Judge postpones ruling on Quigley's disclosure statement

By Reshmi Basu

New York, July 12 - U.S. bankruptcy judge Stuart M. Bernstein delayed his decision on Quigley, Co., Inc.'s request for the approval of its disclosure statement Thursday, noting that there were too many unresolved issues which prevented him from giving the green light to the company's plan.

A new hearing is likely to take place in August.

In postponing his ruling, judge Bernstein of the U.S. Bankruptcy Court for the Southern District of New York said that one of his main concerns was whether those creditors who settled with parent company Pfizer Inc. over asbestos-related claims should be included in the same class as those who did not cut a deal.

In another issue, judge Bernstein questioned whether the channeling injunction gave Pfizer far too much protection from future asbestos claims.

Tort victims claim vote manipulation

During Thursday's heated hearing, the ad hoc committee of tort victims argued that the plan was not confirmable because the interests of creditors as well as some asbestos victims had been subordinated to the interests of Pfizer.

Moreover, the committee contended that the New York-based drug company was perpetrating fraud in the courts by using the plan of reorganization as a protective shell against future asbestos claims.

The disclosure statement does not provide adequate information on how Pfizer benefits from the overall scheme, contended ad hoc committee lawyer Edward S. Weisfelner of Brown Rudnick Berlack Israels LLP

He noted that there was an "inequality of treatment among similarly situated creditors" because those creditors who settled with Pfizer have preferential treatment over those who did not strike a deal, but yet both groups are lumped together for counting votes.

Under the plan, in order for the settling plaintiffs to receive payments, they have to vote "yes" on the disclosure statement, which creates a plan based on incentives, he argued.

This is a "simple vote manipulation by Quigley and Pfizer," claimed Weisfelner.

Judge Bernstein said that the argument raised the issue that there were "different incentives among same creditors" within the same class and that it was a "legitimate argument that they should be separately filed."

However, counsel for both Quigley and Pfizer denied those allegations, asserting that Quigley has acted in the best interest of its creditors and not Pfizer.

"Pfizer agreed to give more...in order to keep everyone even," said Pfizer attorney Bruce R. Zirinsky of Cadwalader Wickersham & Taft LLP, referring to the company's $100 million additional contribution to the asbestos PI trust.

"We didn't touch [Quigley's] assets. We didn't tap into insurance," noted Zirinksy, adding that the pharmaceutical company used its own money to set up the fund.

But Weisfelner said Thursday the lack of equality among creditor classes was a "legal showstopper" and furthermore the 524(g) channeling injunction preventing future claimants from suing Pfizer was overly broad.

"Voters cannot be informed because of the way the plan has been designed," he told the court, adding that the plan violates the principals of treating all members of a class equally and negotiating in good faith.

Under the plan, all current and future asbestos personal injury claims against Quigley will be channeled to a fund. According to the modified plan, Pfizer agreed to make another $100 million contribution, including an additional $50 million cash contribution to the asbestos PI trust on the effective date and $45.1 million in annuities to be paid over a period of 41 years, with the first installment payable of the fifth anniversary of the effective date.

Quigley not independent, U.S. trustee says

Meanwhile, attorney Greg M. Zipes from the office of the U.S. Trustee asked the court to allow it to add language to the disclosure statement's executive summary, which would highlight the trustee's concerns, in particular the close connection between Pfizer and the debtor.

The point of the disclosure statement is for creditors to determine the "best possible dollar amount they can get," Zipes said. Creditors should be informed of the trustee's beliefs that Quigley is not sufficiently independent of Pfizer and has breached its fiduciary duty.

Judge Bernstein asked relevant parties to submit briefs in response to the issues raised in Thursday's hearing. A hearing for the confirmation of the plan will take place in August.

Quigley, a unit of Pfizer Inc., filed for bankruptcy on Sept. 3, 2004. Its Chapter 11 case number is 04-15739.

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