In re AH Robins Co., Inc.
| Decision Date | 26 July 1988 |
| Docket Number | Bankruptcy No. 85-01307-R. |
| Citation | 88 BR 742 |
| Parties | In re A.H. ROBINS COMPANY, INCORPORATED, Debtor. |
| Court | U.S. District Court — Eastern District of Virginia |
William R. Cogar, Guys, Valentine, Davenport & Moore, Richmond, Va., Murray Drabkin, Cadwalader, Wickersham & Taft, Washington, D.C., for Dalkon Shield Claimants Committee, in its own right and on behalf of A.H. Robins Co., Inc.
John Waites, U.S. Trustee, Alexandria, Va.
S. David Schiller, Asst. U.S. Atty., Richmond, Va.
Mark Budnitz, S.E.C., Atlanta, Ga.
Michael L. Cook, Skadden, Arps, Slate, Meagher & Flom, New York City.
Robert M. Miller, David A. Strumwasser, Berlack, Israels & Liberman, New York City.
Harold S. Novikoff, Wachtell, Lipton, Rosen & Katz, New York City.
H. Sean Mathis, Jesup & Lamont Capital Corp., New York City.
Joseph S. Friedberg, Minneapolis, Minn., Theodore I. Brenner, Steven W. Bricker, Brenner, Baber & Janus, Richmond, Va., for Breland, et al.
Ross C. Reeves, Willcox & Savage, P.C., Norfolk, Va.
W. Scott Street, III, Williams, Mullen & Christian, Richmond, Va., for Aetna Cas. & Sur. Co.
M. Caldwell Butler, Woods, Rogers & Hazlegrove, Roanoke, Va.
George B. Little, Lawrence B. Cann, Little, Parsley & Cluverius, Richmond, Va.
Stanley K. Joynes, III, Rilee, Cantor, Arkema & Edmonds, Richmond, Va., for Future Tort Claimants.
Ralph R. Mabey, LeBoeuf, Lamb, Leiby & MacRae, Salt Lake City, Utah.
Peter A. Ivanick, LeBoeuf, Lamb, Leiby & MacRae, New York City.
Francis E. McGovern, Birmingham, Ala.
Michael A. Cooper, Sullivan & Cromwell, New York City.
Clifford Shoemaker, Vienna, Va.
Robert E. Manchester, Manchester & O'Neill, Burlington, Vt., John Cole Gayle, Jr., Richmond, Va., for Rawe claimants and Carolyn Abernethy, et al.
J. Hunt Brasfield, Alexandria, Va., Michael L. Goldberg, Washington, D.C., for Marcia Rubinroit, et al.
K. Daniel Heininger, Coudert Brothers, Washington, D.C.
Joseph F. McDowell, III, Cullity, Kelley & McDowell, Manchester, N.H.
Paul H. Silverman, Garrity, Connolly, Lewis, Lowry, Grimes & Silverman, New York City.
John T. Baker, Denver, Colo., J. Stephen Proffitt, III, Richmond, Va., Bradley Post, Wichita, Kan., for Pamela Reiter, et al.
Neal Batson, John C. Weitnauer, Atlanta, Ga.
George James Mallios, Mallios & Doyle, Austin, Tex.
MEMORANDUM IN RE CONFIRMATION ORDER
On August 21, 1985, A.H. Robins Company, Incorporated ("Robins") filed its petition for reorganization relief pursuant to 11 U.S.C. §§ 101 et seq. (the "Bankruptcy Code"). On that same day, this Court, upon representation that the major aspect of the case required the services of an Article III judge, withdrew the reference of this case to the Bankruptcy Court excepting for limited matters, thus retaining original jurisdiction in the District Court. See Northern Pipeline Co. v. Marathon Pipe Line Co., 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982).
By agreement, the undersigned, with few exceptions, conducted all proceedings jointly.
During this entire case, despite objections by interested parties, Robins was, pursuant to 11 U.S.C. §§ 1107 and 1108, permitted to and did manage its affairs as debtor-in-possession with monitoring by a court-appointed Examiner.
A full appreciation of the circumstances leading to the Court's instant consideration of the feasibility of the Debtor's "Sixth Amended and Restated Plan of Reorganization" in support of its motion for confirmation necessitates a condensed recitation of the events leading both to the petition of August 21, 1985 and to the matter now under consideration.
In June 1970, Robins, a pharmaceutical enterprise, engaged in the research, development, manufacturing, and marketing of prescription drugs and health care products on its own behalf through subsidiaries located both in the United States and in over 100 foreign countries, purchased from the Dalkon Corporation an intrauterine birth control device marketed as a Dalkon Shield.
The very essence of Robins' business operations involves major and consistent interaction with doctors, hospitals and other health care providers. The goodwill of individuals and organizations in the profession and business of health care is a major factor in the financial viability of the Debtor.
