Pfizer Faces Asbestos Actions after Supreme Court Declines to Hear Case

 WASHINGTON, D.C. - (Mealey's) The U.S. Supreme Court on June 24 denied a bid for certiorari by Pfizer Inc. of a ruling removing the protection for Pfizer of a bankruptcy injunction barring asbestos personal injury claims entered in the case of a defunct Pfizer subsidiary (Pfizer Inc. v. Law Offices of Peter G. Angelos, No. 12-300, U.S. Sup.; See January 2013, Page 13) (lexis.com subscribers may access Supreme Court briefs for this case).

The Supreme Court's refusal to review the ruling, a decision that the U.S. solicitor general recommended, means that state court lawsuits filed against the pharmaceutical giant by a prominent asbestos plaintiffs' law firm can proceed.

Angelos Firm

The dispute arises out of Pfizer's acquisition in 1968 of Quigley Co. Inc., a former manufacturer of insulation and other products for the steel industry and foundries.  After the acquisition, some of Quigley's asbestos-containing products began to include Pfizer's name and trademark.  When Quigley filed for Chapter 11 protection in 2004 in the U.S. Bankruptcy Court for the Southern District of New York, both Quigley and Pfizer were facing 160,000 asbestos personal injury claims.  The Bankruptcy Court issued an injunction enjoining most asbestos-related claims against the companies under Section 524(g) of the U.S. Bankruptcy Code.

The Law Offices of Peter G. Angelos began filing asbestos personal injury lawsuits against Pfizer and others in Pennsylvania in 1999.  The Angelos firm moved for summary judgment against Pfizer in many of the actions on the theory that Pfizer is liable as the "apparent manufacturer" of the products under Restatement (Second) of Torts Section 400 (1965), as incorporated into the common law of Pennsylvania, which imposes liability in certain circumstances on the apparent manufacturer of a defective product.  Pfizer responded by filing a motion in the Bankruptcy Court to enforce the injunction against the Angelos firm's lawsuits.

In 2008, the Bankruptcy Court held that the Angelos firm's Section 400 claims were subject to the injunction because they arose out of Quigley's conduct and could be asserted against a trust established under Quigley's proposed Chapter 11 plan of reorganization.  The court, finding that Pfizer's Section 400 liability arose from ownership of Quigley and fell within the realm of Section 524(g), directed the Angelos firm to stop prosecuting the claims against Pfizer.

But in May 2011, the U.S. District Court for the Southern District of New York reversed the ruling, holding that the Section 400 claims do not arise out of Pfizer's ownership of Quigley and, therefore, do not fall within the scope of Section 524(g) or the injunction (In re Quigley Company, Inc., No. 10-1573, S.D. N.Y.; See June 2011, Page 10).  The court said, "Pfizer's liability arises out of its sponsorship of a defective product, not its corporate affiliation . . . with the manufacturer."  Because Quigley's injunction does not cover claims based on Pfizer's name being on Quigley's products, the Angelos firm "is free to pursue its § 400 claims in Pennsylvania state courts," the court ruled.

Ruling Affirmed

In April 2012, the Second Circuit U.S. Court of Appeals affirmed the District Court's ruling, holding that under Section 524(g)(4)(A)(ii)(I) of the Bankruptcy Code, the Angelos firm's lawsuits "do not attempt to fix on Pfizer liability 'arising by reason of' Pfizer's 'ownership of a financial interest in'" Quigley and that, therefore, the actions are not barred by Quigley's injunction.

Pfizer filed a petition for writ of certiorari with the Supreme Court, presenting the following question:  "Whether the Second Circuit erred by failing to apply as written a federal statute, 11 U.S.C. § 524(g)(4)(A)(ii), by limiting its scope in a manner that is contrary to its plain terms and that frustrates the congressional purposes of the statute."

The Supreme Court invited the solicitor general to file a brief in the case expressing the views of the United States.  The United States said in its amicus curiae brief that the question presented is:  "Whether, for purposes of 11 U.S.C. 524(g)(4)(A)(ii), a corporate parent's potential liability in tort arises 'by reason of' its relationship with a subsidiary-debtor when the actions of the corporate parent that resulted in potential liability were motivated in part by that relationship, but the relationship is not legally relevant to the determination whether liability exists."

The United States argued that further review was not warranted because the Second Circuit correctly held that, based on Section 524(g)(4)(A)(ii), a corporate parent's liability does not arise "by reason of" its relationship with a subsidiary-debtor unless that relationship is legally relevant to the plaintiff's allegation that the parent is liable.  Certiorari also should be denied because the phrase "by reason of" in Section 524(g)(4)(A)(ii) has never been construed by the Supreme Court or any circuit court, the United States said.

Counsel

Pfizer is represented by Sheila L. Birnbaum, Jay M. Goffman, Bert L. Wolff and Paul A. LaFata of Skadden, Arps, Slate, Meagher & Flom in New York.

The Angelos firm is represented by James W. Stoll, Jeffrey L. Jonas and Thomas H. Montgomery of Brown Rudnick in Boston and Edward S. Weisfelner of Brown Rudnick in New York.

The United States is represented by Solicitor General Donald B. Verrilli Jr., Acting Assistant Attorney General Stuart F. Delery, Deputy Solicitor General Malcolm L. Stewart, Assistant to the Solicitor General Jeffrey B. Wall and Michael S. Raab and Jeffrey Clair of the Department of Justice in Washington.

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