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SCHULTE ROTH ZABEL LLP Attorneys for Quigley Company Inc

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									SCHULTE ROTH & ZABEL LLP
Attorneys for Quigley Company, Inc., Debtor and Debtor in Possession
919 Third Avenue
New York, New York 10022
Telephone: (212) 756-2000
Facsimile: (212) 593-5955
Michael L. Cook (MC 7887)
Lawrence V. Gelber (LG 9384)

CADWALADER, WICKERSHAM & TAFT LLP
Attorneys for Pfizer Inc.
One World Financial Center
New York, New York 10281
Telephone: (212) 504-6000
Facsimile: (212) 504-6666
Bruce R. Zirinsky (BZ 2990)
John H. Bae (JB 4792)


UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
                                               x

In re                                          :
                                                      Chapter 11
         QUIGLEY COMPANY, INC.,                :
                                                      Case No. 04-15739 (SMB)
                          Debtor.              :
                                               x


                    MEMORANDUM OF QUIGLEY COMPANY, INC.
                   AND PFIZER INC. REGARDING CLASSIFICATION
                  OF ASBESTOS PI CLAIMS UNDER 11 U.S.C. § 1122(a)

               Quigley Company, Inc. (“Quigley”), debtor and debtor in possession, and Pfizer

Inc. (“Pfizer”) submit this memorandum in (a) further support of Quigley’s motion for an order,

among other things, approving its disclosure statement, and (b) accordance with the Court’s

request for additional briefing on the issue of whether holders of asbestos-related claims against

Quigley who have entered into prepetition settlements with Pfizer (the “Settling Claimants”)




10469868.9
should be separately classified from holders of asbestos-related claims against Quigley who have

not settled with Pfizer, and in support thereof, represent as follows:

                                         INTRODUCTION

               1.      Prior to the commencement of this case, Pfizer entered into settlements

with many holders of asbestos-related claims against Quigley to resolve their claims against

Pfizer. The settlements contemplate that 50% of the amount of the settlement would be paid by

Pfizer on December 1, 2005 upon satisfaction of various conditions, and the second 50% of the

settlement amount would be paid upon the effectiveness of Quigley’s plan of reorganization.

During the July 12, 2007 hearing on the adequacy of Quigley’s disclosure statement, the Court

addressed the issue of whether the Settling Claimants who may have an economic incentive to

vote in favor of Quigley’s reorganization plan should be separately classified from those who

have not settled with Pfizer. The Court noted:

               I think the more serious issue that I have is this what I call the
               classification issue. Maybe it’s an unequal treatment issue. But,
               certainly, I can look at that as a legal issue, whether the mere
               connection between the Pfizer settlement and the confirmation of
               the plan somehow makes it unconfirmable as a matter of law as
               presently proposed, whether the settling creditors have to be
               separately classified, which may cure at least any of that.

Tr. Hr’g July 12, 2007, at 83-84 (relevant portion attached hereto as Exhibit A). The Court then

invited further briefing “particularly on the classification issue.” Id. at 84:9-10.

               2.      This memorandum addresses these issues. As explained below, that the

Settling Claimants may have an economic incentive to vote in favor of Quigley’s plan is no basis

to classify them separately from other asbestos claimants. As described in detail below, the law

is dispositive on this issue – the determination of whether claimants should be classified in the

same class is entirely dependent on the nature of the claims they hold against the debtor. It is not

based on each creditor’s, or group of creditors’, economic incentive to vote in favor of or against


10469868.9                                        2
the plan or on the nature of their claims against, or other relationships to, non-debtor third

parties. For this reason, courts have consistently looked only to the nature of the claims against

the estate and the priority of payment of the claims in each class, and not what external economic

interests each creditor may have to vote in favor of or against the plan.

               3.       Here, all asbestos claimants, whether or not they are Settling Claimants,

hold claims against Quigley based on alleged exposure to Quigley’s asbestos containing

products. Each of those claims will receive identical treatment from Quigley’s estate under its

proposed plan – each will be evaluated and paid in accordance with the terms of the trust

distribution procedures based on the claimants’ particular disease. Whether or not a claimant

settled with Pfizer is irrelevant to his or her treatment in the Plan. Under these circumstances,

there is no legal basis to classify separately the Settling Claimants.

               4.       For these same reasons, the Plan does not provide unequal treatment to

Settling Claimants and non-settling claimants. Both the Settling Claimants and non-settling

claimants will be treated exactly the same under Quigley’s plan. While the Settling Claimants

will be receiving consideration from Pfizer to settle their claims against it, they are providing

separate consideration to Pfizer in the form of a release of their claims against Pfizer. In

contrast, the non-settling claimants will not receive any consideration from Pfizer because they

have chosen to retain their direct claims against Pfizer. Those claims will not be channeled to a

section 524(g) trust.

               5.       The Court also addressed the issue of whether the Settling Claimants’

votes could be subject to designation under Bankruptcy Code section 1126(e) because the

Settling Claimants arguably have an economic incentive to vote in favor of the plan. While the

issue of designation is not before the Court presently, Quigley and Pfizer submit that there is no

legal basis for that draconian remedy. Irrespective of the lack of merit of claims against Pfizer,

10469868.9                                        3
both Quigley and Pfizer were named as defendants in hundreds of thousands of asbestos cases in

the tort system. Pfizer has every right to resolve the claims against it as it sees fit, and there is no

legal prohibition against conditioning the payment of a portion of the settlement amount upon

confirmation of a plan for Quigley. Indeed, while it is possible that Settling Claimants might

have an economic incentive to vote in favor of Quigley’s plan to receive the remaining portion of

the settlement amount, it is equally possible that they might have an economic incentive to vote

against Quigley’s plan to demand an even greater financial contribution to Quigley’s estate by

Pfizer. Under similar circumstances, courts have refused to find bad faith or any other basis to

designate the votes of creditors.

               6.       For these reasons, the Court should find that the Settling Claimants are

appropriately classified in the same class as all other asbestos claimants, and approve Quigley’s

disclosure statement.

                                 PROCEDURAL BACKGROUND

               7.       Quigley moved (the “Solicitation Procedures Motion”) on May 18, 2007,

for an order approving, among other things, the adequacy of its disclosure statement and its

proposed solicitation procedures. Together with the Solicitation Procedures Motion, Quigley

filed its fifth amended disclosure statement and its fourth amended plan of reorganization.

Quigley subsequently modified the disclosure statement and plan on June 7, 2007 and July 11,

2007 (as modified, the “Disclosure Statement” and “Plan,” respectively).1 Only the self-styled

Ad Hoc Committee of Tort Victims (the “Ad Hoc Committee”)2 and the United States Trustee

objected to the Disclosure Statement.


