A.H. Robins Co., Inc., In re

Decision Date20 June 1996
Docket Number95-2032,95-2236,Nos. 95-2239,95-2240,95-2033,s. 95-2239
Citation86 F.3d 364
PartiesIn re A.H. ROBINS COMPANY, INCORPORATED, Debtor. Paul W. BERGSTROM; A. Russell Blank; Thomas J. Brandi; Mari C. Bush; William D. Cook; Peter Danziger; Glenn A. Dorfman; J. Michael Egan; Paul E. Fagan; Michael Fields; Joseph S. Friedberg; Michael Friedman; William C. Gage; Abraham N. Goldman and Associates, Limited; Jeffrey Holl; James B. Hovland; Arthur C. Johnson; Charles Johnson; Rodney A. Klein; Martina Langley; Edward C.Y. Lau; Stan Linker; Henri E. Norris; Ralph Pittle; Michael A. Pretl; Ron Schnieder; Gregory J. Semanko; Sybil Shainwald; Andrew S. Zieve, Appellants, v. DALKON SHIELD CLAIMANTS TRUST, Trust-Appellee. In re A.H. ROBINS COMPANY, Incorporated, Debtor. Glenn A. DORFMAN, Appellant, v. DALKON SHIELD CLAIMANTS TRUST, Trust-Appellee. In re A.H. ROBINS COMPANY, Incorporated, Debtor. MEDICAL LEGAL CONSULTANTS OF WASHINGTON, Appellant, v. DALKON SHIELD CLAIMANTS TRUST, Trust-Appellee. In re A.H. ROBINS COMPANY, Incorporated, Debtor. LEVIN, FISHBEIN, SEDRAN & BERMAN, Appellant, v. DALKON SHIELD CLAIMANTS TRUST, Trust-Appellee. In re A.H. ROBINS COMPANY, Incorporated, Debtor. Michael R. TUCKER, Appellant, v. DALKON SHIELD CLAIMANTS TRUST, Trust-Appellee.
CourtU.S. Court of Appeals — Fourth Circuit

ARGUED: Benjamin C. Ackerly, Sr., Hunton & Williams, Richmond, Virginia, for Appellants. John Calvin Jeffries, Jr., University Of Virginia School Of Law, Charlottesville, Virginia, for Appellee. ON BRIEF: Lewis T. Booker, Tyler P. Brown, Hunton & Williams, Richmond, Virginia, for Appellants. George A. Rutherglen, University Of Virginia School Of Law, Charlottesville, Virginia; Orran Lee Brown, Richmond, Virginia, for Appellee.

Before RUSSELL and WIDENER, Circuit Judges, and CHAPMAN, Senior Circuit Judge.

Affirmed by published opinion. Senior Judge CHAPMAN wrote the opinion, in which Judge RUSSELL and Judge WIDENER joined.


CHAPMAN, Senior Circuit Judge:

Four hundred years ago William Shakespeare observed that lawyers "dream on fees." * During the ensuing centuries, few lawyers, even in their wildest dreams, have envisioned fees such as those that have resulted from mass tort litigation. This appeal is taken by 29 attorneys, who have represented claimants seeking recovery from the Dalkon Shield Claimants' Trust (Trust) for injuries sustained because of the use of the intra-uterine contraceptive device known as the Dalkon Shield and manufactured and marketed by A.H. Robins Company, Inc. (Robins). These 29 appellants-attorneys have already received fees in excess of $90,000,000 on claims that have been paid to their clients in excess of $270,000,000. Because claims of other clients are still pending, these amounts will increase.

It now appears certain that the Trust will have a sizable amount remaining after payment of all claims, and under its terms, claimants who received more than the de minimis amount of $750 will receive an additional payment or pro rata distributions with no additional effort by the claimants or by their attorneys. This additional payment will be as much as 75 percent of the original settlement amount for each claimant and may approach 100 percent, thereby doubling the settlement heretofore made. The district court, sitting in bankruptcy after having retained jurisdiction over the administration of the settlement of the Dalkon Shield claims, has limited attorneys' fees on these additional pro rata payments to ten percent. The appellants claim that the district court lacks jurisdiction to enter such an order and that there was no factual basis to support a reduction of their contingent fees from one-third or more to only ten percent of these additional funds. The total amount of additional fees to be collected by the 29 appellants based on a 75 percent pro rata payment would be $19,875,000, if the court's limit of ten percent is sustained. If the appellants receive a fee of one-third of the new payments, they will obtain additional fees in excess of $66,000,000. Under the district court's order, the 29 attorneys will have received total compensation of $110,000,000 resulting from the Dalkon Shield litigation, but they are appealing and assert that the district court has deprived them of due process of law by not allowing them to collect an additional $46,000,000. We find no merit to the appellants' contentions, and we affirm.


