U.S. District Judge Robert R. Merhige Jr. told a joke about a centipede to relieve the stiffness at a hearing in the Dalkon Shield bankruptcy case last month.

Some of the centipede's 100 legs moved ahead while others moved in various other directions, causing the insect to meander, Merhige said.

Troubled, the centipede sought advice from a wise old owl. "Turn yourself into a frog," said the owl.

The centipede tried hard to do so but couldn't. He returned to the owl for new advice, but the owl didn't want to be bothered.

"I just set policy," the owl said.

The meandering centipede could be seen as a metaphor for the A.H. Robins bankruptcy case, which entered its third year in a Richmond courtroom Friday.

Merhige has presided since the first day, when Robins, manufacturer of the Dalkon Shield intrauterine contraceptive device, filed for Chapter 11 protection from a tidal wave of shield lawsuits seeking tens of billions of dollars in punitive and compensatory damages. .

The filing was a transforming event in Merhige's life. He was 66, had been on the bench 18 years, and had talked of taking semi-retired status "at the least." Thus was thrust upon a judge inexperienced in the intricacies of bankruptcy law one of the biggest, most vexing Chapter 11 cases ever.

The case was also unique in human terms: The primary creditors were tens of thousands of women in dozens of countries who had been injured by the IUD, which Robins sold in the first half of the 1970s. Moreover, for many of the older victims whose biological clocks were running, the only hope of bearing a child lay in special medical care for which they needed money quickly.

To have managed the case to a swift end would have been a capstone to a lustrous judicial career. Merhige has both defenders and critics, and the verdict is not yet in on whether he has succeeded. But lawyers who follow the case say they frequently are surprised by his statements on the bench.

In the Robins case, Merhige was predicting as late as March 1986 that within six months the creditors would have confirmed a financial reorganization plan, and the victim compensation checks would be flowing. Now, 17 months later, no one knows when the case will end.

Last month, the judge expressed fervent hope that a new reorganization plan, the product of an intended merger of Robins with Rorer Group Inc., would merit court approval and win creditor confirmation. But Murray Drabkin, counsel to the committee representing shield claimants, has called confirmation "unlikely in the extreme."

The new plan would create two trusts that would pay up to $1.75 billion to shield victims. The key question is whether that sum is large enough to provide the "full" compensation pledged by the judge. The company says $1.75 billion will do it; Drabkin says it won't. But the evidence they and other parties have been gathering has been sealed by the judge until a hearing Nov. 5.

Merhige's goal has been to bring the case to resolution -- the emergence of Robins from bankruptcy with full payment of creditors. The Rorer merger plan comes after many twists and turns in the bankruptcy case, among them:

Last Nov. 4, Merhige ordered Ralph R. Mabey, the examiner in the case, to investigate whether the shield claimants had a viable legal basis for filing a lawsuit for damages against any present or former officers and directors of the company, and to report his findings to the court.

The statute of limitations for filing such a suit was to expire at the close of business last Thursday. Mabey gave no indication he would file his report in time so Drabkin took on the task of preparing a suit and drafting the necessary papers.

On Aug. 10, just before the deadline, Drabkin filed a motion asking Merhige to allow the Dalkon Shield Claimants Committee to sue three directors for $2.4 billion for "misdeeds" and "grossly negligent" conduct that led to the shield problems and the bankruptcy. The award would be paid into the company's treasury.

Last Tuesday Mabey filed his report, recommending that Merhige allow the suit. Merhige granted permission Wednesday and the suit was filed that day, naming as defendants Chairman E. Claiborne Robins; his son, President E. Claiborne Robins Jr., and former president William L. Zimmer III. Also named was Robins' accounting firm, McGladrey, Hendrickson & Pullen.

Last May, Merhige ordered a $15 million emergency fund to pay for reconstructive surgery and in vitro fertilization for up to 1,000 women who are nearing 40, about the end of their childbearing years. But the committee representing outside shareholders, claiming possible "irreparable injury," won a stay from the Fourth U.S. Circuit Court of Appeals, and the matter won't be argued until October.

Early last year the case was stalled for months after Robins was discovered to have paid millions of dollars out of the bankrupt company without court permission. The payments included $3 million in executive bonuses.

Assistant U.S. Attorney S. David Schiller asked Merhige to name a trustee to run Robins, to hold the company in contempt for knowingly violating court orders, and to compel key officers to show why they should not held in contempt. Schiller acted for the Internal Revenue Service, the largest single creditor.

On April 9, 1986, Merhige cheered the effort to take testimony from Robins executives, saying, "Get 'em under oath!" Schiller and Assistant U.S. Attorney Robert W. Jaspen then took 46 depositions in 35 days.

Merhige held four days of hearings in June 1986 and then held Robins in civil contempt. But he rejected pleas by Schiller and Drabkin, among others, to name a trustee or to punish Robins. At the same time, he created the position of an examiner who would have unusually broad powers, and subsequently Mabey was chosen by a Justice Department official.

