$2.47-Billion Dalkon Shield Fund Ordered

The company that marketed Dalkon Shield contraceptive devices must set aside $2.47 billion to pay off thousands of remaining injury claims, a federal judge said Friday in a two-minute announcement that could settle a lengthy and bitter legal wrangle dating back to the product’s use in the early 1970s.

The finding, which comes more than two years after A. H. Robins Co. filed for Chapter 11 bankruptcy protection under a torrent of lawsuits, left unclear when 200,000 women claimants might be compensated.

“It’s not over yet,” said Bradley Post, an attorney representing the women. “I would be very surprised if it wasn’t another year or more before any money flows out of the trust.”

Legal Nightmare

Claims by Dalkon Shield users of pelvic inflammation and other ailments have turned into a legal nightmare for Robins, a family-controlled company based in Richmond, Va., that began as a single drugstore in the 1860s. Just to process the demands for money, the U.S. District Court has hired an extra staff of about 70 clerical, statistical and scientific workers, who take up more than two floors of a downtown Richmond office building. Robins has already paid $520 million to resolve 9,400 cases.

In July, the company revealed plans for a $1.75-billion fund to settle the claims as part of its proposed merger with Rorer Group Inc., a large pharmaceutical company based in Fort Washington, Pa. The amount set Friday by U.S. District Judge Robert R. Merhige Jr. was greater than that but far less than the $7.2 billion demanded by some advocates for those who used the intrauterine device.

Aetna Life & Casualty Co., which insured the Dalkon Shield, previously estimated that the price tag for settling claims would be between $2 billion and $2.5 billion.

Robins marketed 3 million to 4 million of the dime-size contraceptives in the United States and dozens of foreign countries between 1971 and 1974. While about 200,000 cases are pending--nobody has an exact figure--observers have estimated that the number of serious injuries--some of which have required hysterectomies--is smaller, in the range of 30,000 to 50,000.

Robins’ bankruptcy reorganization must be endorsed by stockholders and creditors--including about 200,000 women who contend that they were injured by the contraceptive--before any payments would be made.

Another uncertainty related to Friday’s announcement stems from the fact that Rorer has reserved the right to back out of the merger if the contraceptive-related claims exceed $1.75 billion. But indications Friday were that the deal was moving ahead. Thomas R. Poe, a Robins spokesman, said he could provide “no hard and fast answer” on the status of the deal after the ruling but added, “I don’t foresee any major negative impact.”

Maker of Maalox

Rorer is best known as the producer of the antacid Maalox, in addition to other drugs and hospital products. Robins markets Robitussin cough remedy and Chap Stick lip balm. The merged company would be the nation’s sixth-largest over-the-counter drug concern.

Parties to the case raised questions about Merhige’s announcement and said they were waiting for him to explain it in writing.

Stanley K. Joynes III, an attorney appointed by the court to represent the interests of any Dalkon Shield users whose symptoms appear in the future, said it was not clear whether the $2.47 billion was meant to cover claims for symptoms that have yet to emerge. “Is it an estimate or is it a cap?” he asked. “We contend it’s merely an estimate.”

In addition, the announcement did not spell out how much time Robins has to dispense the cash, although a company attorney later said that seven years would be a reasonable period.

Keeping Merger Alive

Martin I. Klein, a New York attorney and expert on bankruptcy law, said the ruling reflected the judge’s wish to keep the merger plan alive, because the merger plan--in which beleaguered Robins joins a firm with deeper pockets--provides the most obvious way to settle the long-smoldering controversy. “Clearly, he didn’t want to come in with a number that was so high it would scuttle the proposed acquisition--because that’s really his only hope of settling this thing,” Klein said.