Pfizer May Now Face State Court Asbestos Liability Suits

/ 19.Jun, 2012
On April 10th, the United States Court of Appeals for the Second Circuit, in In Re Quigley Company, Inc. decided that Pfizer can now face asbestos liability in state court over products once manufactured by its bankrupt subsidiary, Quigley, Co., thus continuing a dispute that has lasted for over 30 years. Quigley, Co. produced three products for the steel industry between 1940 and 1970 that contained asbestos.  In 1968,Pfizer purchased Quigly. The company ceased most of its operations in 1992 and filed for Chapter 11 bankruptcy in 2004.  Though Pfizer has said that it never made or sold any Quigley products, its logo had been used on the products made by Quigley. Early in Quigley’s Chapter 11 case, a dispute arose over whether Pfizer could be protected from Quigley-related lawsuits.  The bankruptcy court judge held that the scope of 11 U.S.C. § 524(g) of the bankruptcy code was broad enough to protect Pfizer from suits under the “apparent manufacturer” theory due to Pfizer’s parent-subsidiary relationship with Quigley.  But for such a relationship, Pfizer would not have been subjected to claims regarding Quigley’s asbestos products.  As a result, protection for Pfizer was appropriate. In 1999, Peter Angelos of the Law Office of Peter Angelos filed the lawsuits at issue in the Pennsylvania State Court.  Angelos argued that 11 U.S.C.§524(g) did not bar action directed against Pfizer as a third party because the relationship, in light of Quigley’s conduct or the claims asserted against it, must be a legal cause of or a legally relevant factor to Pfizer’s alleged liability.  Angelos argued that the API is inapplicable to the Angelos suits, because Pfizer’s liability as an “apparent manufacturer” under §400 hinges on the presence of Pfizer’s name and logo on Quigley’s products.  Pfizer’s ownership of Quigley is irrelevant.  The Court agreed with Angelos, stating, “We are confident that the Angelos reading of the statutory language at issue here is the correct one. Section 524(g) is designed to facilitate the reorganization and rehabilitation of the debtor as an economically viable entity, as well as make it possible for future asbestos claimants to obtain substantially similar recoveries as current claimants.  Barring the prosecution claimants bearing only an accidental nexus to an asbestos bankruptcy is less than tangentially related to that objective.”  The Court concluded that Pfizer’s ownership interest in Quigley is legally irrelevant to the Angelos §400 claims, and the API, modeled as it is on 11 U.S.C. § 524(g)(4)(A)(ii), does not enjoin the suits against Pfizer. Therefore, Pfizer may now face asbestos liability suits. The result of such a holding is that the Second Circuit is now limited in its use of § 524(g) injunctions in protecting non-debtors from asbestos-related claims arising out of the activities of the debtors.   – Mohamed N. Bakry, Esquire and Shilpa Kadoo (legal intern)