A. H. Robins Co., the Richmond company that manufactured the defective Dalkon Shield birth-control device, yesterday filed for reorganization under the bankruptcy laws to cope with a flood of lawsuits filed by women injured by the product.
Robins' filing for bankruptcy protection will have the immediate effect of delaying about 5,100 pending suits seeking hundreds of millions of dollars in damages from the pharmaceutical company.
The move is similar to that taken by Manville Corp. when it filed for bankruptcy reorganization three years ago to deal with a wave of asbestos lawsuits that threatened to bankrupt the company. Like Manville, Robins said it is financially healthy but is seeking bankruptcy court protection because of "the continuing burden of litigation."
"Our businesses remain sound," company President E. Claiborne Robins Jr. said in a statement yesterday. "Today's filing does not mean the company is going out of business or that its assets will be liquidated."
But a Robins spokesman said the move was necessary because the thousands of Dalkon Shield lawsuits could result in a "serious cash-flow problem."
Said spokesman Roscoe Puckett, "We've got to be a viable company to meet the legitimate claims of present and future plaintiffs. We need an orderly process for this."
Attorneys representing women who were injured by the defective interuterine device attacked Robins' bankruptcy filing as a legal maneuver meant to hurt their clients.
"All they're trying to do is stall these cases further," said Aaron Levine, a Washington lawyer who said he will challenge the bankruptcy petition in court today. "This is a Manville-type ploy so, for five or six years, they don't have to pay these women while they build their profits back up."
After three years in bankruptcy proceedings, Manville this month agreed to settle its asbestos claims by setting up a $2.5 billion fund that will give asbestos victims 80 percent of the company's stock.
While Robins insisted the bankruptcy filing would not disrupt its operations, it could produce immediate repercussions for some of Robins' creditors. Payment on all those debts will be halted by yesterday's petition for protection under Chapter 11 of the federal bankruptcy law.
The biggest creditor, Central Fidelity Banks Inc., said Robins owes it $22 million and that Robins filing will reduce the bank's projected annual earnings by seven cents a share.
In addition, Robins owes $13 million in unsecured debt to Manufaturers Hanover Trust in New York, $9.8 million to unsecured debts to Lloyd's Bank in London and $3.5 million to Aetna Life & Casualty Co., its main insurer, according to the bankruptcy filing.
Trading on Robins stock was suspended by the New York Stock Exchange at 3:39 p.m. yesterday. Earlier in the day, widespread rumors set off a selling spree that sent the stock price plunging. It closed at $8 a share, down $2.75.
The bankruptcy filing further confirms the Dalkon Shield's status as one of the costliest consumer products ever marketed. Robins, a 119-year-old firm that markets such well-known merchandise as Chap Stick lip balm and Robitussin cough syrup, sold the Dalkon Shield to about 2.5 million women between 1970 and 1974.
Those sales have resulted in more than 14,000 lawsuits from women who claim to have suffered pelvic infections, sterility and involuntary abortions caused by the shield. At least 18 women who used the device died.
As of June 30, the company and its insurer, Aetna had paid out $378.3 million to dispose of about 9,230 of those cases and had spent another $107.3 million in legal fees and other expenses.
In April, in an attempt to calm growing doubts among investors, Robins set up a $615 million special reserve fund that it said it hoped would be enough to pay out all future claims against the company through the year 2002.
But the rash of publicity about the Dalkon shield claims only increased the number of lawsuits. An average of 371 new claims were filed every month during the first six months of 1985 -- more than double the rate of new claims in the previous year.
Robins had pinned its hopes on winning a court decision that would merge all the lawsuits pending against the company and set a single figure for punitive damages. Punitive damages, which can be as much as a jury wants to award, generally are given when juries find that a company acted recklessly.
That hope vanished on July 23, when U.S. District Court Judge Robert R. Merhige Jr. rejected the request to combine the lawsuits at the urging of the plaintiffs' lawyers.
Another major legal setback came last month when a jury in Kansas City awarded $7.5 million in punitive damage awards to a group of women. It was the largest damage award ever in a Dalkon Shield case.
Company spokesman Puckett said yesterday that the move by plaintiffs lawyers showed "we wouldn't have the necessary cooperation" to settle the Dalkon Shield cases and left the company with no alternative.
Robins last year reported record sales of $632 million and operating earnings of $128 million. But after setting up a reserve fund to pay shield claims, the company reported a loss of $461 million.
Robins executives say the company has acted with concern and responsibility in its handling of the Dalkon Shield. Robins says the shield, when used properly, is as safe and effective as any other IUD.