Robins and its subsidiaries distributed almost five (5) million Dalkon Shields throughout the United States and foreign countries until June, 1974 when the product was withdrawn from the United States market, and early 1975 when foreign sales were discontinued.
By the mid-1970's, numerous lawsuits alleging injuries associated with the use of the Dalkon Shield were filed against Robins, its officers, directors, employees, as well as its insurer, Aetna Casualty and Surety Company ("Aetna") and various other co-defendants, including hospitals and physicians.
By the time of filing of the instant proceedings, Robins was faced with almost 6,000 lawsuits and claims arising from the Dalkon Shield, and had by that period of time, along with Aetna, paid approximately $530 million in settlements or in satisfying judgments arising from Dalkon Shield claims.
Additionally, in 1977, Robins and its directors and officers, including William L. Zimmer, III, E. Claiborne Robins and E. Claiborne Robins, Jr., became the subject of a class action suit in 1977 by stockholders Kalman and Anita Ross, based on the alleged dissemination of false and misleading information, and failure to disclose other information, concerning the Dalkon Shield to purchasers of Robins' stock during the period of March 8, 1971 through June 28, 1974 (the "Ross Class Action"). The parties to the Ross Class Action agreed upon a settlement in 1984 pursuant to which Robins deposited $6.9 million with its attorneys under an escrow agreement (the "Escrowed Funds") and submitted the settlement in that amount to the Class Action Court. The Class Action Court had not ruled on the proposed settlement when Robins commenced its reorganization case on August 21, 1985.
In accord with the Ross Order, this Court authorized named plaintiffs Kalman and Anita Ross to vote as class representatives either acceptance or rejection of the Plan on behalf of the Ross Class Action plaintiffs.
Under the Plan, and to resolve a controversy regarding whether the Escrowed Funds are property of the estate, the claim of the plaintiffs in the Ross Class Action is limited to the Escrowed Funds.
As the Court has indicated, Aetna had been Robins' insurer covering compensatory damages arising from the use of the Dalkon Shield prior to March, 1979.
Robins and Aetna differed as to the extent of the coverage to be afforded Robins under its policy with Aetna, and in 1979 Robins brought suit against Aetna in reference to Aetna's coverage of Dalkon Shield alleged claims (the "Coverage Litigation"). Thereafter, Robins and Aetna entered into a settlement agreement wherein it was agreed that (a) Robins receive $70 million in additional insurance coverage, (b) Aetna would continue to handle and defend Dalkon Shield cases and claims on Robins' behalf and (c) certain releases were exchanged.
Aetna has filed in these proceedings a proof of claim seeking from the Debtor reimbursement of approximately $58 million and asserting as well, rights of contribution. Robins, in turn, has contended that it has available to it insurance coverage from Aetna in excess of Aetna's proof of claim.
The Court directed its Examiner to investigate the amount of insurance coverage available to Robins, including Aetna's, and to report on the propriety of the settlement between Aetna and Robins in the Coverage Litigation. After a lengthy investigation, the Examiner, Ralph Mabey, a former Bankruptcy Judge, concluded that the settlement of the Coverage Litigation was an arms-length, good faith resolution of the issues involved, and that the amount of the settlement was reasonable as a resolution of the disputed claims.
As the Court has indicated, the consequences of Robins' Dalkon Shield venture were devastating both from a financial aspect as well as from the physical suffering alleged to have resulted to hundreds of thousands of claimants, some of whom have established their claimed injuries as evidenced by a number of judgments rendered against Robins amounting to millions of dollars.
The evidence before the Court is that, immediately prior to the reorganization filing, the financial drain upon Robins' assets, coupled with declining employee morale and productivity, as well as Robins' inability to borrow money at a time of a serious cash flow deficiency, led to a late determination to seek protection under the Bankruptcy Code.
Promptly following the filing for reorganization, the Court authorized and approved the appointment of a number of official committees. Each of the committees, with court approval, retained counsel as well as other experts.
The official committees, Equity Security Holders' Committee, the Unsecured Creditors' Committee, the Dalkon Shield Claimants' Committee, a Future Claimants' Representative (collectively, the "Official Committees"), the U.S. Trustee, the United States Attorney, as well as other interested parties each contributed their views, with few exceptions, on literally every issue which arose during these proceedings.
Because the distribution of the Dalkon Shield to its ultimate users was not made by Robins, hence to a great extent claimants were unknown to Robins, a method of notice of the proceedings had to be devised which would conform to the requirements of due process.
On November 21, 1985, the Court entered an order (the "Bar Date order") establishing April 30, 1986 as the deadline for filing claims against Robins (the "Bar Date"). The claim filing process required those persons wishing to assert a Dalkon Shield claim to file initially, on or before the Bar Date, only a post card containing their name,...
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