1
    Capitalized terms used but not defined in this memorandum have the meanings assigned to them in
the Plan.
2
    Two law firms representing asbestos personal injury claimants joined in the Ad Hoc Committee's
objection.

10469868.9                                         4
               8.      The Court held a hearing on July 12, 2007 to consider the Solicitation

Procedures Motion and the adequacy of the Disclosure Statement. At the conclusion of the

hearing, the Court invited the parties to submit additional briefs as to whether, as a result of the

terms of certain prepetition settlements between Pfizer and various holders of asbestos personal

injury claims against Quigley, (i) the Settling Claimants should be classified separately from

non-settling asbestos personal injury claimants under the Plan, and (ii) the Settling Claimants are

being treated differently from non-settling claimants. See Tr. Hr’g July 12, 2007, at 83-84.

                                  THE PFIZER SETTLEMENTS

               9.      The Quigley Chapter 11 case will result in a global resolution of all

present and future asbestos personal injury claims against Quigley and Pfizer based on alleged

exposure to asbestos in Quigley’s products. By establishing a trust under section 524(g) of title

11, United States Code (the “Bankruptcy Code”) to pay present and future asbestos claimants,

Quigley can maximize the value of its available assets for the benefit of all present and future

asbestos claimants, while treating all claimants fairly and equitably. Pfizer would then resolve

the claims against it separately through negotiated settlements or otherwise.

               10.     Beginning in late 2003, Pfizer’s counsel entered into settlement

discussions with numerous plaintiffs’ law firms representing claimants holding claims against

Quigley who also had asserted or potentially could or would assert claims against Pfizer.3 These

settlement discussions contemplated resolution of all of the Settling Claimants’ claims against

Pfizer, arising from exposure to asbestos, silica, talc, and mixed dust. The Pfizer settlement

agreements (the “Pfizer Settlement Agreements”) do not, however, resolve or release any claims

the Settling Claimants hold against Quigley. The Settling Claimants thus may assert their claims

3
    Pfizer's counsel had similar discussions with counsel for all asbestos claimants, but was unable to
achieve settlements with certain of the plaintiffs’ law firms, including the members of the Ad Hoc
Committee.

10469868.9                                        5
against Quigley in its chapter 11 case, pursuant to trust distribution procedures to be established

in connection with confirmation of a plan.4

               11.     In accordance with the terms of the Pfizer Settlement Agreements, Pfizer

has paid a 50% advance on the settlement amounts to those Settling Claimants who have

presented qualified proof of their medical conditions. The balance of the settlement amounts is

due promptly after the effective date of a Quigley plan of reorganization that establishes a trust

for the benefit of the claimants and an injunction for the benefit of Pfizer and its affiliates under

Bankruptcy Code section 524(g).

               12.     Under Quigley’s proposed Plan, any claims against Quigley for damages

allegedly caused by the presence of, or exposure to, asbestos or asbestos-containing products

(“Asbestos PI Claims”) are to be channeled to and paid by a section 524(g) trust (the “Asbestos

PI Trust”). Derivative claims against Pfizer and other Pfizer Protected Parties alleging that

Pfizer or the Pfizer Protected Parties are liable for the conduct of, claims against, or demands

against Quigley are also channeled to the Asbestos PI Trust. See Plan §§ 1.1, 11.6 (setting forth

terms of Asbestos PI Channeling Injunction). All Asbestos PI Claims channeled to the Asbestos

PI Trust are to be evaluated and paid according to the proposed Asbestos PI Trust Distribution

Procedures. The Asbestos PI Trust Distribution Procedures do not provide for any distinction

between Settling Claimants and non-settling claimants with respect to either the evaluation or

treatment of claims.

                                            ARGUMENT

               13.     A chapter 11 plan must be accepted by at least one class of claims that are

impaired under the plan, if any are impaired. 11 U.S.C. § 1129(a)(10). That requirement



4
     The Pfizer Settlement Agreements originally provided that Settling Claimants agreed to take reduced
distributions from the Asbestos PI Trust. Pfizer subsequently waived this requirement.

10469868.9                                         6
“provide[s] some indicia” that the plan “pass[es] muster in the opinion of creditors whose rights

to repayment from the debtor are implicated by the reorganization,” and “ensures [that ]the terms

of the reorganization are monitored by those who have a financial stake in its outcome.” In re

Combustion Eng’g, Inc., 391 F.3d 190, 243-44 (3d Cir. 2004).

               14.     The monitoring function of Bankruptcy Code section 1129(a)(10) can be

weakened if a class’s acceptance lacks integrity. See In re Combustion Eng’g, Inc., 391 F.3d at

244. The Bankruptcy Code thus requires compliance with several provisions aimed at protecting

that integrity. For example, creditor classes must be comprised of claims that are substantially

similar, and all claims in the same class must receive the same treatment. 11 U.S.C. §§ 1122(a),

1123(a)(4).

Single Classification is Proper Because Settling Claimants
Hold Identical Claims to Those Who Did Not Settle With Pfizer

               15.     “A plan proponent is afforded significant flexibility in classifying claims

under [section] 1122(a) if there is a reasonable basis for the classification scheme and if all

claims within a particular class are substantially similar.” In re Drexel Burnham Lambert Group

Inc., 138 B.R. 723, 757 (Bankr. S.D.N.Y. 1992). Under section 1122(a), a plan may “place a

claim or interest in a particular class only if such claim or interest is substantially similar to the

other claims or interests of such class.” 11 U.S.C. § 1122(a). Claims are substantially similar

when they arise from “substantially similar rights to the debtor’s assets.” In re Drexel Burnham

Lambert Group, Inc. 138 B.R. at 757 (emphasis added). In other words, the “primary analysis

centers upon the legal attributes of the claims, and not upon the status or circumstances of the

claimant.” In re N.E. Dairy Coop. Fed., Inc., 73 B.R. 239, 250 (Bankr. N.D.N.Y. 1987).

               16.     For this reason, courts do not require claims to be classified separately

merely because creditors may have different voting incentives.          “‘[U]nsecured claims will,

generally speaking, comprise one class, whether trade, tort, publicly held debt, or a deficiency of
10469868.9                                        7
a secured creditor’ because ‘they are claim[]s of equal legal rank entitled to share pro rata in

values remaining after payment of secured and priority claims.’” FGH Realty Credit Corp. v.

New Airport/Hotel Ltd. P’ship, 155 B.R. 93, 99 (D.N.J. 1993) (quoting In re 266 Washington

Assocs., 141 B.R. 275, 282 (Bankr. E.D.N.Y. 1992)). Here, there is no dispute, as even counsel

for the Ad Hoc Committee acknowledged on the record, that Settling Claimants hold claims

against Quigley that are not only similar to those of non-settling claimants, “[t]hey’re identical.”

