788 F.2d 994 (4th Cir. 1986), 85-2183, A.H. Robins Co., Inc. v. Piccinin

Docket Nº:85-2183 to 85-2186.
Citation:788 F.2d 994
Party Name:A.H. ROBINS COMPANY, INCORPORATED, Appellee, v. Anna PICCININ, Appellant. and Nancy Campbell, Kathryn Conrad, Jeanette Dicharry, Vernon Dicharry, Luisa Mosa, Stella J. Camp, John H. Camp, Helen Barnett, Michael Barnett, and Edna Lindsey Ruminiski, Defendants. Aetna Casualty and Surety Company, Intervenor/Appellee. In re A.H. ROBINS COMPANY, INCORPO
Case Date:April 10, 1986
Court:United States Courts of Appeals, Court of Appeals for the Fourth Circuit
 
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Page 994

788 F.2d 994 (4th Cir. 1986)

A.H. ROBINS COMPANY, INCORPORATED, Appellee,

v.

Anna PICCININ, Appellant.

and

Nancy Campbell, Kathryn Conrad, Jeanette Dicharry, Vernon

Dicharry, Luisa Mosa, Stella J. Camp, John H.

Camp, Helen Barnett, Michael Barnett,

and Edna Lindsey Ruminiski,

Defendants.

Aetna Casualty and Surety Company, Intervenor/Appellee.

In re A.H. ROBINS COMPANY, INCORPORATED, Debtor.

A.H. ROBINS COMPANY, INCORPORATED, Appellee,

v.

COMMITTEE REPRESENTATIVES OF DALKON SHIELD CLAIMANTS, Appellants.

Aetna Casualty and Surety Company, Intervenor/Appellee.

In re A.H. ROBINS COMPANY, INCORPORATED, Debtor.

A.H. ROBINS COMPANY, INCORPORATED, Appellee,

v.

Kathryn CONRAD, Luisa and Jack Mosa, Appellants.

In re A.H. ROBINS COMPANY, INC., Debtor.

A.H. ROBINS COMPANY, INC., Appellee,

v.

Anna PICCININ, Appellant.

Nos. 85-2183 to 85-2186.

United States Court of Appeals, Fourth Circuit

April 10, 1986

Argued Dec. 3, 1985.

Rehearing Denied May 14, 1986.

Page 995

C. Neal Pope (Max R. McGlamry, Pope, Kellogg, McGlamry, Kilpatrick & Morrison, Atlanta, Ga., Robert L. Dolbeare, Richmond, Va., on brief), for appellant Anna Piccinin.

H. Robert Erwin, Jr. (Pretl & Schultheis, P.A., Baltimore, Md., on brief) for appellants Kathryn Conrad, Luisa Mosa and Jack Mosa.

Mark C. Ellenberg (Murray Drabkin; Cadwalader, Wickersham & Taft, Washington, D.C., George B. Little, L.B. Cann, III, Little, Parsley & Cluverius, P.C., Richmond, Va., on brief), for appellant Committee of Representatives of Dalkon Shield Claimants.

Patrick A. Murphy (Penn Ayers Butler, Michael Kip Maly, Murphy, Weir & Butler, San Francisco, Cal., William R. Cogar, Bradfute W. Davenport, Jr., Clifford W. Perrin, Jr., James S. Crockett, Jr., Mays,

Page 996

Valentine, Davenport & Moore, Richmond, Va., on brief), for appellee.

Jan Z. Krasnowiecki, Pepper, Hamilton & Scheetz, Philadelphia, Pa., for intervenor.

Before RUSSELL and CHAPMAN, Circuit Judges, and SWYGERT, Senior Circuit Judge of the United States Court of Appeals for the Seventh Circuit, sitting by designation.

DONALD RUSSELL, Circuit Judge:

Confronted, if not overwhelmed, with an avalanche of actions filed in various state and federal courts throughout the United States by citizens of this country as well as of foreign countries seeking damages for injuries allegedly sustained by the use of an intrauterine contraceptive device known as a Dalkon Shield, 1 the manufacturer of the device, A.H. Robins Company, Incorporated (Robins) filed its petition under Chapter 11 of the Bankruptcy Code, 11 U.S.C. Secs. 101 et seq., in August, 1985.

Background

The device, which is the subject of these suits, had been developed in the 1960's by Dr. Hugh Davis at the Johns Hopkins Hospital in Baltimore, Maryland. 2 In mid-1970 Robins acquired all patent and marketing rights to the Dalkon Shield and engaged in the manufacture and marketing of the device from early 1971 until 1974, when it discontinued manufacture and sale of the device because of complaints and suits charging injuries arising allegedly out of the use of the device. The institution of Dalkon Shield suits did not, however, moderate with the discontinuance of manufacture of the device, since Robins did not actually recall the device until 1984. 3 By the middle of 1985, when the Chapter 11 petition was filed the number of such suits arising out of the continued sale and use of the Dalkon Shield device earlier put into the stream of commerce by Robins had grown to 5,000. More than half of these pending cases named Robins as the sole defendant; a co-defendant or co-defendants were named in the others. Prior to the filing, a number of suits had been tried and, while Robins had prevailed in some of the actions, judgments in large and burdensome amounts had been recovered in others. Many more had been settled. 4 Moreover, the costs of defending these suits both to Robins and to its insurance carrier had risen into the millions. A large amount of the time and energies of Robins' officers and executives was also being absorbed in preparing material for trial and in attending and testifying at depositions and trials. The problems arising out of this mounting tide of claims and suits precipitated this Chapter 11 proceeding.

