Pfizer, Inc. v. Angelos (In re Quigley Co.)

Decision Date10 April 2012
Docket Number11–2767.,Nos. 11–2635,s. 11–2635
Citation56 Bankr.Ct.Dec. 78,676 F.3d 45
PartiesIn re QUIGLEY COMPANY, INC.Pfizer Inc., Appellant,Quigley Company, Inc., Debtor–Appellant, v. Law Offices of Peter G. Angelos, Appellee.
CourtU.S. Court of Appeals — Second Circuit

OPINION TEXT STARTS HERE

Sheila L. Birnbaum, Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York (Jay M. Goffman, George A. Zimmerman, Bert L. Wolff, on the brief) for Appellant.

Michael L. Cook, Schulte Roth & Zabel LLP, New York, New York (Lawrence V. Gelber, on the brief) for DebtorAppellant.

Jeffrey L. Jonas, Brown Rudnick LLP, Boston, MA (Edward S. Weisfelner, Brown Rudnick LLP, New York, NY; James W. Stoll, Thomas H. Montgomery, Brown Rudnick LLP, Boston, MA, on the brief) for Appellee.Thomas A. Pitta, Lowenstein Sandler PC, Roseland, NJ (Jeffrey Prol, Adrienne L. Isacoff, Michael T.G. Long, on the brief) for amici curiae Hissey Kientz L.L.P. and Hissey, Kientz & Herron P.L.L.C.

Before: WALKER, STRAUB, and LIVINGSTON, Circuit Judges.

LIVINGSTON, Circuit Judge:

This case requires us to address the scope of federal bankruptcy jurisdiction over suits against non-debtor third parties, as well as the scope of a stay issued pursuant to 11 U.S.C. § 524(g)(4). In reaching these questions, we are also called upon to clarify our own jurisdiction to hear appeals from decisions of district courts reviewing bankruptcy court orders.

Appellant Pfizer Inc. (“Pfizer”) and Debtor–Appellant Quigley Co., Inc. (Quigley) (collectively Appellants) appeal from a judgment entered May 23, 2011 in the United States District Court for the Southern District of New York (Holwell, J.) reversing the Clarifying Order of the bankruptcy court (Bernstein, C.J.) and holding that Appellee Law Offices of Peter G. Angelos (Angelos) may bring suit against Pfizer for claims based on “apparent manufacturer” liability under Pennsylvania law. We determine that we have jurisdiction to hear the appeal; that the bankruptcy court had jurisdiction to issue the Clarifying Order; and that the Clarifying Order does not bar Angelos from bringing the suits in question against Pfizer. Accordingly, we affirm the district court.

BACKGROUND

Quigley was involved in the manufacture of “refractories,” which are “materials that retain their strength at high temperatures.” In re Quigley Co., Inc., 449 B.R. 196, 198 (S.D.N.Y.2011) (District Court Opinion). In the decades from the 1930's through the 1970's, some Quigley products, including a product known as “Insulag,” which was primarily used as an insulator in high heat environments, contained asbestos. Id. Pfizer acquired Quigley in 1968, the latter becoming Pfizer's wholly-owned subsidiary. Id. Post-acquisition, various marketing materials for Quigley products, including Insulag, “began to include the Pfizer name, logo, and trademark.” Id. After the hazardous effects of asbestos became widely known, more than 160,000 plaintiffs filed asbestos-related suits against Quigley. Id. at 199. Many of these suits also named Pfizer as a defendant. Id. Quigley filed for Chapter 11 bankruptcy in 2004. Id.

Important to the instant litigation are a number of insurance policies that Quigley and Pfizer share (Insurance Policies) as well as “the funds contained in a certain insurance trust under which Quigley and Pfizer are joint beneficiaries” (“Insurance Trust”). Original Preliminary Injunction (“OPI”) at 3. As found by the bankruptcy court, Pfizer and Quigley have used and may continue to use the policies and the trust “to satisfy settlements, judgments and defense costs related to ... Asbestos Related Claims.” Id. The Insurance Policies and Insurance Trust cover claims against Pfizer or Quigley “on a first billed, first paid basis, irrespective of amounts previously billed by or paid to Pfizer or Quigley.” Id. Quigley contemplates that “the remaining limits under the Shared Insurance Policies and the amounts contained in the Insurance Trust ... will be used to fund [its] pre-negotiated plan of reorganization.” Id.

