Pfizer Inc’s bankrupt Quigley unit cannot reorganize as planned because the drug manufacturer arranged the bankruptcy to protect itself from asbestos liability. Quigley filed for bankruptcy after the heat shields it made for years were found to contain asbestos. Attorneys for the United States Trustee, a branch of the Justice Department that oversees bankruptcy, objected to this reorganization plan stating Pfizer made a joint-defense agreement with Quigley a year before the bankruptcy and failed to mention it in the proposal; these objections add to the plan that has been opposed by at least nine insurance companies and many creditors. It has been speculated that Pfizer orchestrated Quigley’s bankruptcy filing in order to receive the channeling injunction provisions of the Bankruptcy Code and to obtain benefits of an automatic stay, or protection from lawsuits as the company reorganizes. Not only does Quigley’s board consist of executives who are tied to Pfizer, the two companies have also never taken adverse positions on an issue.
The trustee said the tie between the two companies will benefit Pfizer and hurt the twenty percent of personal-injury claimants who did not settle with the company before the bankruptcy. It could also potentially reduce the funds paid by Pfizer to a trust fund for asbestos claims; presently Pfizer is paying $50 million in cash and an annuity of $405 million paid over forty years. Quigley’s lawyer stated the objections are without merit and show a misunderstanding of the facts of the case; Pfizer’s lawyer agreed and said the company will file a response.
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