See Tr. Hr’g July 12, 2007, at 26:7. Accordingly, the Plan appropriately classifies together the

claims of settling and non-settling claimants.

               17.     “‘It is the nature of [creditors’] claims being classified [under the plan]

that is significant, not the nature of other claims or interests a creditor might have’” in or against

a third party. Appeal of Hawley Coal Fuelmart, Inc. (In re AOV Indus., Inc.), 792 F.2d 1140,

1150 (D.C. Cir. 1986) (quoting In re Martin’s Point Limited P’ship, 12 B.R. 721, 727 (Bankr.

N.D. Ga. 1981)). In AOV, the District of Columbia Circuit Court of Appeals held that the

debtors’ plan properly classified the debtors’ general unsecured creditors in a single class, even

though the plan provided two sources of funding for payment of claims in this class – the

debtors’ own assets and a fund, in the form of letters of credit, established by two third-party

non-debtors. Id. at 1150. In order to share in the letter of credit fund, however, creditors were

required to release all of their claims against the non-debtor contributors. Id. A member of the

class appealed the confirmation order, asserting that the plan improperly classified him in the

same class as other unsecured creditors. Id. He reasoned that, because he held a direct claim

against one of the third-party funders of the letter of credit fund, based on that party’s alleged

guarantee of the debtors’ outstanding debts to him, the plan improperly classified him with

creditors who merely held less valuable, derivative claims against the third parties. Id. The

court rejected this argument, finding that the creditor’s claim against the debtors was

10469868.9                                        8
substantially similar to the claims of other unsecured creditors. The court further found that the

“existence of a third-party guarantor does not change the nature of a claim vis-à-vis the bankrupt

estate and, therefore, is irrelevant to a determination of whether claims are ‘substantially similar’

for classification purposes.” Id. at 1151 (citing In re McKenzie, 4 B.R. 88, 91-92 (Bankr.

W.D.N.Y. 1980) (holding that existence of third party guarantor on debtor’s obligation to

creditors does not change nature of creditor’s claim against debtor’s estate)).

               18.     The court in In re 455 CPW Associates similarly found that separate

classification of otherwise substantially similar claims is not mandated simply because a third-

party payor is co-liable with the debtor on certain claims within the class, but not others. No.

96 Civ 367 (DAB), 1999 WL 675972, at *1 (S.D.N.Y. Aug. 31, 1999) (upholding bankruptcy

court’s finding that unsecured deficiency claim of creditor whose claim was guaranteed by non-

debtor need not be classified separately from other unsecured creditors). Like the Settling

Claimants here, a creditor with a third-party guarantee could have an incentive to vote for a plan

that other creditors lack – confirmation of a plan would mature its rights against the guarantor.

The mere existence of an additional incentive, however, does not give rise to the need for

separate classification. As a result, the sole determinative factor regarding the propriety of

Quigley’s proposed Plan classification scheme is whether the Settling Claimants have the same

rights against Quigley as the non-settling claimants.

               19.     Faced with analogous circumstances, the court in In re Dow Corning

Corp. rejected the arguments of a number of unsecured creditors who alleged that their claims

should be classified separately from the claims of other unsecured creditors based upon factors

other than the character and legal nature of their claims against the debtor. For example, during

the pendency of the debtor’s chapter 11 case, the Nevada Supreme Court entered an adverse

decision against The Dow Chemical Company, a shareholder of the debtor (“TDCC”), based on

10469868.9                                       9
the theory that TDCC negligently undertook certain actions in connection with the debtor’s

manufacture and sale of silicone-gel breast implants. In re Dow Corning Corporation, 244 B.R.

634, 652 (Bankr. E.D. Mich. 1999). A group of unsecured creditors from Nevada argued that

their claims should be classified separately from the claims of other unsecured creditors because

certain of the terms of the plan would negatively affect substantive state rights that affected only

their claims under the recent state court decision. Id. at 652. The bankruptcy court held that the

Nevada creditors’ claims were similar to the claims of other unsecured creditors, who were not

subject to the state court decision, because “[t]he Plan classifie[d] claims filed against the

Debtor, not its shareholders.” Id. at 655. The court emphasized that it “is the legal nature of the

character of the claims against the Debtor that guides the Court’s inquiry with respect to

§ 1122(a).” Id. (emphasis supplied). Similarly, the Dow Corning court overruled objections to

classification based upon differences in the value of claims among members of the same class.

Id. at 655 (rejecting theory that multiple rupture claims should be classified separately from less

valuable single rupture claims). The Dow Corning court also rejected attempts to distinguish

between direct and derivative claims against the debtor. Id. at 664-65 (physicians with derivative

claims against debtor could be classified together with holders of direct indemnity claims

because all claims arose out of claimants’ use of debtor’s products).

               20.     In re Chateaugay Corp., 89 F.3d 942 (2d Cir. 1996), a case mentioned by

the Court at the July 12th hearing, is distinguishable from this case. The issue in Chateaugay

was whether legitimate reason and credible proof existed to support the debtor’s proposed

separate classification of similar claims in its plan. Cf. Tr. Hr’g July 12, 2007, at 45:5-8. Here,

however, the issue is whether the claims of the Settling Claimants and non-settling claimants are

similarly situated vis-à-vis Quigley and therefore properly classified under the Plan.

Classification is constrained by two straight-forward rules: (1) dissimilar claims may not be

10469868.9                                      10
classified together; and (2) similar claims may be classified separately only for a legitimate

reason. Chateaugay, 89 F.3d at 949. The Chateaugay court addressed the second rule, but it is

the first rule now before this Court.

               21.     In Chateaugay, the debtor proposed a plan that classified and treated

differently similar claims arising under the debtor’s workers’ compensation plan. The unpaid

claims of employees would receive priority status and payment in full, while paid workers’

compensation claims and the claims of the debtor’s workers’ compensation surety would be

impaired and treated as general unsecured creditors. Id. at 946. The court held that, although the

claims were similar because they both arose from the debtor’s workers’ compensation

obligations, the negative reaction by the debtor’s unions to the similar treatment of the claims (as

impaired, general unsecured claims) would jeopardize the viability of the entire reorganization.

It thus was appropriate to permit separate classification of the claims to preserve labor peace and

to further the debtor’s reorganization. Id. at 949-50. Chateaugay thus stands for the proposition

that Quigley, had it chosen to do so, could have proposed a plan under which similarly situated

claims were separately classified, but only if it satisfied the standard of legitimate reason and

credible proof. The Chateaugay court emphasized that the discretion to separately classify

similar claims belongs to the debtor. Id. Here, Quigley has exercised its discretion to propose a

plan that treats all Asbestos PI Claims similarly.

