In re Quigley Company, Inc., Case No. 04-15739(SMB) (Bankr. S.D.N.Y. 5/15/2008)
| Decision Date | 15 May 2008 |
| Docket Number | Adv. Proc. No. 04-04262.,Case No. 04-15739(SMB). |
| Parties | In re: QUIGLEY COMPANY, INC., Chapter 11, Debtor. v. QUIGLEY COMPANY, INC., Plaintiff, v. A.C. Coleman, THE OTHER PARTIES LISTED ON EXHIBIT A TO THE COMPLAINT, JOHN DOES 1-1000 AND JANE DOES 1-1000 Defendants. |
| Court | U.S. Bankruptcy Court — Southern District of New York |
CADWALADER, WICKERSHAM & TAFT LLP, Attorneys for Pfizer, Inc. New York, Bruce R. Zirinsky, Esq. John H. Bae, Esq. Of Counsel.
BROWN RUDNICK BERLACK ISRAELS LLP Attorneys for the Law Offices of Peter G. Angelos, P.C. New York, Gregory T. Arnold, Esq. Of Counsel.
On the same day that Quigley Company, Inc. ("Quigley") filed this asbestos bankruptcy case, the Court entered a preliminary injunction (Injunction Pursuant to 11 U.S.C. §§ 105(a) and 362(a) and Federal Rule of Bankruptcy Procedure 7065, dated December 17, 2004 ("Preliminary Injunction") (ECF Doc. # 122)), which enjoined asbestos-related litigation against Quigley's non-debtor parent, Pfizer Inc. ("Pfizer"). By the Amended Injunction Pursuant to 11 U.S.C. §§ 105(a) and 362(a) and Federal Rule of Bankruptcy Procedure 7065, dated December 6, 2007 ("Amended Injunction")(ECF Doc. # 238), the Court narrowed the relief granted to Pfizer. The Amended Injunction provided Pfizer with the same protection it would receive under 11 U.S.C. 524(g) if Quigley confirms its proposed plan.
The Law Offices of Peter G. Angelos, P.C. (the "Angelos Firm") represent asbestos claimants that had sued Pfizer prior to the Quigley petition date. The Angelos Firm contends that certain of its claims asserted against Pfizer in Pennsylvania are based on the Restatement (Second) of Torts § 400 ("Section 400"). As discussed below, Section 400 imposes a manufacturer's liability on an entity that places its name on a product manufactured by another.
It is undisputed that the Preliminary Injunction barred the Section 400 claims. The Angelos Firm contends, however, that the Amended Injunction does not, and has taken steps to prosecute them. For the reasons that follow, the Court concludes that the Section 400 claims are also enjoined under the Amended Injunction.
The facts leading up to the issuance of the Preliminary Injunction are described in Quigley Co v. Coleman (In re Quigley Co.), 361 B.R. 670 (Bankr. S.D.N.Y. 2007). I assume familiarity with that decision, and highlight the facts relevant to the instant motion. Pfizer is a well-known pharmaceutical company. In addition to its pharmaceutical business, Pfizer manufactured or sold products that contained asbestos, including Kilnoise and Firex.
In 1968, Pfizer acquired Quigley. Quigley was engaged in the refractories business, and manufactured and sold products that contained asbestos, including Insulag. By the time Quigley filed this chapter 11 case on September 3, 2004, it was defending against over 160,000 asbestos-related lawsuits and claims. Pfizer had also been sued in many of the same actions. As of Quigley's petition date, approximately 109,200 claimants had asserted claims naming both Quigley and Pfizer, but it is impossible to tell whether the claims asserted against Pfizer are based on its own products or Quigley's. In re Quigley Co., 377 B.R. 110, 113 (Bankr. S.D.N.Y. 2007).
On the petition date, Quigley commenced this adversary proceeding to obtain an injunction stopping the lawsuits against the non-debtor Pfizer. Pfizer and Quigley shared liability insurance coverage, and the goal was to stop the litigation while Quigley made its anticipated quick trip through bankruptcy and confirmed a plan. The Preliminary Injunction issued by Bankruptcy Judge Beatty "enjoined [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."
