Reichel v. Dalkon Shield Trust (In Re A.H. Robins Co.) , 109 F.3d 965 ( 1997 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
In Re: A. H. ROBINS COMPANY,
INCORPORATED,
Debtor.
DENISE S. REICHEL; PHILIP T.
REICHEL; DEBRA A. BUTLER;
No. 95-1031
KATIE M. WADDELL; RICHARD K.
FELLOWS; VIVIAN FELLOWS,
Claimants-Appellants,
v.
DALKON SHIELD CLAIMANTS TRUST,
Trust-Appellee.
Appeal from the United States District Court
for the Eastern District of Virginia, at Richmond.
Robert R. Merhige, Jr., Senior District Judge.
(CA-85-1307-R)
Argued: March 5, 1996
Decided: March 26, 1997
Before RUSSELL and WIDENER, Circuit Judges, and
CHAPMAN, Senior Circuit Judge.
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Vacated and remanded by published opinion. Judge Widener wrote
the opinion, in which Judge Russell and Senior Judge Chapman
joined.
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COUNSEL
ARGUED: Anthony James Nemo, Sr., MESHBESHER & SPENCE,
LTD., St. Paul, Minnesota, for Appellants. Orran Lee Brown, Sr.,
Richmond, Virginia, for Appellee. ON BRIEF: Ronald I. Mesh-
besher, Michael J. Nemo, Sr., MESHBESHER & SPENCE, LTD.,
St. Paul, Minnesota; Theodore I. Brenner, BREMNER, BABER &
JANUS, Richmond, Virginia, for Appellants.
_________________________________________________________________
OPINION
WIDENER, Circuit Judge:
Certain Dalkon Shield claimants appeal the district court's order
holding that Claims Resolution Facility (CRF) § G.2 does not create
a presumption of causation in favor of the claimant, and that the rules
governing alternative dispute resolution (ADR) promulgated by the
Trust are consistent with the Debtor's Sixth Amended and Restated
Plan of Reorganization and related documents and are therefore
enforceable. While we conclude that CRF § G.2 does create a pre-
sumption of causation, we agree that the challenged ADR rules are
consistent with CRF § G.2. For the reasons that follow, we vacate and
remand.
On July 26, 1988, the district court approved the Debtor's Sixth
Amended and Restated Plan of Reorganization (Plan) and this court
affirmed that confirmation of the Plan on June 16, 1989. In re A.H.
Robins Co., 88 B.R. 742 (Bankr. E.D. Va. 1988), affirmed, 880 F.2d
694 (4th Cir.), cert. denied, 493 U.S. 959 (1989). The Plan established
a trust to compensate injured parties which was funded by the debtor,
A.H. Robins Company. Section 8.04 of the Plan requires all claimants
to follow the procedures set out in a document titled the Dalkon
Shield Trust Claims Resolution Facility (the CRF) to resolve their
claims.
The CRF gives claimants three options. Option 1 is intended to
resolve small claims with prompt payment to claimants and a mini-
mum of transaction costs for the Trust. The claimant elects this option
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by filing an affidavit attesting that she used the Dalkon Shield and
was injured or believes she may have been injured as a result of such
use, or, for non-users, they believe they may have been injured by the
use by another. The CRF provides that if Option 1 is selected, the
Trust waives all defenses to the claim except for duplication of
claims, previous payments, previous court disallowance, or late filing.
See CRF § C.
Claimants who choose Option 2 may be eligible to receive more
compensation based on fixed amounts for specified injuries catego-
rized and listed in Exhibit A of the CRF. Option 2 claimants must
attest to the specific injury or injuries they are claiming, answer addi-
tional questions under oath relating to Dalkon Shield use and injury,
and submit medical records or a physician's affidavit supporting the
claim. Under Option 2, the Trust again waives all defenses except
those available under Option 1 and invalidity of the information sub-
mitted to support the claim. See CRF § D.
Claimants who choose Option 3 may be eligible upon proper proof
to receive a greater amount of compensatory damages than allowed
under Options 1 and 2. The Option 3 claimant must complete a
detailed claim form and provide medical records or evidence of use
of the Dalkon Shield and all medical records of any injuries and dam-
ages alleged to have resulted from use of the Dalkon Shield. The
Trust then fully evaluates the claim and makes a settlement offer. If
the claimant rejects the settlement offer, the claimant may choose to
proceed through In-Depth Review/Voluntary Settlement Conference
or other voluntary alternative dispute resolution (ADR) process under
§ E.4 of the CRF.
