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Second Circuit Allows Asbestos Claims to Proceed Against Pfizer

By Steven B. Smith and Dana Gale Hefter

In September 2004, the Quigley Company, a wholly owned subsidiary of Pfizer, filed for Chapter 11 relief in the United States Bankruptcy Court for the Southern District of New York, and advised the court in its first-day filings that it intended on filing a pre-negotiated Chapter 11 plan as soon as practicable that would establish a trust and provide for channeling injunctions in favor of, among others, Pfizer, a non-debtor third party, pursuant to 11 U.S.C. ' 524. Some parties-in-interest, including an ad-hoc committee of tort claimants that had organized and appeared early in the bankruptcy case, viewed Quigley's bankruptcy filing as a carefully orchestrated scheme by Quigley to shield its non-debtor parent from substantial exposure.

Fast-forward almost eight years to April 10, 2012, when the United States Court of Appeals for the Second Circuit, agreeing with the district court and disagreeing with the Quigley bankruptcy court, concluded that in fact the channeling injunction issued in favor of Pfizer did not bar the commencement or continuation of certain asbestos actions against Pfizer. This article addresses issues that the Second Circuit considered in reaching its conclusion, including: 1) whether the bankruptcy court had jurisdiction to enjoin the asbestos actions from going forward in light of the United States Supreme Court's opinion in Stern v. Marshall and under the Bankruptcy Code in general; and 2) whether the asbestos actions in question fell within the scope of the channeling injunction.

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