               22.     All Asbestos PI Claims against Quigley, whether their holders settled with

Pfizer or not, are non-priority general unsecured claims for damages allegedly caused by

exposure to asbestos in Quigley’s products. Classifying them together is entirely appropriate.




10469868.9                                       11
As in Dow Corning, there is no basis here for separate classification based upon the character

and legal nature of claims against a non-debtor (here Pfizer), rather than claims against Quigley.5

                23.     Indeed, if the Court were to adopt a rule requiring separate classification

in this case, it would defeat the principle purpose of chapter 11 – to bind a recalcitrant minority

of creditors holding identical claims to the will of the majority. It would also improperly reward

creditors who vote against acceptance of a debtor’s plan in order to extract for themselves (and

not the debtor) more money from a third party.

The Plan Treats All Asbestos PI Claims the Same

                24.     Under the Plan, every Asbestos PI Claim will be channeled to the

Asbestos PI Trust and paid according to the Asbestos PI Trust Distribution Procedures,

regardless of whether the holder of such claim settled its claims against Pfizer. In other words,

the Plan in no way distinguishes between the claims held by Settling Claimants and those held by

non-settling claimants. The Plan thus complies with the Bankruptcy Code.

                25.     Section 1123(a)(4) of the Bankruptcy Code requires a plan to “provide the

same treatment for each claim or interest of a particular class, unless the holder of a particular

claim or interest agrees to a less favorable treatment of such particular claim or interest.” 11

U.S.C. § 1123(a)(4). Section 1123(a)(4) merely requires that distributions from the estate on

account of claims against the debtor be equal.           In In re Adelphia Communications Corp.,

members of the ACC Senior Notes Class argued that the solicitation process was tainted in

violation of section 1123(a)(4) by offers of special consideration to some, but not all, members

of the Senior Notes class. In re Adelphia Communications Corp., Case No. 02-41729 (REG),

2007 WL 866643, at *94 (Bankr. S.D.N.Y. Jan. 3, 2007), aff’d, 361 B.R. 357 (S.D.N.Y. 2007).

5
     Indeed, if the Plan had placed Settling Claimants and non-settling claimants in separate classes, non-
settlers may have argued that Quigley was gerrymandering, separately classifying identical claims to
ensure an accepting impaired class.

10469868.9                                          12
The ACC Senior Noteholders argued that only certain members of the class (the “ACC Settling

Parties”) received consideration in the form of broad releases, exculpation, and payment of fees

and expenses in exchange for their votes in favor of the plan. Id. The complaining class

members argued that, because these benefits were not available to all class members, the plan

treated members of the same class differently in violation of section 1123(a)(4). Id. The court

found that because the pro rata distributions to the members of the class and ultimate recovery on

their claims were in no way tied to the releases and exculpations, the “equal treatment”

requirement of section 1123(a)(4) was satisfied. The requirements of section 1123(a)(4) thus

apply only to a plan’s treatment of the particular claims or interests in a specific class – not any

benefit that members of the class may separately receive on account of the class members’ other

rights or contributions. Id. at *95.

               26.     Similarly, in In re Middle Plantation of Williamsburg, Inc., the court

concluded that a plan did not provide dissimilar treatment simply because certain creditors

agreed to transfer claims among themselves. 47 B.R. 884, 893 (E.D. Va. 1984). The court

expressly declared that section 1123 does not touch on those agreements, stating that

               [s]uch agreements among [the creditors] are not a part of the
               “Plan.” The requirements of 11 U.S.C. § 1123 concern a plan, not
               other agreements. The section begins with the language—“A plan
               shall” (underscoring added). The plan must provide the equal
               treatment. Appellant’s contentions are without merit or support.
               The agreements between [the creditors] in no way affect the Plan
               or its operation. They merely provide for particular claims or
               interest to be transferred to another party.

Id. In In re Resorts Int’l, Inc., the court likewise concluded that a plan did not provide dissimilar

treatment by classifying a particular unsecured creditor that had previously released its claims

against a non-debtor third party (in a separate state court litigation) in the same class as other

unsecured creditors. The debtor’s plan provided for the establishment of a litigation trust to

pursue claims against the third party for the benefit of the creditor’s class. 145 B.R. 412 (Bankr.
10469868.9                                       13
D.N.J. 1990). The creditor argued that it thus received unequal treatment, because its prior

release could result in its receiving a lower distribution than other members of the class, who

were free to participate in the litigation trust. Id. at 447. The court overruled the objection,

concluding that the creditor’s release only affected its rights in the earlier litigation, not the

treatment of its unsecured claim under the plan. Id.

               27.     Under Quigley’s Plan, all holders of Asbestos PI Claims are

unquestionably treated similarly vis-à-vis Quigley. The Plan thus comports with the Bankruptcy

Code provisions regarding equal treatment by the debtor of similarly situated creditors. When

the Combustion Engineering court emphasized the importance of equality of distribution among

creditors, its concern was with an unequal sharing of the debtor’s assets, not the assets of a third

party. In that case, the claimants who settled with the debtor prepetition received as much as

95% of the liquidated value of their claims, and they were to be paid from a trust that the debtor

set up prepetition and funded with approximately half of its assets. 391 F.3d at 239-43. That

95% share was demonstrably more than both the settling claimants would have received in a

liquidation and the non-settling and future claimants would receive. Id. The Third Circuit

therefore was troubled by the “unequal share of the limited Combustion Engineering fund”

available for settling claimants on the one hand, and non-settlers, on the other. Id. at 242

(emphasis added). Moreover, when votes were solicited on the debtor’s plan, the plan released

the settling claimants from all avoidance and preference actions. Id. at 244-45. The settling

claimants therefore had a financial incentive that was directly adverse to non-settling claimants:

Their claims were being paid from assets that might otherwise be returned to the estate and

added to the otherwise meager recoveries of other claimants. See id.

               28.     The Pfizer Settlement Agreements simply are not part of Quigley’s Plan

and Quigley is not a party to those agreements. As described above, under the Plan all holders of

10469868.9                                      14
Asbestos PI Claims will receive the same pro rata distribution on account of their claims against

Quigley, pursuant to the Asbestos PI Trust Distribution Procedures.                 Pfizer’s settlement

payments were made and will be made, as the case may be, from Pfizer assets6 – not assets of

Quigley’s bankruptcy estate – in consideration for the Settling Claimants’ releases of claims

against Pfizer. The Pfizer Settlement Agreements thus do not affect distributions under the Plan.

All asbestos claimants – settlers and non-settlers alike – have precisely the same rights against

Quigley’s assets and will receive the same benefits.

