Robins Runs for Shelter

The drugmaker files for bankruptcy to cope with the Dalkon Shield disaster

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Victims' lawyers are outraged at Robins' decision to go into bankruptcy proceedings. Says Sidney Matthew, a Tallahassee attorney: "The filing of this petition is in bad faith and is fraudulent. This is an attempt by Robins to escape responsibility for thousands of injuries." Agrees Wichita Lawyer Bradley Post, whose client won the $9.2 million verdict: "It's an unwarranted, inappropriate use of the judicial system."

! Many experts not involved in the case are also disturbed. Says Thomas Kerr, an associate professor of business ethics at Carnegie-Mellon University's Graduate School of Industrial Administration: "If the filing is a device to avoid paying as much in damages as the company would have without the bankruptcy proceeding, it is ethically questionable." But others argue that Robins' strategy will benefit victims in the long run if it keeps the firm from going under. "If the company is liquidated," says Lawrence King, a New York University law professor, "future claimants whose injuries have not come to light yet will get nothing. Even what the present claimants would receive in the event of liquidation might turn out to be much less than if they agreed to a deal that would allow the company to survive."

Those hurt by the Dalkon Shield can take some comfort in what has happened in the Manville case. Though the asbestos victims have already waited three years for compensation, the company's proposed $2.5 billion settlement is, in the opinion of some experts, probably more than the plaintiffs could have won by pursuing their suits individually. Under the plan, Manville shareholders would bear the brunt of the cost. They would have to put at least 50% and perhaps as much as 80% of their stock into a trust fund to settle the asbestos suits. Moreover, Manville has pledged that after three years it would turn up to 20% of its annual profits over to the fund if needed. Manville's stock has fallen from a 1981 high of 26 1/2 to 6 1/4 last week.

Robins' shareholders will not get off lightly. The firm's stock has dropped to 8 1/4 from a 1983 peak of 29 3/8. Since April, Robins has paid no dividends. Conceivably, the stockholders might have to give up a portion of their shares to a settlement fund, as in the Manville plan.

Some stock analysts are confident that Robins will overcome its Dalkon Shield ordeal. Says Louis Hannen of Wheat, First Securities in Richmond: "The company will survive in some form or other." Concludes Craig Dickson of Interstate Securities in Charlotte, N.C.: "Anything that allows Robins to separate its problems with the Dalkon Shield from its basic businesses will benefit the company, and probably all concerned."

Robins officials insisted last week that the firm was not trying to dodge its responsibilities. Says William Cogar, an attorney representing Robins: "We don't for a moment question that every business creditor for Robins will be paid and that every meritorious Dalkon Shield claimant will be compensated." The bankruptcy petition, in the company's view, is merely a way to buy time so that it can settle later.


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