The case proceeded more slowly than anticipated, but Quigley eventually proposed a plan that included an injunction in favor of Pfizer that, after some modification, tracked the language of 11 U.S.C. § 524(g). The proposed plan injunction was narrower than the Preliminary Injunction, and did not bar claims against Pfizer based on Pfizer products that had nothing to do with Quigley. Corresponding amendments were made to the Preliminary Injunction to parallel the more limited plan injunction. The resulting Amended Injunction restrained:
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.
Beginning in 1999, the Angelos Firm commenced one or more lawsuits in Pennsylvania on behalf of numerous plaintiffs against Pfizer and others. The complaints identified Pfizer as a manufacturer of various asbestos products, including "asbestos spray insulation." . "Asbestos spray insulation" referred to Insulag. (Id. at p. 3.) In addition, after the Amended Injunction was entered, the Angelos Firm sought to add Pfizer as a defendant in other cases based on the plaintiffs' exposure to Insulag. (Memorandum of Law of Pfizer Inc. in Support of Motion (I) To Enforce the Preliminary Injunction Order and (II) For Interim Relief to Enjoin the Insulag Actions Pending Ruling on the Motion, dated Feb. 28, 2008 ("Pfizer Memo "), at Ex. C (ECF Doc. # 242.)) Finally, the Angelos Firm filed or intends to file additional complaints in Pennsylvania naming Pfizer as a defendant based upon exposure to Insulag. (Id., at Ex. D, F.) In short, the Angelos Firm has sued Pfizer as a manufacturer of Insulag.
The Angelos Firm has now moved for partial summary judgment against Pfizer in many of these actions on the theory that Pfizer is liable as a manufacturer of Insulag under Section 400. (Id., at Ex. H, I, M and N.) The proof attached to these motions indicates that the Pfizer and Quigley names and logos, including, in some cases, the reference to Quigley as a subsidiary of Pfizer, appeared on diaries, advertisements and literature, purchase orders, invoices, packaging and sales reports relating to the manufacture or sale of Insulag.1
In response, Pfizer filed this motion to enforce the Amended Injunction. It maintains that it never manufactured Insulag — Quigley did — and the Pennsylvania actions seek to impose liability based upon its ownership or purported management of Quigley in violation of the Amended Injunction. Furthermore, Pfizer argues that it bargained for this relief under the plan, and is making a substantial contribution to get it. Allowing the Angelos Firm to prosecute these claims will undermine the foundation of the plan and the purpose of Pfizer's contribution, and prevent Quigley's successful reorganization.
Not surprisingly, the Angelos Firm disagrees. It contends that despite Pfizer's statements that it never manufactured or sold Insulag, Section 400 imposes a manufacturer's liability on Pfizer under Pennsylvania law. Furthermore, neither Bankruptcy Code § 524(g) nor the Amended Injunction can stop the prosecution of asbestos claims against Pfizer based upon allegations that it is directly responsible or liable for its own conduct. According to the Angelos Firm, "[t]he operative facts giving rise to Pfizer's liability may be related to, but they do not derive from, Quigley's actions." (Angelos Reply, at p. 2.)
The Amended Injunction provides the same protection as a channeling injunction under § 524(g).2 The channeling injunction may
enjoin entities from taking legal action for the purpose of directly or indirectly collecting, recovering, or receiving payment or recovery with respect to any claim or demand that, under a plan of reorganization, is to be paid in whole or in part by a trust described in paragraph (2)(B)(i) ....
11 U.S.C. § 524(g)(1)(B).
The injunction is not limited to the debtor. The court may extend it to protect third parties to the extent that the third party is allegedly liable based upon a past connection with the debtor relating to its ownership, management, provision of insurance, or participation in a transaction that changes the debtor's structure or relates to its financial condition. 4 ALAN N. Resnick & HENRY J. SOMMER, COLLIER ON BANKRUPTCY ¶ 524.07[1], at 524-49 (15th rev. ed. 2007). Section 524(g)(4)(A)(ii), on which the Amended Injunction was based, states:
Notwithstanding the provisions of section 524(e), such an injunction may bar any action directed against a third party who is identifiable from the terms of such injunction (by name or as part of an identifiable group) and is alleged to be directly or indirectly liable for the conduct of, claims against, or demands on the debtor to the extent such alleged liability of such third party arises by reason of —
(I) the third ...
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