In re Quigley Co., Inc.

• Decision Date: 25 July 2008
• Docket Number: No. 04-15739(SMB).,04-15739(SMB).
• Citation: 391 B.R. 695
• Parties: In re QUIGLEY COMPANY, INC. Debtor.
• Court: U.S. Bankruptcy Court — Southern District of New York

391 B.R. 695

In re QUIGLEY COMPANY, INC. Debtor.

No. 04-15739(SMB).

United States Bankruptcy Court, S.D. New York.

July 25, 2008.

COPYRIGHT MATERIAL OMITTED

Schulte Roth & Zabel LLP, Michael L. Cook, Esq., Lawrence V. Gelber, Esq., Victoria A. Lepore, Esq., Jessica L. Fainman, Esq., of Counsel, New York, NY, Attorneys for the Debtor.

Cadwalader, Wickersham & Taft LLP, John H. Bae, Esq., Gary D. Ticoll, Esq., of Counsel, New York, NY, Gilbert Randolph LLP, David B. Killalea, Esq., Jonathan M Cohen, Esq., of Counsel, Washington, DC, Attorneys for Pfizer, Inc.

Brown Rudnick Berlack Israels LLP, Gregory T. Arnold, Esq., of Counsel, New York, NY, Attorneys for the Ad-Hoc Committee of Tort Victims.

Caplin & Drysdale, CHTD., Elihu Inselbuch, Esq., Rita C. Tobin, Esq., Peter Van N. Lockwood, Esq., Ronald E. Reinsel, Esq., of Counsel, New York, NY, Attorneys for the Official Unsecured Creditors Committee of Quigley Co., Inc.

Wilmer Cutler Pickering Hale and Dorr LLP, Craig Goldblatt, Esq., Nancy Manzer, Esq., Michelle Goldis, Esq., of Counsel, New York, NY, Hogan & Hartson LLP, William J. Bowman, Esq., James P. Ruggeri, Esq., Edward B. Parks, II, Esq., of counsel, Washington, D.C., Attorneys for Hartford Accident and Indemnity Company, First State Insurance Company, New England Insurance Company, and Twin City Fire Insurance Company.

White and Williams LLP, Karel S. Karpe, Esq., James S. Yoder, Esq., Elit. R. Felix, II, Esq., of Counsel, New York, NY, Attorneys for Allianz Global Risks U.S. Insurance Company (f/k/a Allianz Insurance Company) and Allianz Underwriters Insurance Company (f/k/a Allianz Underwriters, Inc.).

Seyfarth Shaw LLP, Robert W. Dremluk, Esq., David C. Christian, II, Esq., of Counsel, New York, NY, Carroll Burdick & McDonough LLP, Rodney Eshelman, Esq., Shay Aaron Gilmore, Esq., Gretchen Ramos, Esq., of Counsel, San Francisco, CA, Attorneys for Continental Casualty Company and The Continental Insurance Company.

Levin & Glasser, P.C., Paul G. Burns, Esq., of Counsel, New York, NY, Crowell & Moring LLP, Mark D. Plevin, Esq., Leslie A. Epley, Esq., Kelly R.Cusick, Esq., of Counsel, Washington, D.C., Attorneys for OneBeacon America Insurance Company.

Mendes & Mount, LLP, Eileen T. McCabe, Esq., Of Counsel, New York, NY, Attorneys for Korean Reinsurance Company Steptoe & Johnson LLP, Greg R. Yates, Esq., James E. Rocap, III, Esq., George R. Calhoun, V, Esq., of Counsel, New York, NY, Attorneys for Travelers Casualty and Surety Company.

Stevens & Lee, P.C., Constantine D. Pourakis, Esq., Leonard P. Goldberger, Esq., Jocelyn Keynes, Esq., of Counsel, New York, NY, Attorneys for Fireman's Fund Insurance Company, Associated Indemnity Corp., and The American Insurance Company.

Togut, Segal & Segal LLP, Scott E Ratner, Esq., Richard K. Milin, Esq., of Counsel, New York, NY, Attorneys for Albert Togut, as the Legal Representative for the Future Asbestos Personal Injury Claimants of Quigley Co., Inc.

Office of the U.S. Trustee, Greg M. Zipes, Esq., Of Counsel, New York, NY.

MEMORANDUM DECISION AND ORDER REGARDING INSURERS' STANDING

STUART M. BERNSTEIN, Chief Judge.

Quigley Company, Inc. ("Quigley") commenced this chapter 11 case on September 3, 2004. It filed the Fourth Amended and Restated Quigley Company, Inc. Plan of Reorganization on May 18, 2007 (ECF Doc. # 1098), as further amended on March 28, 2008 (ECF Doc. #1380), (the "Plan"). The Court approved Quigley's disclosure statement, and adjourned the confirmation hearing sine die to accommodate the filing of objections, appropriate discovery and the disposition of any legal issues.

While no objections to confirmation have yet been filed, several insurance companies (the "Insurers") objected to earlier plans, and Quigley expects them to do so again. Of more immediate concern, the Insurers served discovery requests relating to confirmation of the Plan. Quigley and its parent company, Pfizer, Inc. ("Pfizer"), seek the entry of an order to the effect that the Insurers lack standing to participate, and are contractually foreclosed from participating, in the confirmation proceedings except with respect to one issue described below. This memorandum decision outlines the considerations governing the Insurers' standing, and directs the parties to meet and confer regarding the pending discovery disputes in light of this opinion.

