Pfizer Inc.’s non-operating Quigley Co. won permission to end almost nine years in bankruptcy under a plan that resolves most asbestos claims against the former insulation maker and its parent, the world’s largest drugmaker.
U.S. Bankruptcy Judge Stuart Bernstein in Manhattan today approved a Chapter 11 plan under which Pfizer will contribute assets worth $964 million. He rejected a prior plan almost three years ago, saying Pfizer was improperly using Quigley’s bankruptcy to shield itself from asbestos claims.
“The current Pfizer contribution cures all the financial issues raised with the prior plan,” Bernstein said today, adding that the amount was increased by about $750 million.
The ruling means people like Brenda Hagerich, 62, of Hot Springs, Arkansas, may get payments on their claims. Hagerich, whose father died in 1999 of mesothelioma, said she has been waiting for a second distribution of a $125,000 payment.
Bernstein found in September 2010 that Pfizer’s proposed $216.2 million contribution to a prior plan wasn’t enough considering court testimony that Quigley may face $4.45 billion in claims over 42 years, and that asbestos claimants could have fared better by suing the company under civil tort law.
A company reorganizing in bankruptcy is shielded from lawsuits, including tort, or wrongful-injury claims. Once it emerges, it is a new legal entity and often can no longer be sued.
Separately this week, the U.S. Supreme Court ruled that Quigley’s bankruptcy doesn’t shield Pfizer from lawsuits filed against it under Pennsylvania state law by the Baltimore law firm of Peter Angelos.
Jay Goffman, a lawyer for Pfizer, told Bernstein today that while the ruling suggests his client will get more limited protection from Quigley’s bankruptcy, the company decided not to change an agreement that will pay unsettled claimants 23 percent of their claims. Pfizer was disappointed by the Supreme Court’s decision, spokesman Christopher Loder said.
“Pfizer has never been found derivatively or directly liable for injuries allegedly caused by Quigley’s asbestos-containing products,” Loder said. Higher court rulings on Pfizer’s liability have been “procedural” and do not “reach the merit of the underlying claims,” he said.
Quigley made asbestos-containing products from the 1940s to the 1970s, including Insulag, a powdered insulation. Pfizer, based in New York, bought the company in 1968.
It stopped most operations in 1992 and filed for bankruptcy in 2004, facing 160,000 lawsuits. Many also named Pfizer, whose name appeared on Insulag packaging.
Pfizer has said throughout the case that it never made or sold Quigley’s products and it doesn’t have liability for them. Asbestos, once widely used as an insulator, was later shown to cause cancer.
The U.S. Trustee, a bankruptcy watchdog for the Justice Department, sought to have the case thrown out in 2010, saying that while it’s pending, creditors with alleged asbestos-related health problems have been unable to sue Pfizer, and many have died.
Bernstein overruled the sole objection to the plan, from Wilentz, Goldman & Spitzer. The Woodbridge, New Jersey-based law firm called it yet another flawed plan after “nine years of afflicted deals” in which Pfizer has tried to buy votes.
Pfizer settled with some law firms, which agreed to give up any future claims against it and vote in favor of a reorganization in exchange for different amounts. As a result, some asbestos claimants will get more money than others, Wilentz said in court papers.
“Pfizer has taken itself out of the tort system for a decade on its subsidiary’s back and still has done nothing more creative than pay some claimants 90 percent of the value of their claims while paying others only 23 percent of that value,” lawyers for Wilentz wrote.
Pfizer called the objection “meritless,” in court papers, saying Wilentz appeared in the bankruptcy at the 11th hour to try and get a “sweetheart deal.”
Under the plan, Pfizer will contribute assets to a trust to cover claims, including a property leased to an Orange County, California, Anheuser-Busch distributor that will bring in income of about $2.1 million a year.
The case is In re Quigley Co., 04-bk-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).