Blum v. Unnamed (In re A.H. Robins Co.)

880 F.2d 779, 13 Fed. R. Serv. 3d 1239, 1989 U.S. App. LEXIS 8886
CourtCourt of Appeals for the Fourth Circuit
DecidedJune 16, 1989
DocketNos. 88-3219, 88-3221, 88-3223, 88-3224 and 88-3226
StatusPublished
Cited by4 cases

This text of 880 F.2d 779 (Blum v. Unnamed (In re A.H. Robins Co.)) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fourth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Blum v. Unnamed (In re A.H. Robins Co.), 880 F.2d 779, 13 Fed. R. Serv. 3d 1239, 1989 U.S. App. LEXIS 8886 (4th Cir. 1989).

Opinion

CHAPMAN, Circuit Judge:

The appellants, Barbara Blum, Ann Sa-mani and Gene Locks were named as three of the five trustees under the Daikon Shield Claimants’ Trust (“Trust”) which was created as a part of the Plan of Reorganization (“Plan”) of A.H. Robins (“Robins”) under Chapter 11 of the Bankruptcy Code. The Plan also created a Claims Resolution Facility (“CRF”) to handle the settlement of claims against Robins resulting from its manufacture and sale of the Dai-kon Shield. After hearing twenty hours of testimony in support and opposition of a motion by certain beneficiaries to remove all five trustees, the district court removed the three appellants. We find that the district court’s findings of fact are not clearly erroneous, and that these findings, under Virginia law, support the conclusion to remove the three appellants.

I

On August 21, 1985, A.H. Robins, Inc. filed its petition for reorganization pursuant to 11 U.S.C. §§ 101 et seq. Robins sought relief under the Bankruptcy Code because of its cash flow problems resulting from the cost of defending, litigating and paying thousands of claims brought against it by persons claiming damage from use of the Daikon Shield. During the bankruptcy, notice was given to claimants throughout the world that they must file claims in the bankruptcy proceeding, or their claims against Robins resulting from its manufacture and distribution of the Dai-kon Shield would be barred. As a result, several hundred thousand claims were filed. In order to keep records of these claims, the district court, which had retained jurisdiction over a number of questions and issues in the bankruptcy, created a record keeping and computer center under the management of the Clerk of the Bankruptcy Court for the Eastern District of Virginia. This facility employed approximately 20 people, and it became the repository of the information relating to claimants. It was an indispensable storehouse of information necessary to the eventual resolution of all claims.

After months of negotiations, a Sixth Amended and Restated Plan of Reorganization of A.H. Robins, Inc. was agreed upon and was submitted to all claimants and approved by an overwhelming majority of claimants in both number and amount. This plan called for the merger of Robins into a subsidiary of American Home Products, and the creation of a Claims Resolution Facility, a Claimants’ Trust and the Other Claimants’ Trust for the purpose of resolving and satisfying all claims brought against Robins as a result of the Daikon Shield. All claims arising from the Daikon Shield would be made against the Trusts and none of them would follow Robins after the merger.

The Plan provided for the appointment of five trustees and Barbara B. Blum, Kenneth R. Feinberg, Gene Locks, Stephen A. Saltzburg and Ann Samani were appointed and duly qualified. The Trust is to be funded in the amount of $2.3 billion. This amount will not be paid into the Trust until the Plan has been confirmed by the court [781]*781and all appeals challenging the Plan have been exhausted.

In March 1988, each of the five trustees were informed that they would be selected. The selection of trustees was made by the court upon recommendation of the Claimants’ Committee. On April 11, 1988 the court entered an order appointing the five trustees and on May 5, 1988 the court met with the trustees and tried to impress upon them the tremendous responsibility of handling such a large number of claims and such an enormous trust fund. He advised that he wanted them to “hit the ground running”. The court was anxious to promptly pay the liquidated claims of persons who had obtained judgments against Robins prior to the bankruptcy and to pay settlements that had been agreed upon pri- or to the bankruptcy. Interest on these claims was running as of January 1, 1988.

On July 25, 1988, the day that the confirmation order was entered approving the plan of reorganization, the district judge and the bankruptcy judge met with the five trustees and reiterated the necessity for handling the claims expeditiously. The trustees were also advised that this was a public trust, one of the largest ever created in the United States, and that the court had 'a role to play to be sure that valid claims were promptly paid.

Under § 3.03(c) of the Trust, it is provided:

A trustee may be removed from office by the Court upon its own motion, the motion of any Trustee, or the motion of at least 100 Beneficiaries represented by at least five independent and unaffiliated attorneys and a determination by the court that such removal is appropriate upon good cause shown.

On September 24, 1988 a motion was made to remove the trustees for the Dai-kon Shield Claimants’ Trust and the Daikon Shield Claims Resolution Facility. This motion was filed by five unaffiliated independent attorneys representing more than 1,800 Daikon Shield personal injury claimants. Thereafter, an additional 1,101 Dai-kon Shield personal injury claimants intervened in support of the motion, and at the trial more than 300 additional claimants, through their attorneys, were permitted to participate in the removal proceeding. The petition for removal of the trustees alleged in part that the trustees “are guilty of malfeasance, or at least misfeasance in the performance of their duties as set forth in the Claimants’ Trust Agreement.” In particular the moving parties are informed and believe that these acts consist of the following:

(1) The trustees have negligently failed to act prudently and expeditiously in setting up the Claims Resolution Facility.
(2) The trustees sought the employment of a managing consultant firm to advise them as to the deployment of the Claims Resolution Facility, which is a task they should be able to handle themselves without such assistance, if they have the requisite ability and background to justify their appointment as trustees. Such a request, in the opinion of the moving parties, underscores the trustees’ apparent lack of ability .and skill required to administer this trust fund.
(3) The trustees are opposed to having their activities supervised by this court for the protection of the Daikon Shield claimants.
(4) The trustees voted to appoint Murray Drabkin, and his law firm as legal representative of the Daikon Shield Trust Fund. The moving parties are informed and believe that some or all of the trustees have had long and close relationships with Mr. Drabkin, that such prior relationships improperly influenced the trustees to consent to Mr. Drabkin’s appointment as attorney for the trust fund that Mr. Drabkin and his firm have an inherent conflict of interest which precludes their legal representation of the fund, and that this act demonstrates that the trustees are not acting prudently in the best and sole interests of the Daikon Shield claimants, and
(5) Other acts of misfeasance and improprieties which have been disclosed by Mr. Mabey’s investigation and report to this court.

[782]*782A trial on the issue of whether the trustees should be removed was commenced on October 31, 1988 and twenty hours of testimony was taken. On November 28, 1988, the district court filed its Order and Memorandum removing appellants Blum, Locks and Samani as trustees, and retaining trustees Feinberg and Saltzburg.

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880 F.2d 779, 13 Fed. R. Serv. 3d 1239, 1989 U.S. App. LEXIS 8886, Counsel Stack Legal Research, https://law.counselstack.com/opinion/blum-v-unnamed-in-re-ah-robins-co-ca4-1989.