RICHMOND, AUG. 19 -- A federal judge today approved the filing of a $2.4 billion lawsuit that will seek to hold three executives of A.H. Robins Co. accountable for "misdeeds" and "gross negligence" in the Dalkon Shield case.
The chief targets of the suit, which was filed later today, are three inside directors of the 121-year-old, family controlled pharmaceutical manufacturer: Chairman E. Claiborne Robins; his son, President E. Claiborne Robins Jr., and former president William L. Zimmer III. The sum sought in the suit would go to the company, which is in bankruptcy.
Only Zimmer was in the courtroom when U.S. District Judge Robert R. Merhige Jr. granted permission to file the suit to the Dalkon Shield Claimants' Committee. The committee represents about 214,000 women who used the intrauterine contraceptive device and whose claims for damages have withstood initial screening.
The lawsuit also names as a defendant the accounting firm of McGladrey, Hendrickson & Pullen, which audited Robins' books. According to the suit, the firm knew or should have known key facts about a lack of conformity of Robins' financial statements with generally accepted accounting principles.
When the claimants committee filed the motion requesting permission to bring the suit, company spokesman Roscoe E. Puckett Jr. accused it of starting "a side show" and continuing "obstructionist tactics," all to the detriment of shield claimants. The accounting firm has denied any impropriety.
"The case for personal liability cries out to be made," claimants committee counsel Mark C. Ellenberg, a partner in Cadwalader, Wickersham & Taft, told the hearing on whether to allow the suit.
The judge agreed in a sharp exchange with Dennis J. Drebsky, special bankruptcy counsel for the company.
"A lot of people were hurt," Merhige said. "Your client would have saved itself millions of dollars if just one person had got up and said, 'We're sorry,' " and admitted that it had "made a product that injured people."
Merhige said he did not understand why no Robins executive had ever said anything of the kind, adding, "They can do it right now."
The judge also referred to a recent unanimous ruling in which the Kansas Supreme Court upheld a record $9.2 million award to a shield victim. The ruling said no appeals court in Kansas had ever "been presented with corporate misconduct of such magnitude and duration."
Robins sold millions of shields worldwide in the first half of the 1970s, but did not launch a recall campaign until October 1984. That was only 10 months before a wave of product-liability suits drove the company to seek protection under Chapter 11 of the bankruptcy law.
Drebsky, a partner in Skadden, Arps, Meagher, Slate & Flom, said that the company "is profoundly sorry and proposes to pay the claims."
Merhige responded, "That's not the same as recognizing that the product injured people." It would have helped, he continued, if the company had said, " 'Yes, we made a"Your client would have saved itself millions of dollars if just one person had got up and said, 'We're sorry,' " -- Robert R. Merhige Jr. product that, unfortunately, wasn't what we hoped it would be.' "
The suit alleged that starting in June 1970, when Robins bought the rights to make and sell the shield, the defendants "knew, or should have known" that the IUD was "poorly designed," inadequately tested and carried substantial risks -- particularly of life-threatening pelvic infections that could diminish or destroy fertility and cause birth defects in the victims' children.
For a decade after the company halted U.S. shield sales in mid-1974, the suit alleged, Chairman Robins, his son and Zimmer failed to recall the device despite mounting evidence of great hazards, to study the potential liability of the company, or to set up a reserve fund to deal with the soaring volume of claims.
While the company was paying out $110 million in dividends, the suit said, claims for punitive damages rose from $1.5 billion to $28.5 billion, and for compensatory damages from $753,654 to $5 billion. Meanwhile, the company's net worth plummeted from $240.3 million in 1978 to a negative $127.9 million in 1984, after deducting $615 million for a reserve for shield claims.
Ellenberg filed the lawsuit about 24 hours before the statute of limitations expires. If the deadline had been missed, certain causes of action in the complaint would have been barred.
Another individual accountability issue today concerned E. Claiborne Robins Jr.'s personal use of a company helicopter.
Murray Drabkin, counsel for the claimants committee, said Robins owed $227,597 to the company and asked the court's permission to sue him. Ralph R. Mabey, the examiner in the case, said the sum owed was $87,754.
Robins' counsel said the president conceded owing $18,748, but agreed to pay the $87,754. That resolved the dispute for the time being, but the amount could be contested later.
Merhige also allowed the claimants' committee to file suits intended to get millions of dollars in contributions to the bankrupt estate from Aetna Casualty & Surety Co., which had insured the shield, and from other carriers that had insured the IUD for Robins subsidiaries