The filing of the Chapter 11 petition automatically stayed all suits against Robins itself under section 362(a) of the Bankruptcy Code, even though no formal order of stay was immediately entered. See In re Larmar Estates, 5 B.R. 328, 330 (Bankr.E.D.N.Y.1980). But a number of plaintiffs in suits where there were defendants other than Robins, sought to sever their actions against Robins and to proceed with their claims against the co-defendant or co-defendants. Robins responded to the move by filing an adversary proceeding in which it named as defendants the plaintiffs in eight such suits pending in various state and federal courts. In that proceeding, the debtor sought (1) declaratory relief adjudging

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that the debtor's products liability policy with Aetna Casualty and Insurance Company (Aetna) was an asset of the estate in which all the Dalkon Shield plaintiffs and claimants had an interest and (2) injunctive relief restraining the prosecution of the actions against its co-defendants. Service of the summons and complaint in that adversary proceeding, a memorandum of law in support of the motion for a preliminary injunction therein, a notice of the debtor's intention to apply for a temporary restraining order, a copy of the proposed temporary restraining order and affidavits in support were duly mailed by first-class mail and by Federal Express to all the defendants and their attorneys at their addresses. See Bankruptcy Rule 7004 and Rule 4, Fed.R.Civ.P.

The debtor's application for a temporary restraining order and for the setting of a date for a hearing on the request for preliminary injunction in the adversary proceeding was heard ex parte by the district judge who had jurisdiction over the proceedings. 5 The district judge granted at the time a temporary restraining order in the proceedings and set a hearing on the debtor's application for a preliminary injunction. On that same day, Robins mailed by first-class mail and by Federal Express to all the defendants and their attorneys at their addresses "Notice of Hearing on Plaintiff's Motion for Preliminary Injunction."

At the hearing on the motion for a preliminary injunction, a number of defendants as well as the Committee constituted by the court to represent Dalkon Shield Claimants appeared by counsel. 6 At the commencement of the hearing the defendant Piccinin, a plaintiff in one of the Dalkon Shield actions which Robins sought to stay, filed through her attorney a written motion to dismiss as against her. No other defendant filed a motion in response to the motion for a preliminary injunction. After receiving certain testimony, admitting various records, and hearing arguments of parties, the district court granted Robins' request for a preliminary injunction.

In his order granting the preliminary injunction, the district judge found (1) that continuation of litigation in the civil actions threatened property of Robins' estate, burdened and impeded Robins' reorganization effort, contravened the public interest, and rendered any plan of reorganization futile; (2) that this burden on Robins' estate outweighed any burden on the Dalkon claimants caused by enjoining their civil actions; and (3) that all remaining insurance coverage in favor of the debtor under its liability policy issued by Aetna was property of the Robins' Chapter 11 estate. The district judge then held that all actions for damages that might be satisfied from proceeds of the Aetna insurance policy were subject to the stay pursuant to 11 U.S.C. Sec. 362(a)(3) and enjoined further litigation in the eight civil actions, pursuant to 11 U.S.C. Sec. 362(a)(1), (3) as supplemented by 11 U.S.C. Sec. 105.

Only the defendants Piccinin, the Mosas, and Conrad filed timely notices of appeal from the grant of the preliminary injunction. Their appeals, questioning the propriety of that preliminary injunction as against suits by Robins' co-defendants is the first of the issues now before this Court.

Some three weeks after entry of the preliminary injunction, Robins filed a motion for (1) a determination of trial venue of all Dalkon Shield suits, (2) identification of such Dalkon Shield cases as were "related to" the Chapter 11 case, and (3) transfer of such cases to the Eastern District of Virginia for trial. It also requested an expedited

Page 998

hearing on these motions. This request for an expedited hearing was granted and the expedited hearing was set ten days later. Notice of the hearing was given the Representatives of the Dalkon Shield Claimants Committee and the Unsecured Creditors Committee. The Committees and the defendants Piccinin, the Mosas and Conrad appeared by counsel at the hearing and joined in entering objections to the motion.

After a hearing on the motions, the district judge entered an order holding that (1) pursuant to 28 U.S.C. Sec. 1334(b), all actions based upon personal injury tort or wrongful death claims arising from the use of the Dalkon Shield were proceedings related to this Chapter 11 case over which this court had jurisdiction; (2) pursuant to 28 U.S.C. Secs. 157(b)(5) 7 and 1334(b), all such actions, wherever pending, were to be tried in the Richmond Division of the United States District Court for the Eastern District of Virginia; (3) all actions related to the Robins' Chapter 11 case now pending in any federal district court or subsequently removed to any federal district court, during the pendency of this Chapter 11 case, were to be transferred to this court [the Richmond Division of the United States District Court]; and (4) nothing in the order...

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