Professor-emeritus Vern Countryman, who specialized in bankruptcy law at Harvard Law School, said in an interview, "Merhige talks out of one side of his mouth and does nothing out of the other. His rulings are never consistent with his talk."

Countryman said Robins' officers had shown "flagrant disregard" of their duties under the Bankruptcy Code and court orders, and that the $3 million in unauthorized bonus payments they paid themselves was alone sufficient "to justify a trustee" to run the company. He added that he was "perplexed" by Merhige's refusal to name one.

But Richard Lieb, a leading bankruptcy lawyer and scholar in New York City, said: "I think that the court's handling of the situation by the appointment of an examiner, rather than of a person who would have total control of the business, was an appropriate response.

Merhige seemed angry when he spoke again on the issue at a hearing last Wednesday. "Maybe they {the present officers} ought to have been discharged, and some should have been," he acknowledged. But he repeated his view that their money-making ability is so much to the benefit of shield claimants as to outweigh the benefits of replacing them with a trustee.

A major criticism of Merhige -- by persons who ask not to be identified -- is that he hasn't provided what they say a Chapter 11 case must have if it is to move apace: an environment in which a take-charge figure -- backed by the judge -- works out most disputes in head-knocking, behind-the-scenes sessions and goes to the judge for ratification of the agreements.

In some big bankruptcies, the take-charge figure has been the counsel for one of the official committees. In this case, it might have been U.S. Bankruptcy Judge Blackwell N. Shelley, who sits beside Merhige in court, and whose role has been mainly advisory. Instead, they say, poor personal chemistry among some of the lawyers has meant that they work out little by themselves and leave too much to Merhige to resolve.

One lawyer blamed Merhige for the poor chemistry and the inability of counsel to act. "He smothers everyone," the lawyer said. "He gets too involved in running the case, rather than just trying it."

Some critics complain about what they saw as Merhige's unusually lenient treatment of the company's special bankruptcy counsel, Skadden, Arps, Slate, Meagher & Flom, on the second occasion in nine months that the huge New York law firm got itself into difficulties.

Last year, Drabkin filed a complaint against Skadden after finding that it hadn't disclosed that its simultaneous representation of Robins and of the shield insurer, Aetna Life & Casualty Co.

Shelley then disqualified Skadden "unless and until" it dropped Aetna as a client. In the end, Aetna got Skadden off the hook by releasing it from representation.

Against this background, Skadden, in a last-minute motion in July, warned Merhige that Rorer would end merger negotiations unless he would issue a prompt order for reimbursement of Rorer's expenses -- possibly millions of dollars out -- if the merger attempt should fail.

At a court hearing, Mark C. Ellenberg, a partner of Drabkin in Cadwalader, Wickersham & Taft, and Stanley K. Joynes III, counsel for the committee of future shield claimants, accused Skadden of trying to intimidate Merhige. Joynes said it was "not true" that Rorer had made reimbursement a condition.

Obviously angered, Merhige told Skadden partner Dennis J. Drebsky: "I am not going to rule on cases where somebody puts a club over my head and says either we do it our way or {we} get out of the game. ... I am not going to rule while that sort of thing is hanging over the court."

Minutes later, Drebsky absolved Rorer and Robins of having had any role in his "flat-out incorrect warning" and apologized for it.

Merhige accepted the apology without reprimanding Drebsky, and closed the incident with a pledge that he and Shelley would approve "reasonable" reimbursement if the merger were to fail through no fault of Rorer's.

But often Merhige reacts to the vexations of the case by venting his irritation and anger in colorful terms.

In "By George!" tones, he reaffirms his oath to uphold the law ("the law is the law, is the law, is the law").

He severely criticizes some of the clients and counsel before him (a lawyer for the Federal Reserve System, Merhige said, made an "asinine" argument for withholding certain confidential documents).

He shows decisiveness, to the point on occasion of not waiting to hear the argument he has set on an issue before announcing the way he is likely to decide it.

While he can be impetuous, he has tried to heal any damage. If he concludes he was unfair or wrong, he apologizes unreservedly -- from the bench, face to face, or both.

At a hearing last July 10, for example, Merhige -- seemingly out of nowhere -- raised the possibility of removing Drabkin from the claimants committee.

But the ax never fell. In fact, Drabkin got an implied exoneration a few days later, when a reporter phoned Merhige's chambers in Richmond to ask two unrelated questions:

If the judge had known at the outset what he knows now about the Chapter 11 case, what -- if anything -- would he have done differently? And did he wish to comment on criticisms of his performance?

A law clerk said she was certain the judge could not respond under the Rules of Judicial Conduct, but asked the reporter to hold the line while she checked with him. She came back to confirm what she had said, but added: "He's sorry to have the criticism, but he said that's what's great about the First Amendment."

Merhige himself then picked up the phone. "I can't discuss" the case, he said. Then he offered a suggestion: ask Drabkin for comment.

Drabkin?

Some people think "we're at odds," the judge said, with no hint as to why anyone might think such a thing. "I think he's doing an excellent job.