There is No Basis to Designate the
Votes of the Settling Claimants

                29.     Quigley and Pfizer respectfully submit that under relevant case law in this

District and elsewhere, the consideration received by the Settling Claimants from Pfizer for

resolving their claims against Pfizer is not an indicia of bad faith and would not taint the Settling

Claimants' votes on Quigley’s plan. 11 U.S.C. § 1126(e); In re Adelphia Communications Corp.,

359 B.R. 54 (Bankr. S.D.N.Y. 2006); In re Dune Deck Owners Corp., 175 B.R. 839 (Bankr.

S.D.N.Y. 1995). Disqualification or “designation” of the Settling Claimants’ votes on Quigley’s

plan thus would be improper.

                30.     Section 1126(e) provides:

                On request of a party in interest, and after notice and a hearing, the
                court may designate any entity whose acceptance or rejection of
                such plan was not in good faith, or was not solicited or procured in
                good faith or in accordance with the provisions of this title.

11 U.S.C. §1126(e).

                31.     The term “good faith” is not defined in the Bankruptcy Code. As this

Court observed in Dune Deck Owners, the case law recognizes two types of bad faith: (i) the



6
    If the Plan is confirmed and becomes effective, Pfizer will not draw on the insurance assets it shares
with Quigley for reimbursement of, or to pay, any amounts under the Pfizer Settlement Agreements.

10469868.9                                         15
creditor attempts to extract or extort a personal advantage not available to other creditors in the

class, and (ii) the creditor has an “ulterior motive,” such as to procure some collateral or

competitive advantage that does not relate to its claim. 175 B.R. at 844 (citations omitted). Here,

the Ad Hoc Committee suggests that the unpaid installments of the Pfizer settlement payments

constitute an “ulterior motive.” However, as this Court observed in Dune Deck Owners, to

determine whether to designate the vote of a creditor, a court must distinguish between a selfish

motive – which is not bad faith – and an ulterior motive – which is. Quoting from one of the

earliest and most frequently cited decisions on bad faith conduct, this Court wrote:

               The new provision [Section 203 of the Bankruptcy Act7] was
               intended to empower the Court to disregard dissenters, as well as
               assenters, not voting in good faith. It prescribes a standard of
               conduct defined by the elusive term “good faith,” which must be
               met under pain of disqualification. The test is plainly to be sought
               in the motives of the holder of the claims .... If a selfish motive
               were sufficient to condemn reorganization policies of interested
               parties, very few, if any, would pass muster. On the other hand,
               pure malice, “strikes” and blackmail, and the purpose to destroy an
               enterprise in order to advance the interests of a competing
               business, all plainly constituting bad faith, are motives which may
               be accurately described as ulterior.

Id. (quoting In re Pine Hill Colleries Co., 46 F. Supp. 669 (E.D. Pa. 1942)); accord In re Federal

Support Co., 859 F.2d 17, 19 (4th Cir. 1988); In re Lloyd McKee Motors., Inc., 157 B.R. 487,

489 (Bankr .D.N.M. 1993); In re MacLeod Co., 63 B.R. 654, 655 (Bankr. S.D. Ohio 1986).

               32.     In other words, an economic benefit not available to other creditors and a

selfish motive are insufficient to trigger designation under section 1126(e). Rather, there must be

malice. Or, as this Court stated, where there is evidence that the creditor will “vote without

regard to the treatment of its claim, but instead, to achieve some benefit or goal inconsistent with



7
 Section 1126(e) of the Bankruptcy Code is derived from Section 203 of the Bankruptcy Act of 1898, as
amended, and former Bankruptcy Rule 10-305. Both authorized a court to disqualify a vote for
acceptance or rejection of a Chapter X plan if the vote was not made in good faith.

10469868.9                                       16
interests of the estate and its creditors, the Court must inquire into those motives in order to

preserve the integrity of the Chapter 11 process.”        Dune Deck Owners, 175 B.R. at 845

(emphasis added). In Dune Deck Owners, this Court found that there was ample evidence that a

secured creditor, who had purchased a blocking position of unsecured claims, may have had

ulterior motives. In particular, the Court found that, as a result of an assignment agreement with

a third party, the secured creditor had nothing to lose and much to gain by opposing the debtor’s

plan and foreclosing its mortgage on the debtor’s property. Equally importantly, the Court found

that the result would harm the debtor and its estate. Accordingly, the Court determined that the

factual issues regarding the creditor’s motivation be tried together with other confirmation

issues. Id. at 845-47. Here, an affirmative vote by Settling Claimants can achieve no goal

inconsistent with the interests of the estate and the estate will only be benefited, not harmed, if

the Plan is confirmed.8

               33.     As Judge Gerber recently held in the Adelphia case, the right to vote on a

plan is a fundamental right of creditors under chapter 11, thus designation of a creditor’s vote is a

drastic remedy – it is the exception, not the rule. 359 B.R. at 61. The party seeking to have a

ballot disallowed has a heavy burden of proof to demonstrate “bad faith.” Id. The badges of

“bad faith” noted by the courts include creditor votes designed to (1) assume control of the

debtor, (2) put the debtor out of business or otherwise gain a competitive advantage, (3) destroy

the debtor out of pure malice or (4) obtain benefits available under a private agreement with a

third party which depends upon the debtor’s failure to reorganize. Id. (citing Dune Deck

Owners, 175 B.R. at 844-55). Notably, a movant must demonstrate more than a mere selfish

motive on behalf of a voting party in order for a court to designate that party’s vote. Adelphia,


8
  Dune Deck Owners is further distinguished from the facts here because the creditor in that case had
acquired claims post-petition for the specific purpose of manipulating the voting on the plan.

10469868.9                                       17
359 B.R. at 61 (citing Figter Ltd. V. Teacher Ins. & Annuity Ass’n of Am., 118 F.3d 635, 639

(9th Cir. 1997)).

               34.     In Adelphia, Judge Gerber refused to designate the votes of certain

creditors who had voted in favor of the debtors’ Chapter 11 plan (the “Targeted Creditors”) who,

similar to the Settling Claimants in this case, may have had incentive to vote in favor of the

debtors’ plan in the form of consideration received under a separate settlement agreement. 359

B.R. at 57-58. The Targeted Creditors held both senior Adelphia notes and notes issued by an

indirect subsidiary of Adelphia, Arahova Communications Corp. Id. at 56. A central feature of

Adelphia’s plan was the settlement of inter-company disputes. Id. at 57.       The settling parties

included, among others, the Targeted Creditors. As part of the settlement, the Targeted Creditors

received releases, exculpation, and fee reimbursements in consideration of their agreement to

support the plan. Id. A group of creditors consisting of holders of Adelphia’s senior notes who

had not signed the settlement (the “ACC Bondholders Group”), sought designation of the

Targeted Creditors’ votes, arguing that the benefits offered by the settlement were a “coercive

carrot” used by the debtor to induce additional acceptances of the plan. Id. at 61-62. Judge

Gerber held that the creditors’ alleged conduct in seeking to benefit their own economic

interests, though it may have been overly aggressive, did not justify the “draconian” remedy of

disenfranchisement of the creditors’ right to vote. Id. at 57. Judge Gerber reasoned that where

creditors are acting to maximize their recoveries, their “overly aggressive” conduct in the chapter

11 process is not a basis for disqualifying their votes. Id. at 63.

