NEW YORK - (Mealey's) Finding that Pfizer Inc. manipulated creditor votes in seeking support for a plan of reorganization for its wholly owned subsidiary Quigley Co. Inc., a New York bankruptcy judge on Sept. 8 denied Quigley's plan of reorganization to resolve its asbestos liabilities (In re: Quigley Company Inc., No. 04-15739, S.D. N.Y. Bkcy.).
Quigley, which is no longer operating, formerly developed, produced and marketed refractories and related products, some of which contained asbestos. Facing more than 150,000 asbestos personal injury claims, Quigley on Sept. 4, 2004, filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York.
In March 2008, Quigley filed its fourth amended and restated plan of reorganization. The plan channels all asbestos personal injury claims into a trust, which would have paid all present and future holders of asbestos personal injury claims in accordance to trust distribution procedures. Under the plan, Quigley and Pfizer would make contributions to the trust, including the rights to process under certain shared insurance policies. The trust also would be funded through settlements reached with the settling insurance entities.
After a 15-day bench trial, Bankruptcy Judge Stuart M. Bernstein denied Quigley's plan, saying that "Pfizer wrongfully manipulated the voting process to assure confirmation of the Quigley plan, and thereby gain the benefit of the channeling injunction for itself and the other Pfizer Protected parties."
The plan "is designed to free Pfizer Protected Parties from derivative liability, and only incidentally, to reorganize Quigley to the extent necessary to confirm the plan," Bankruptcy Judge Bernstein said.
"In a nutshell, Pfizer bought enough votes to assure that any plan would be accepted" by altering its approach to settling asbestos claims, Bankruptcy Judge Bernstein said.
Historically, the same lawyer represented Pfizer and Quigley to settle asbestos claims, but that changed over time to the point that Pfizer was reaching settlements that expressly excluded Quigley without informing Quigley about the change, Bankruptcy Judge Bernstein said.
The method of settlement Pfizer used gave settling claimants the status of creditors in Quigley's anticipated bankruptcy and the financial incentive to vote for any Quigley plan in order to receive a second payment, Bankruptcy Judge Bernstein said.
Because the plan was proposed in bad faith and designed to achieve acceptance through a tainted vote, it must be denied, he added.
[Editor's Note: Full coverage will be in the October issue of Mealey's Asbestos Bankruptcy Report. In the meantime, the findings of fact and conclusions of law is available at www.mealeysonline.com or by calling the Customer Support Department at 1-800-833-9844. Document #48-101013-001Z. For all of your legal news needs, please visit www.lexisnexis.com/mealeys.]
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