A.H. Robins Co. v. Piccinin

788 F.2d 994 (1986)


The Dalkon Shield was invented in the 1960's. P 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 number of such suits arising out of the continued sale and use of the Dalkon Shield had grown to 5,000. The problems arising out of these claims and suits precipitated a Chapter 11 filing. The filing automatically stayed all suits against P under section 362(a) of the Bankruptcy Code, even though no formal order of stay was immediately entered. To handle the suits where there were other defendants besides P, P filed an adversary proceeding seeking injunctive relief restraining the prosecution of the actions against its co-defendants. The district judge found (1) that litigation in the civil actions threatened property of P's estate, burdened and impeded P's reorganization effort, contravened the public interest, and rendered any plan of reorganization futile; (2) that this burden on the estate outweighed any burden on the 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 court ruled 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. § 362(a)(3) and enjoined further litigation in the eight civil actions, pursuant to 11 U.S.C. § 362(a)(1), (3) as supplemented by 11 U.S.C. § 105. D appealed.