               35.     The consideration received by the Settling Claimants similarly does not

warrant designation of the Settling Claimants’ votes. None of the badges of “bad faith” are

present here. The Settling Claimants do not seek (1) to assume control of the debtor, (2) to put

the debtor out of business or otherwise gain a competitive advantage, (3) to destroy the debtor

10469868.9                                        18
out of pure malice or (4) to obtain benefits available under a private agreement with a third party

that depends upon the debtor’s failure to reorganize. Indeed, the Settling Claimants’ settlements

with Pfizer are unrelated to Quigley in that they resolve asbestos-related claims against Pfizer

only and do not negatively affect the treatment of any creditor under Quigley's plan.

Accordingly, as in Adelphia, any incentive possessed by the Settling Claimants is permissible

and is not grounds for designation of their votes.

               36.     That Settling Claimants might have an economic incentive to vote in favor

of Quigley’s Plan is not evidence of the “bad faith” required under section 1126(e) to designate

their votes. The Pfizer Settlement Agreements do not require Settling Claimants to vote in favor

of Quigley’s Plan, although the Settling Claimants might have an incentive to do so. There

simply is no legal prohibition against a non-debtor’s entry into settlements whose performance is

conditioned on approval of a debtor’s plan of reorganization. Indeed, other courts have approved

plans of reorganization when the settlement agreements among non-debtors and creditors of the

debtor were conditioned upon the confirmation of the plan. For example, in In re Resorts Int’l,

Inc., 145 B.R. 412, 468 (Bankr. D.N.J. 1990), the debtor’s plan provided that creditors who

agreed to release claims against certain non-debtor plan funders would receive additional cash

and stock to be contributed by the plan funders. Although the effectiveness of the plan was

contingent upon 90% of the creditors providing releases to the plan funders, the court rejected

the assertion that the releases were coerced from the creditors. Id. at 468. The court instead

found that the releases between the parties were purely contractual, noting that, under the plan,

the non-debtor plan funder was providing consideration for the release. Id. In approving the

debtor’s plan, the court held that applicable law does not “require precise equality of treatment

[of creditors in the same class], but rather, some approximate measure” and that a plan is not

required to “treat all class members precisely the same in all respects.” Id.

10469868.9                                       19
               37.     Courts have also approved plans under which the debtor was providing a

financial incentive to creditors to support its plan. For example, in In re Mid-Valley Inc., et al.,

the court confirmed the debtors’ plan of reorganization and approved a section 524(g) injunction

where the debtors had entered into prepetition settlement agreements with payment conditioned

on the confirmation of the plan of reorganization. Case No. 03-35592 (JFK) (Bankr. W.D. Pa.

2003), aff'd, Misc. No. 04-295 (W.D. Pa. 2003).

               38.     Similarly, the bankruptcy courts in JT Thorpe and Shook & Fletcher each

confirmed plans of reorganization containing section 524(g) injunctions where the debtor had

entered into prepetition settlement agreements with creditors requiring them to support the

debtor’s plan as a condition to payment under the agreements. See In re JT Thorpe Co., Case

No. 02-41487 (Bankr. S.D. Tex. 2002) (Order dated Jan. 29, 2003); In re Shook & Fletcher

Insulation Co., Case No. 02-02771 (Bankr. N.D. Ala. 2002) (Order dated Oct. 29, 2002). In JT

Thorpe, prior to commencing its bankruptcy case, the debtor entered into settlement agreements

with asbestos personal injury claimants. As part of the settlement, the debtor established a

prepetition trust and each settling claimant was granted a security interest in the trust assets equal

to 75% of the claimant’s settlement amount. In the event the debtor filed a chapter 11 petition,

which it subsequently did, the remaining 25% of the claimant’s settlement amount was to be

treated as an unsecured claim in accordance with the terms of the debtor’s plan of reorganization.

Under the terms of the prepetition settlement agreements, the settling claimants were required to

“support and not oppose the plan of reorganization.” Although the settling claimants were

financially incentivized to support the debtor’s plan of reorganization, the bankruptcy court

approved the plan.

               39.     Here, the Settling Claimants will receive consideration from Pfizer in

exchange for resolving their claims against Pfizer, but they are providing Pfizer with separate

10469868.9                                       20
consideration in exchange for the settlement. Non-settling and future claimants are not releasing

their claims against Pfizer, and will be entitled to assert their non-derivative claims against Pfizer

after Quigley’s Plan becomes effective. There is no legal prohibition against this type of

settlement. Nor does this type of settlement in any way mandate designation of the Settling

Claimants’ votes.

               40.     In Dune Deck Owners, this Court found that the secured creditor would

gain by the failure of the debtor’s plan and the estate and debtor’s other creditors would lose.

175 B.R. at 845. Here, it is a win-win situation for Quigley and its estate and creditors if the

Settling Claimants vote for the Plan and the Plan is confirmed and consummated. Under these

circumstances, there is no basis for any inquiry into the motivation of the Settling Claimants’

votes. Accordingly, the Court should rule, as a matter of law, that the existence of the Pfizer

Settlements does not provide a basis to designate the votes of the Settling Claimants.




10469868.9                                       21
                                      CONCLUSION

                For all of the foregoing reasons, the Court should grant the Solicitation

Procedures Motion, approve Quigley’s Disclosure Statement as proposed, and grant such other

relief as it deems just.

Dated: New York, New York
       July 20, 2007


                                          SCHULTE ROTH & ZABEL LLP


                                          By: /s/ Lawrence V. Gelber
                                          Michael L. Cook (MC 7887)
                                          Lawrence V. Gelber (LG 9384)
                                          919 Third Avenue
                                          New York, New York 10022
                                          Telephone: (212) 756-2000
                                          Facsimile: (212) 593-5955
                                          Attorneys for Quigley Company, Inc.,
                                          Debtor in Possession



                                          CADWALADER, WICKERSHAM & TAFT LLP


                                          By: /s/ Bruce R. Zirinsky
                                          Bruce R. Zirinsky (BZ 2990)
                                          John H. Bae (JB 4792)

                                          One World Financial Center
                                          New York, New York 10281
                                          Telephone: (212) 504-6000
                                          Facsimile: (212) 504-6666
                                          Attorneys for Pfizer Inc.