From early 1971 to 1974, Robins manufactured and sold worldwide an intra-uterine contraceptive device known as the Dalkon Shield. Manufacture and sale of this device stopped because of complaints and law suits of women claiming injuries arising out of its use. These law suits continued to multiply until the company was overwhelmed with the effort and the expense of defending and settling claims and paying judgments in state and federal courts throughout the land and in foreign countries. In August 1985, Robins filed a petition under Chapter 11 of the Bankruptcy Code. This stayed all suits against the company.

While attempting to reorganize under Chapter 11, Robins managed its affairs and operated its businesses as a debtor-in-possession under 11 U.S.C. §§ 1107 and 1108 with oversight by a court-appointed examiner. After extensive negotiations, a plan of reorganization dated March 28, 1988 (Plan), was filed accompanied by the Sixth Amended and Restated Disclosure Statement pursuant to § 1125 of the Bankruptcy Code. Under this Plan, Robins was merged into a subsidiary of American Home Products Corporation (AHP). The Plan created the Claims Resolution Facility (CRF), a Claimants' Trust and Other Claimants' Trust which were funded by AHP in the amount of $2.475 billion to pay the valid Dalkon Shield claims. Each Trust is non-reversionary, and the entire corpus and all interest and income earned thereon must be used to pay claims and the costs of administration. Each Trust is charged with the responsibility of evaluating each claim and deciding what amount, if any, to award the claimant. Any funds remaining after all claims and expenses have been paid is to be distributed pro rata to claimants in lieu of punitive damages, which are not otherwise available under the Plan. These pro rata payments will go to those claimants who did not accept Option 1, which provided quick settlement for minor claims and paid $725 on minimal proof of Dalkon Shield use and injury.

From the beginning, the United States District Court for the Eastern District of Virginia retained jurisdiction of most issues arising out of this bankruptcy and the United States District Judge and the United States Bankruptcy Judge have been sitting together and deciding those legal issues that have been presented. The district court has retained continuing supervision of the CRF and the Trust.

There has been great concern and difference of opinion as to the amount of money that would be required to fund the Trust so as to pay all valid claims and cover the cost of administration. Prior to approving the amount to be placed in the Trust, the district court, sitting in bankruptcy, heard expert testimony as to the total recovery value of all Dalkon Shield claims. The expert opinions ranged from 600 million dollars to 7 billion dollars. Attorneys for the claimants appealed the district court's finding that $2.475 billion would be sufficient, because their experts had insisted on a figure of 4.2 to 7 billion dollars.

We affirmed the district court's amount in In re A.H. Robins Co., 880 F.2d 694 (1989), cert. denied, 493 U.S. 959, 110 S.Ct. 376, 107 L.Ed.2d 362 (1989). The funds were contributed to the Trust by American Home Products, and the Trust began to pay claims. From the beginning, the Trustees were fearful that the money would not be sufficient and requested the district court to enter Administrative Order No. 1 of July 1, 1991, which included a hold back provision which provided in part:

... In order to assure the continued availability of funds to pay all valid Dalkon Shield personal injury claims, and in order to further the other proper purposes of the plan, Trust and CRF, in satisfaction of all awards and judgments ... obtained as a result of Arbitration or Litigation, the Trust shall

a. Pay initially only that portion of such award or judgment which does not exceed the greater of $10,000 or the final settlement offer made by the Trust under Option 3, Section E.4 of the CRF....

(Paragraph 13 of Administrative Order No. 1.)

Certain claimants appealed, and we approved this order In re: A.H. Robins, Inc., 42 F.3d 870, 872 (1994). At the same time, the Trustees also held back their compensation because of their concern as to the sufficiency of funds. However, as settlement of claims progressed, the need for such hold backs no longer existed and all amounts held back from payments to claimants have now been restored and paid in full.

The record reflects that the Trustees have done an excellent job of administration. They have minimized administrative expenses, engaged excellent financial consultants, and earned over $800,000,000 by investing the Trust funds. They have also set in place an effective regimen for evaluating and paying the valid claims of persons who suffered from use of the Dalkon Shield. The Claims Resolution Facility was designed:

to provide all persons full payment of valid claims at the earliest possible time consistent with the efficient design and implementation of the Claims Resolution Facility. This purpose is to be achieved by (1) providing an efficient economical mechanism for liquidating claims which favors settlement over arbitration and litigation thereby reducing transaction costs, (2) providing claimants with an attractive alternative to trial by jury where settlement is not achieved, (3) providing fair and equitable compensation based upon historic values, updated by current developments, to persons injured by...

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