Pursuant to its discretionary authority under the Claimants Trust
Agreement at § 4.03(b)(xii), in 1992 the Trust established the Rules
Governing Alternative Dispute Resolution. The rules were amended
in 1993 and again in 1994 (the First and Second Amended ADR
Rules). The original rules did not state specifically that the claimant
had the burden of proving that the alleged injury was caused by the
Dalkon Shield. However, both the First and Second Amended ADR
Rules added the provision that claimants have the burden of proving
that they suffered an injury that was caused by the use of the Dalkon
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Shield.1 If claimants continue to reject a settlement offer following
this initial form of alternative dispute resolution, they may then
choose either binding arbitration or traditional litigation. If a claimant
chooses arbitration, §§ E.5(a) and G.12 of the CRF provide that the
Trust may assert all available defenses except for absence of product
defect. If a claimant chooses traditional litigation, §§ E.5(b) and G.12
provide that all claims and defenses are available to both sides.
The appellants in this case are claimants with respect to injuries
caused by their own or another's use of the Dalkon Shield. All filed
Option 3 claims and all rejected early evaluation settlement offers and
elected to proceed to alternative dispute resolution. Claimant Philip
Reichel signed a contract under the Second Amended Rules for ADR.
The remaining claimants signed a contract under the First Amended
Rules for ADR. Before proceeding to alternative dispute resolution,
the claimants filed a motion in the district court asking the court to
interpret certain provisions of the ADR rules and the CRF as follows:
(1) CRF § G.2 governs the ADR process and requires the
Trust to presume that the injuries listed in CRF Exhibit A
are caused by the Dalkon Shield;
(2) First Amended Rule XII.G(2) and Second Amended
Rules 12.H(1) and 12.H(2), which ignore the presumption of
CRF § G.2, and place the burden upon claimants to prove
that the injuries listed in CRF Exhibit A were caused by the
Dalkon Shield, are inconsistent with the CRF;
(3) First Amended Rule XII.G(2) and Second Amended
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1 First Amended ADR Rule XII.G, captioned "Burden of Proof" states:
It is claimant's burden to prove by a preponderance of the evi-
dence that (1) she or he suffered an injury, (2) the injury was
caused by the use of the Dalkon Shield, and (3) she or he should
receive compensatory damages.
Second Amended ADR Rules 12.H.1.C and H.2.C captioned "Burden of
Proof" states essentially the same but divides the section into user and
non-user claimants. It omits "preponderance of the evidence," but leaves,
nevertheless, the burden on the claimant.
4
Rules 12.H(1) and 12.H(2) are void and unenforceable
because the Trustees are prohibited from adopting ADR
rules which are inconsistent with the CRF.
The district court held that the contested rules were not inconsistent
with CRF § G.2 because § G.2 applies only to a threshold or initial
evaluation process by the Trust and does not require the Trust to pre-
sume causation. Accordingly, the court concluded that because the
rules did not violate CRF § G.2, the implementation and enforcement
of the rules were within the authority of the Trust. 2
On appeal, the claimants assert that, in the prosecution of their
Option 3 claims, CRF § G.2 creates a presumption in favor of the
claimant, upon a showing of use of the Dalkon Shield, see CRF
§ E(1)(3), that an injury listed on Exhibit A was caused by the Dalkon
Shield. The claimants next assert that the First and Second Amended
ADR Rules are inconsistent with the § G.2 presumption of causation
and are therefore void and unenforceable.3
CRF § G.2 states:
2. Scheduled Compensable Claims. In determining
whether an injury could have been caused by the Dalkon
Shield and, therefore, could be eligible for compensation,
the Trust shall presume that the injuries listed in Exhibit A
are eligible for compensation. The Trust shall consider on a
case by case basis whether any injury not in Exhibit A is eli-
gible for compensation.
The district court reasoned that CRF § G.2"in no way requires the
Trust to presume causation; rather it directs the Trust to presume
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2 The record does not show affirmatively that the injuries involved in
this case are injuries listed on Exhibit A so that they would be entitled
to the presumption of causation under CRF § G.2. The parties have
treated them as such, and so do we.
3 Because the CRF is a part of the Plan which was approved by the
court, it must govern in the event of irreconcilable conflict between the
CRF and the ADR rules which were merely promulgated by the Trust.
We see no such conflict, however, as this opinion concludes.
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eligibility for compensation when a claimant possesses Exhibit A
injuries that ``could have' been caused by the Dalkon Shield." (italics
in original) To the contrary, we are of opinion that CRF § G.2 does
create a presumption of causation in favor of a claimant. This is not
to say that the presumption may not be rebutted.
In determining that § G.2 creates a presumption, we consider prin-
cipally, if not wholly, the language of the same. That section in rele-
vant part provides that
[i]n determining whether an injury could have been caused
by the Dalkon Shield and, therefore, could be eligible for
compensation, the trust shall presume that the injuries listed
in Exhibit A are eligible for compensation. (italics added)
The word "therefore" means "for that reason: because of that: on that
ground; to that end: CONSEQUENTLY." Webster's Third New Inter-
national Dictionary, 1971, p. 2372. The plain meaning of § G.2 then
is "whether an injury could be caused by the Dalkon Shield and, for
that reason, could have been eligible for compensation." Since the
reason an injury could be eligible for compensation is that it could
have been caused by the Dalkon Shield, it follows that the presump-
tion required under § G.2 that the injuries"are eligible for compensa-
tion" necessarily includes a presumption of cause, and we so hold.4
Certainly there could be no compensation for an injury not caused by
the Dalkon Shield. Indeed, the presumption of eligibility for compen-
sation which is imposed by § G.2 of the CRF absent the rational con-
nection of causation might itself be suspect. See Mobile, J. & K. C.