10469868.9                                  22
EXHIBIT A
1                      UNITED STATES BANKRUPTCY COURT
                        SOUTHERN DISTRICT OF NEW YORK
2

3                                  .
     IN RE:                        .    Case No. 04-15739 (smb)
4                                  .
     QUIGLEY COMPANY, INC., et al, .    New York, New York
5                                  .    Thursday, July 12, 2007
                       Debtors.    .    10:05 a.m.
6    . . . . . . . . . . . . . . . .

7                             TRANSCRIPT OF
                   OBJECTIONS TO DISCLOSURE STATEMENT
8                 STATUS CONFERENCE ON TRUSTEE MOTION
                       FOR PRELIMINARY INJUNCTION
9              BEFORE THE HONORABLE STUART M. BERNSTEIN
                 CHIEF UNITED STATES BANKRUPTCY JUDGE
10
     APPEARANCES:   (On the Record)
11
     For the Debtors:              Lawrence V. Gelber, Esq.
12                                 Michael L. Cook, Esq.
                                   SCHULTE, ROTH & ZABEL, LLP
13                                 919 Third Avenue
                                   New York, New York 10022
14
     For The U.S. Trustee:         Greg M. Zipes, Esq.
15                                 OFFICE OF THE U.S. TRUSTEE
                                   33 Whitehall Street, 21st Floor
16                                 New York, New York 10004

17

18   (Appearances Continued)

19   Audio Operator:               Electronically Recorded
                                   by Court Personnel
20
     Transcription Company:        Rand Transcript Service, Inc.
21                                 80 Broad Street, Fifth Floor
                                   New York, New York 10004
22                                 (212) 504-2919
                                   www.randtranscript.com
23

24
     Proceedings recorded by electronic sound recording,
25   transcript produced by transcription service.
1    APPEARANCES:   (Continued)

2    For the Official Committee
     of Unsecured Creditors:      Ronald E. Reinsel, Esq.
3                                 CAPLIN & DRYSDALE, CHARTERED
                                  One Thomas Circle, NW, Suite 1100
4                                 Washington, D.C. 20005

5    For Pfizer, Inc.:            John H. Bae, Esq.
                                  Bruce R. Zirinsky, Esq.
6                                 CADWALADER, WICKERSHAM
                                   & TAFT, LLP
7                                 One World Financial Center
                                  New York, New York 10281
8
     For the Ad Hoc Committee
9    of Tort Victims:
                                  Edward Weisfelner, Esq.
10                                BROWN, RUDNICK, BERLACK
                                   ISRAELS, LLP
11                                Seven Times Square
                                  New York, New York 10036
12
                                  Gregory T. Arnold, Esq.
13                                BROWN, RUDNICK, BERLACK
                                   ISRAELS, LLP
14                                One Financial Center
                                  Boston, Massachusetts 02111
15
     For Continental Insurance
16   Company:                     Robert W. Dremluk, Esq.
                                  SEYFARTH SHAW, LLP
17                                1270 Avenue of the Americas
                                  Suite 2500
18                                New York, New York 10020

19

20

21

22

23

24

25
                                                                        3

1        (Proceedings commence at 10:05 a.m.)

2             THE COURT:     Please be seated.    Quigley.

3             MR. COOK:     Okay.    Good morning, Your Honor.    We have

4    roughly four substantive matters on the calendar, two of

5    which are unopposed.    And what I would suggest doing is

6    taking care of the unopposed housekeeping procedural matters

7    before we get into more substantive things.

8             THE COURT:     Okay.

9             MR. COOK:     The first one is the motion to authorize

10   the assumption of the Jenkins agreement.      And that was

11   unopposed.   It's a pre-petition retention allowance

12   agreement.   Most of the payments have been made under it.

13   But Ms. Jenkins is the head of the claims handling unit.

14   She's really key.    She's quite experienced, knowledgeable,

15   and sophisticated, and we want to keep her.

16            As the Yankees said with Mr. Rodriquez, we --

17            THE COURT:     Does she have thirty home runs also?

18       (Laughter.)

19            MR. COOK:     Claims processing.

20            THE COURT:     Well, hopefully, you won't have to pay

21   her what the Yankees are proposing to pay to Mr. Rodriquez.

22            But are there any objections to the application?

23            MR. WEISFELNER:       Your Honor, just one concern.    And,

24   obviously, we didn't file any papers.       But perhaps Mr. Cook

25   can just respond to an inquiry that my clients raised.
                                                                        4

1              Does Ms. Jenkins have the benefit of an indemnity

2    from Pfizer for her activity as an officer of Quigley?

3              MR. COOK:    No, she has the Quigley standard Delaware

4    corporation indemnity.    And, as we noted in the application,

5    to the extent there are any financial obligations outstanding

6    under this contract, there is a Pfizer guarantee.       But most

7    of the payments have already been made.

8              MR. WEISFELNER:    No further questions, Judge.

9              THE COURT:    Anyone else want to be heard?    The

10   record should reflect there's no response.     The application

11   is granted.   You can drop an order off in chambers.

12             MR. COOK:    Thank you.   The second matter on the

13   calendar, there are seven fee applications, and four of them

14   are from the future claims representative and two from the

15   creditors' committee, and my firm for the debtor.       Again,

16   there is no opposition, and Mr. Zipes can correct me if I'm

17   wrong.   What Your Honor has done, there was a -- there has

18   been a twenty-percent holdback, and Your Honor has authorized

19   ten percent of that twenty-percent holdback if the

20   applications are approved on an interim basis to be paid.

21   Eighty percent of all the fees, and 100 percent of the

22   expenses have been paid to date.

23             Mr. Zipes has told me that the United States Trustee

24   has no objection to what the Court has done in the past, and

25   that practice going forward.    And he can correct me if I'm
                                                                          5

1    wrong.

2                THE COURT:    So the proposal is to pay -- approve

3    ninety percent on an interim basis and 100 percent of the

4    expenses.    Any objection?    All right.   Those are approved.

5                MR. COOK:    Thank you, Your Honor.

6                The third substantive matter is a motion by CNA, and

7    I will defer to CNA to -- it's a motion to assume -- compel

8    assumption or rejection of a certain agreement.       And my

9    partner Mr. Gelber will respond to CNA.      Mr. Dremluk.

10               MR. WEISFELNER:    Your Honor, I'm wondering whether

11   or not -- and I don't want to impose on Mr. Dremluk --

12   whether or not this is an issue that is best left until after

13   consideration of the disclosure statement.

