Quigley/Pfizer Asbestos Bankruptcy Trial Underway and Highlights Deep Flaws in the Chapter 11 Proces
This article from Bloomberg describes the start of the confirmation trial in the Pfizer/Quigley asbestos bankruptcy and reviews the case in general. The trial is to run off and on for 7 or more trial days, concluding Oct. 16.
Despite various efforts to paint the situation in other lights, Quigley essentially is a corporate shell doing nothing but running off tort claims, so the relevance/applicability of chapter 11 is not apparent. Indeed, according to Bloomberg, ” Edward Weisfelner, a lawyer for asbestos victims, challenged precedents set by asbestos cases in the 1980s. said of this case, “We are allowing the Chapter 11 process to be rented out, for the benefit of the true economic party of interest,” Weisfelner told Bernstein, calling the case a “sham,” by Pfizer that abuses the bankruptcy code. He said the bankruptcy, which has cost $75 million over five years, was filed solely to protect Pfizer. The US Trustee’s office also has raised issues on this topic, which is notable because that office has not done much in most of the asbestos-driven chapter 11 cases. In short, one key issue is the extent to which a parent company can pay money and obtain in exchange a bankruptcy court injunction to protect itself against future asbestos claims arising from its relationship to the subsidiary and/or its actions related to the subsidiary. Some procedural issues cloud what the bankruptcy court will and will not do in terms of ruling on those issues.
Also interesting will be the process of estimating the value of future claims. As I’ve described before here (see item 4) the chapter 11 “estimation” process used in mass tort cases was the subject of scathing criticism in the W. R. Grace asbestos bankruptcy case. The criticism took the form of a declaration by a Nobel prize winning economist, Dr. James Heckman. As he explains it, the estimation process is not even close to scientific and instead is far more about trying to predict the future claiming practices of plaintiff’s lawyers based on what the lawyers did in the past. That of course brings to mind the usual investment fund disclosure that past performance is not a predictor of the future, a statement that surely is equally true for the claiming practices of plaintiff’s lawyers. According to Professor Heckman, courts should not allow themselves to be used to make a ruling based on estimates built in part around the massive asbestos claiming frauds that Professor Brickman and others have described at length.
The Quigley/Pfizer case also somewhat addresses the reality that in some limited ways, some asbestos plaintiff’s lawyers representing some cancer claimants are in some ways contesting the usual approach to asbestos chapter 11 cases because it gives far too much power to the lawyers representing the least sick claimants (if they are sick at all, in the every day sense of the word). This case is thus another part of the occasionally public intramural disputes between different asbestos plaintiff’s lawyers, with the two basic camps composed of 1) firms that represent thousands of minimally sick claimants and 2) firms that represent relative handfuls of cancer claimants.
Another public example of those disputes occurred back when some plaintiff’s lawyers went to Congress during the days of the so-called FAIR Act and testified about the deep flaws in the thousands of claims being mass-filed on behalf of persons who were at most minimally sick.
Another public indicator of the battle may be found in the chapter 11 trusts which include terms that impose “collars” (limits) on the amount of money that may be paid out in a given year to the least sick claimants.
The intramural battle between camps of plaintiff’s lawyer goes on because Congress irrationally handed huge economic power to lawyers for the minimally sick when it enacted section 524(g) of the bankruptcy code. Economic power was created by including a term that requires a vote in favor of the chapter 11 plan by 75% of ALL asbestos claimants. That rule has been under some attack in this case as the lawyers for cancer claimants seek to reduce the value of the votes of the least sick claimants.
The same economic dispute between the cancer claimants and the minimally sick also applies to future personal injury claimants. However, the inherent and obvious conflict between these two subsets of future claimants is typically ignored in chapter 11 cases. How is the conflict ignored? By assigning one person the impossible task of trying to properly represent all future personal injury claimants.