R. Co. v. Turnipseed, 219 U.S. 35, 43 (1910).
But that does not end the matter. We are left with the presumption
of causation and ADR Rules XII.G and 12.H which provide that the
claimant must prove cause. While the trust takes the view that the end
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4 In that connection, we note that the district court in a previous case,
In re: A. H. Robins Co. Inc., 131 B.R. 292, 297 (Bankr. E.D. Va. 1991),
reversed on other grounds, 972 F.2d 77 (4th Cir. 1992), construed § G.2
as we do here. And in In re: A. H. Robins Co. Inc., 197 B.R. 519 (Bankr.
E.D. Va. 1994), it construed § G.2 as it did in this case. As our opinion
sets out, we prefer its first construction.
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and effect of rules XII.G and 12.H is that there is no presumption
established by CRF § G.2, and the claimants take the view that the
presumption established by § G.2 makes inoperable the proof of cau-
sation required by Rules XII.G and 12.H, we think that neither is cor-
rect.
We commence with the proposition that we have held that § G.2
establishes a presumption of causation upon proof of the use of the
Dalkon Shield and an injury appearing in Exhibit A. Also ADR Rules
XII.E.1 and XII.G.1 provide that the Federal Rules of Evidence shall
not apply. That leaves to us the obligation to define the effect of the
presumption established by § G.2. We are of opinion that rule 704 of
the Model Code of Evidence of the American Law Institute (1942) is
the proper rule to apply here.
Rule 704. EFFECT OF PRESUMPTIONS.
(1) . . . when the basic fact of a presumption has been
established in an action, the existence of the presumed fact
must be assumed unless and until evidence has been intro-
duced which would support a finding of its non-existence or
the basic fact of an inconsistent presumption has been estab-
lished.
(2) . . . when the basic fact of a presumption has been
established in an action and evidence has been introduced
which would support a finding of the non-existence of the
presumed fact or the basic fact of an inconsistent presump-
tion has been established, the existence or non-existence of
the presumed fact is to be determined exactly as if no pre-
sumption had ever been applicable in the action. 5
Application of the presumption created by § G.2 and Rule 704
leaves this case in the same position as would have been the ordinary
civil case absent the Federal Rules of Evidence. A presumption, of
course, aids the party who seeks proof of the presumed fact. But the
presumed fact may be rebutted and, upon introduction of evidence
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5 No inconsistent presumption is involved in this case.
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which would support a finding of the non-existence of the presumed
fact, the case is left in the same situation as if no presumption had
ever been applicable.
To apply that rule to the case at hand, we must suppose, as do the
parties, that a claimant has introduced sufficient evidence to prove
that the woman involved used the Dalkon Shield and that her injury
was an injury listed in Exhibit A. Proof of those facts establishes the
presumption that the woman's injury was caused by the use of the
Dalkon Shield. If nothing else appears in the record, the finder of fact
must find that the injury was caused by use of the Dalkon Shield. But
the presumption may be rebutted, and if evidence is introduced which
would support a finding of the non-existence of cause of the injury
by use of the Dalkon Shield, then the existence or non-existence of
causation is to be determined exactly as if no presumption had ever
been applicable in this case.
Our application of the effect of the presumption in this case is con-
sistent with circuit precedent prior to 1975 when the Federal Rules of
Evidence were adopted. See Breeden v. Weinberger , 493 F.2d 1002,
1005-1006 (4th Cir. 1974), and Foster v. CIR, 391 F.2d 727, 735 (4th
Cir. 1968). Giving effect to a presumption favorable to a claimant, as
here, which is subject to rebuttal, yet which does not alter the scheme
of proof placing the ultimate burden of persuasion on the claimant, is
not different, for example, than the presumption, which may favor a
plaintiff, of scope of employment of an employee who acts on com-
pany time or of fraud of an attorney who deals to his advantage with
a client. See Western Union Telegraph Co. v. Phelps, 169 S.E. 574
(Va. 1933), and Nicholson v. Shockey, 64 S.E.2d 813 (Va. 1951).
In sum, a presumption of causation arises upon proof pursuant to
§ G.2 that the woman involved used a Dalkon Shield and that her
injury is one listed in Exhibit A. The effect of such a presumption
arising under § G.2 is that given in Rule 704 of the Model Code of
Evidence referred to in this opinion. Any such presumption is subject
to rebuttal, and the ultimate burden of persuasion rests on the claim-
ant.
The judgment of the district court is vacated and the case is
remanded for action not inconsistent with this opinion.
VACATED AND REMANDED
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