to Brazil and Mexico could put the bank out of business if not paid.
Manning called the foreign loans issue "a smokescreen. . . . We're one of the most regulated organizations in the United States."
Merhige and Shelley did not rule on the banks' request but called the attorneys into chambers for a private meeting, after which Manning said the judges "gave us time to make peace."
Meanwhile, the amendments filed today to the reorganization plan provided that Robins would not contest whether the Dalkon Shield was defective in settling out-of-court claims. The company also agreed that the three independent trustees overseeing the claims process be appointed by Merhige.