In 2004, the bankruptcy court granted Quigley's motion for a preliminary injunction (the OPI), pursuant to 11 U.S.C. §§ 105(a) and 362(a), enjoining “all parties ... from taking any action in any and all pending or future Asbestos Related Claims against Pfizer during the pendency of Quigley's chapter 11 case.” Id. at 5–6. The goal of the OPI was to prevent “depletion of the Shared Insurance Policies and the Insurance Trust assets,” which would “cause immediate and irreparable injury to Quigley's estate and impair Quigley's ability to implement its pre-negotiated chapter 11 plan and successfully reorganize under chapter 11.” Id. at 4. The OPI allowed a party asserting that “it holds an Asbestos Related Claim solely against Pfizer based on a product having no relation to Quigley” to obtain relief from the injunction by demonstrating to the bankruptcy court's satisfaction that such claim truly arose from a product having no relation to Quigley and also that the Insurance Policies and Insurance Trust “could not be utilized to satisfy any portion of the defense costs, settlements or judgments” related to the claim and would not be “diminished or impaired by [its] prosecution.” Id. at 6.

In 2007, the bankruptcy court modified the preliminary injunction “to parallel the more limited ... injunction” contemplated by Quigley's proposed reorganization plan. In re Quigley Co., Inc., Bankruptcy No. 04–15739(SMB), 2008 WL 2097016, at *2 (Bankr.S.D.N.Y. May 15, 2008) (“Clarifying Order” or “CO”). As set out in the bankruptcy court's order, the Amended Preliminary Injunction (“API”) tracked the language of § 524(g)(4)(A)(ii) of the Bankruptcy Code. Section 524(g) authorizes bankruptcy courts in asbestos-related bankruptcies to enter, in connection with confirmation of a reorganization plan, an injunction channeling certain classes of claims to a trust set up in accordance with the plan. The trust makes payments to both present and future claimants, thereby helping to ensure that legitimate claimants against the bankruptcy estate who develop symptoms of asbestos-related disease years after the estate's assets would otherwise have been depleted are able to recover. The API here, employing § 524(g)(4)(A)(ii)'s language, provided as follows:

[P]ursuant to sections 105(a) and 362(a) of the Bankruptcy Code, during the pendency of Quigley's chapter 11 case, all parties ... are hereby stayed, restrained and enjoined from commencing or continuing any legal action against Pfizer alleging that Pfizer is directly or indirectly liable for the conduct of, claims against, or demands on Quigley to the extent such alleged liability of Pfizer arises by reason of—

(I) Pfizer's ownership of a financial interest in Quigley, a past or present affiliate of Quigley, or a predecessor in interest of Quigley;

(II) Pfizer's involvement in the management of Quigley or a predecessor in interest of Quigley; or service as an officer, director or employee of Quigley or a related party;

(III) Pfizer's provision of insurance to Quigley or a related party;

(IV) Pfizer's involvement in a transaction changing the corporate structure, or in a loan or other financial transaction affecting the financial condition, of Quigley or a related party, including but not limited to—

(aa) involvement in providing financing (debt or equity), or advice to an entity involved in such a transaction; or

(bb) acquiring or selling a financial interest in an entity as part of such a transaction.

API at 2–3. The order further provided that “nothing contained in this order shall prohibit any party in interest from seeking relief from the automatic stay of section 362(a) of the Bankruptcy Code or the terms of this order by filing an appropriate motion with the Court.” Id. at 6.

Beginning in 1999, Angelos brought multiple suits (the “Angelos suits”) in Pennsylvania against Pfizer on behalf of plaintiffs alleging they were injured by exposure to asbestos. CO at *2. At least some of these suits sought to hold Pfizer liable in connection with products containing asbestos and manufactured by Quigley under an “apparent manufacturer” theory of liability as set out in Restatement (Second) of Torts § 400. Id. The Angelos suits alleged that Pfizer's logo appeared on Quigley's advertising and the packages of Quigley's asbestos-containing products. Id. at *5. Under § 400, [o]ne who puts out as his own product a chattel manufactured by another is subject to the same liability as though he were its manufacturer.” Forry v. Gulf Oil Corp., 428 Pa. 334, 237 A.2d 593, 599 (1968) (quoting Restatement (Second) of Torts § 400 (1965)) (internal quotation marks omitted). Angelos moved for partial summary judgment against Pfizer on the issue of liability in many of these suits, and in response Pfizer moved in the bankruptcy court to enforce the API against Angelos. CO at *2–3. Angelos argued that the liability it sought to impose on Pfizer was based on Pfizer's own conduct in permitting its label to be affixed to Quigley products containing asbestos and to Quigley advertising, and therefore its suits were not barred by the API. Id. at *3.

In its Clarifying Order, the bankruptcy court began by noting that all the actions upon which Pfizer's liability is predicated in the Angelos suits were actually undertaken by Quigley, and that consequently the relevant inquiry for determining whether the API enjoins continuance of these suits is whether “Pfizer's liability ‘arises by reason of’ its ownership or management of Quigley,” as the API, mirroring § 524(g)(4)(A)(ii), provides. Id. at *5. It then observed that the phrase “arises by reason of” is ambiguous. On the one hand, the liability Angelos seeks to impose on Pfizer “arises by reason of the use of its name and logo by Quigley,” not its ownership or management of Quigley. Id. (internal quotation marks omitted). On the other hand, [b]ut for Pfizer's ownership and/or...

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