Pfizer’s Quigley Wins Approval for Bankruptcy Plan Vote
Pfizer Inc. (PFE)’s non-operating Quigley Co. unit won permission to have creditors vote on a bankruptcy plan that would bar most asbestos claims against the two companies, as a judge said the issue of whether Pfizer bought votes will be addressed later.
U.S. Bankruptcy Judge Stuart Bernstein in Manhattan today approved Quigley’s sixth reorganization plan draft after objections that it won’t resolve whether Pfizer devised the plan in bad faith and manipulated the bankruptcy for its benefit.
An issue that keeps resurfacing -- whether Pfizer’s actions are “just another attempt to buy the vote” of asbestos claimants -- will be addressed at a trial when Quigley seeks final confirmation of its plan after a vote, Bernstein said.
His ruling may lead to an end to the seven-year Chapter 11 case over how the former maker of products for the steel industry and its parent, the world’s largest drugmaker, will resolve their liability for asbestos claims.
Under the draft plan, Pfizer would contribute assets to a trust to cover claims that Quigley’s past products caused asbestos-related injuries.
Asbestos claims against Quigley may total $4.45 billion over 42 years, according to testimony cited by Bernstein in September 2010, when he denied Quigley’s request to exit bankruptcy under a prior plan.
At the time, the court found Pfizer’s proposed contribution of $216.2 million wasn’t enough to pay asbestos claimants, who may have fared better by suing the company under civil tort law.
Pfizer has since increased its contributions, and in March 2011 a committee formed by asbestos claimants settled with Pfizer and will receive $800 million under the agreement.
The U.S. Trustee, an arm of the Justice Department that oversees bankruptcies, objected to the current disclosure statement, which describes how creditors would be treated. Concerns raised by Bernstein in his September 2010 ruling still haven’t been resolved, Tracy Hope Davis, the acting trustee, said in court papers.
In that ruling, Bernstein found Pfizer “wrongly manipulated the voting process to assure confirmation of the plan, and thereby gain the benefit of the channeling injunction” by giving some asbestos claimants incentives to vote in favor of the plan, Davis said.
Under the bankruptcy code, channeling injunctions allow companies to limit future liabilities by channeling them to a trust.
The current plan still doesn’t disclose whether settlements Pfizer made with asbestos victims are consistent with historic standards, and why asbestos claimants who settled their lawsuits against Pfizer before Quigley’s bankruptcy have a right to vote, Davis said.
It would only give some asbestos claimants 7.5 percent of what they seek and block them from making future claims against Pfizer under tort law, where they might get an estimated 23 percent of what they seek, Davis added.
Quigley, in bankruptcy since 2004, filed the sixth version of its plan June 29. It addresses an April appeals court ruling on how Pfizer can use Quigley’s bankruptcy to protect itself from asbestos claims. The court found that law firm of Peter Angelos can sue Pfizer based on manufacturer liability under Pennsylvania law.
The new plan’s exception for claims under state law would be null and void if the appeals court’s decision was modified on rehearing or by the Supreme Court, Quigley said in the plan.
Angelos began suing Pfizer in 1999, saying that because the drug company’s logo appeared on Quigley products, it should have liability for the asbestos-containing products.
Reaud, Morgan & Quinn LLP, a law firm that represents asbestos claimants, objected, saying Pfizer is paying $300 million more to the 40,000 claimants represented by the committee than it paid 193,000 earlier, to “settle the claims of the most outspoken opponents” of its reorganization plan.
Hissey Kientz LLP, a law firm which said it represents 3,200 claimants with diseases such as mesothelioma and lung cancer, joined in Reaud Morgan’s objection. A committee of unsecured creditors and Pfizer said they supported the current disclosure statement.
Albert Togut, a representative for people who haven’t yet manifested asbestos-related illnesses but will do so in the future and bring claims against the trust, said in court papers that he was still resolving issues with Quigley and Pfizer.
Christopher Loder, a Pfizer spokesman, said the company is “pleased with the court’s decision to approve Quigley’s disclosure statement” and looks forward to moving ahead with the bankruptcy.
Quigley, founded in 1916, made three products for the steel industry from the 1940s to the 1970s that contained asbestos. Pfizer bought Quigley in 1968. The unit stopped most operations in 1992 and filed for bankruptcy in 2004.
Pfizer has said it never made or sold any Quigley products. Some claimants haven’t released Pfizer from alleged derivative liability, according to the company.
Under the sixth amended plan, Pfizer will contribute $260 million in cash to a trust that will pay most future asbestos claims brought against it and Quigley. Pfizer will also forgive a secured claim of $95 million against Quigley, a loan of $19 million to Quigley, and an unsecured claim of $33 million. It will contribute insurance benefits that cover asbestos personal injury claims.
Pfizer will also contribute a property leased to an Orange County, California, Anheuser-Busch distributor to pay asbestos claims. The property has an estimated value of $43.6 million and produced cash flow of $1.9 million in the first 12 months since Pfizer acquired it, according to court papers.
The committee of asbestos claimants asked in 2010 to have the bankruptcy dismissed so it could bring tort claims, which are otherwise blocked by bankruptcy law.
The U.S. Trustee also in 2010 asked the bankruptcy court to end Quigley’s Chapter 11 case, citing the fact that creditors alleging asbestos-related health issues have been unable to sue New York-based Pfizer during the case, and many have died.
The case is In re Quigley Co., 04-15739, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The appeals case is 11-2635, 11-2767, U.S. Court of Appeals for the Second Circuit (Manhattan).
To contact the reporter on this story: Tiffany Kary in New York at firstname.lastname@example.org.