BACKGROUND

The background leading to this bankruptcy case has been discussed at length in the Court's prior published decisions. See In re Quigley Co., Inc., 377 B.R. 110 (Bankr.S.D.N.Y.2007); Continental Cas. Co. v. Pfizer, Inc. (In re Quigley Co., Inc.), 361 B.R. 723 (Bankr.S.D.N.Y.2007); In re Quigley Co., 346 B.R. 647 (Bankr.S.D.N.Y. 2006). I assume familiarity with these decisions, and limit the present discussion to the facts and information relevant to the disposition of the pending motion.

Quigley and Pfizer have been named as defendants in thousands of asbestos-related personal injury lawsuits, and share insurance covering their asbestos-related liability. The Plan proposes to channel the claims against Quigley, and the derivative claims against Pfizer, into a trust, which will administer, and where appropriate, pay them. The trust will be funded, inter alia, through an assignment by Pfizer and Quigley of their rights in certain insurance policies and settlements (the "Insurance Rights"). It appears that the Insurers are the counter-parties to these insurance agreements.

With one exception, the Plan purports to preserve all of the Insurers' defenses to coverage under the policies. Section 10.4, entitled "Insurance Neutrality" states:

(a) All Asbestos PI Insurer Coverage Defenses¹ are preserved and nothing in the Plan, the Confirmation Order, any finding of fact and/or conclusion of law with respect to the Confirmation of the Plan, or any order or opinion entered on appeal from the Confirmation Order, shall limit the right of any Asbestos Insurance Entity, in any Asbestos Insurance Action, to assert any Asbestos PI Insurer Coverage Defense. Notwithstanding anything in this Section 10.4 to the contrary, nothing in this Section 10.4 shall affect or limit, or be construed as affecting or limiting, (i) the binding effect of the Plan and the Confirmation Order on Quigley, Reorganized Quigley, or the Asbestos PI Trust or the beneficiaries of such trust; (ii) the protection afforded to any Settling Asbestos Insurance Entity by the Settling Asbestos Insurance Entity Injunction; or (iii) the Non-Settling Asbestos Insurance Entity Injunction.

(b) Nothing in this Section 10.4 is intended or shall be construed to preclude otherwise applicable principles of res judicata or collateral estoppel from being applied against any Asbestos Insurance Entity with respect to any issue that is actually litigated by such Asbestos Insurance Entity as part of its objections, if any, to confirmation of the Plan or as part of any contested matter or adversary proceeding in this Chapter 11 Case.

(Plan at § 10.4.)

The exception to the so-called "insurance neutrality" of the Plan concerns the assignment of the Insurance Rights. It appears that certain of the insurance policies, and possibly the settlements, include clauses that prohibit the assignment of the policy without the insurer's consent. A violation of the consent-to-assignment clause ordinarily provides a defense to coverage. The Plan proposes to assign the Insurance Rights with or without the Insurers' consents, and eliminate that particular coverage defense. Toward that end, the definition of the preserved "Asbestos PI Insurer Coverage Defenses" excludes any defenses based on the assignment of the Insurance Rights. In addition, Section 12 of the Plan identifies various conditions precedent to confirmation and consummation of the Plan, and section 12(e) requires that the confirmation order contain, inter alio, the following findings of fact and conclusions of law:

(ii) The Quigley Insurance Transfer, the Insurance Relinquishment Agreement and the AIG Assignment Agreement do not violate any consent-to assignment provisions of any Shared Asbestos Insurance Policy, any Insurance Settlement Agreement, the AIG Insurance Settlement Agreement or any other applicable insurance policy, agreement, or contract;

(iii) The Quigley Insurance Transfer pursuant to the Plan is valid, effective and enforceable, and effectuates the transfer to the Asbestos PI Trust of the Quigley Transferred Insurance Rights; provided, however, that all Asbestos PI Insurer Coverage Defenses are preserved to the extent set forth in Section 10.4 of this Plan; [and]

(iv) The duties, obligations and liabilities of any Asbestos Insurance Entity under all insurance policies, all Shared Asbestos Insurance Policies, all Insurance Settlement Agreements, and all other settlement agreements, are not diminished, reduced or eliminated by: (A) the discharge of Quigley and Reorganized Quigley from all Asbestos PI Claims; (B) the injunctive protection provided to Quigley, Reorganized Quigley, the Asbestos Protected Parties, and the Settling Asbestos Insurance Entities with respect to Asbestos PI Claims; or (C) the assumption of responsibility and liability for all Asbestos PI Claims by the Asbestos PI Trust; provided, however, that all Asbestos PI Insurer Coverage Defenses are preserved to the extent set forth in Section 10.4 of this Plan....

(Plan at § 10.4.)

In an earlier proceeding, certain insurers sought, inter alia, a declaration that similar provisions in an previous plan constituted a repudiation of the policies that contained the consent-to-assignment clause. Quigley, 361 B.R. at 732. The Court dismissed the cause of action without prejudice. Quigley and Pfizer argued, and the Court agreed, that the plaintiff insurers could raise this objection at confirmation. Id. at 745-47.

The Instant Proceedings

As noted, the Insurers served discovery requests on Pfizer and Quigley in connection with the confirmation hearing....