14               And I will apologize to Mr. Cook.     I read --

15               THE COURT:    Why do you think that should be?

16               MR. WEISFELNER:    Because I just don't understand the

17   motion or what it's intended to do.

18               THE COURT:    Well, maybe Mr. Dremluk will tell us.

19               MR. WEISFELNER:    Okay.

20               MR. DREMLUK:    Actually, Your Honor, I'm not going to

21   be able to do that right now for the following reason.         Mr.

22   Gelber approached me this morning about a possible resolution

23   of this matter, and, at this point, I'm in the process of

24   conferring with my counsel -- co-counsel, some of whom are in

25   California.    So if I could follow the hearing on the
                                                                          6

1    disclosure statement later today, I may be in a position to

2    go forward.

3               THE COURT:    Okay.    See, you were right, Mr.

4    Weisfelner.

5        (Laughter.)

6               MR. WEISFELNER:      One for one.

7               MR. COOK:    One for one.

8               Okay.   The third thing we have on the calendar, Your

9    Honor, is the motion to approve the disclosure statement.       We

10   have heard the objections.       We've tried to respond to them to

11   the extent we can, to the extent there are language changes.

12   The disclosure statement and the plan are essentially the

13   same that were approved before after a number of hearings.

14              The two substantive differences from the prior plan

15   are very simple:    One, the additional Pfizer contribution

16   which --

17              THE COURT:    Excuse me.    If you have a Blackberry on,

18   would you please turn it off?        Because it's interfering with

19   the electronic recording.

20              Go ahead.    Thank you.

21              MR. COOK:    Okay.    I'm sorry.

22              So it's the additional Pfizer contribution of a

23   little under $100 million.       And what the plan does, to

24   respond to the Court's decision of August '96 -- 2006, is to

25   provide for a full distribution to all -- or an equal
                                                                         7

1    distribution to all asbestos personal injury claimants.       The

2    settling and the non-settling will get the same distribution.

3             That's the substantive difference.       There were some

4    minor language changes.        For example, the U.S. Trustee wanted

5    certain language changes.

6             THE COURT:      By the way, I understand you filed a

7    black-lined version or an amended version yesterday or today.

8             MR. COOK:      Yes.

9             THE COURT:      I don't have that.

10            MR. COOK:      Okay.    We have extra copies, I'm sure.

11            THE COURT:      Do you have a black-lined version?

12   That's all I really need.

13            MR. COOK:      I thought we did -- we sent it around to

14   everybody, and we have extra copies for the Court.

15            THE COURT:      Okay.

16            MR. COOK:      And what you'll also see, both in the

17   plan and in the disclosure statement, and this also responds

18   to a request made by the Court, clarification on the

19   injunctive -- the injunction that will be in effect post-

20   confirmation.   So --

21            THE COURT:      So it tracks the statute now.   I

22   understand you have -- Mr. Weisfelner, you say it doesn't

23   track the statute, but that's what the attempt is to do, to

24   track the language of the statute.

25            MR. COOK:      That's correct.
                                                                     8

1             THE COURT:    Whatever the statute means.

2             MR. COOK:    That's right.

3             So that's essentially it.    Now the objections, to

4    cut through it, as we read them, the ad hoc committee is

5    taking the position that the plan is not confirmable, and

6    they argue that the injunction is overly broad, that settlers

7    get more, that the plan fails to comply with Section 524(g),

8    and that it was solicited in bad faith.   That, we think,

9    should be deferred to the confirmation hearing.

10            Most of these issues -- virtually all of them, are

11   fact issues, whether the settlers get more, whether the

12   524(g) test, whether there's an ongoing business, bad faith,

13   the purported vote buying --

14            THE COURT:    What about the issue of whether the

15   injunction exceeds the permissible injunction under 524(g)?

16            MR. COOK:    That's purely legal and you can look at

17   the statute, and I think what we tried to do is we labored

18   mightily to track this statute.   And I think there's no

19   question that Pfizer is entitled to seek the relief of the

20   Bankruptcy Code under the basis -- on the basis of the

21   language of the statute.

22            As far as the second part of the objection by the ad

23   hoc committee that there's inadequate information about the

24   benefit that Pfizer gets, it's pretty obvious the benefit

25   that Pfizer is getting.    It's getting the injunction under
                                                                         9

1    524(g).   And what we've had to disclose in the disclosure

2    statement is why this makes good business sense.

3              We have Exhibit H, which is a liquidation analysis,

4    which shows in graphic detail the benefit to the estate is

5    more than $500 million under this proposed plan.       Now they

6    may take issue with that, but that's a fact issue for the

7    confirmation hearing.

8              THE COURT:    That's the benefit the estate gets.       But

9    I think what he's talking about and what you have to show in

10   connection with the future demands is that the overall deal

11   is fair and equitable, what you're getting out of it and what

12   you're giving into it.

13             MR. COOK:    That's right.   That's right.

14             And that --

15             THE COURT:    And that may be Mr. Togut's fight, not

16   Mr. Weisfelner, because he represents existing claimants.

17   And, as I read the statute, that's not a disclosure you have

18   to make in connection with existing claimants.

19             MR. COOK:    Right.   And what we've disclosed, I

20   think, in overwhelming detail in negotiations with Mr. Togut,

21   and Mr. Togut is here and can explain how he got to the

22   position that he did, the incredible deal that he got for his

23   constituency, the additional $100 million, including a forty-

24   million-dollar-plus annuity, plus the claims servicing

25   agreement.
                                                                        10

1             THE COURT:    Well, I think to cut to the chase, I

2    think what Mr. Weisfelner is talking about, I'm not saying

3    you have to disclose it necessarily, is what Pfizer projects

4    its costs will be over the next forty years, discounted to

5    present value -- or not necessarily discounted to present

6    value because it's paying out over forty years.      But I think

7    that's what he's talking about.

8             MR. COOK:    Okay.   Well --

9             THE COURT:    So do you think that that's something

10   that you should have to disclose, I guess, or that the law

11   requires you to disclose?

12            MR. COOK:    Well, we didn't, because we don't think

13   we have to disclose it because, first of all, we don't know

14   what Pfizer's thinking is.    Pfizer is not the debtor.    We're

15   the debtor.   We've got the exposure.     We've got the problem.

16   And what we've tried to do is maximize these assets, this

17   insurance.

18            THE COURT:    But how could the plan be confirmed, at

19   least without that kind of proof?       I understand what you're

20   saying, that that's really for Pfizer to disclose.      But isn't

21   that something that would have to be demonstrated at the

22   confirmation hearing to bind the future demand holders, if

23   that's the appropriate phrase?

24            MR. COOK:    Well, I mean, as I understand it from --

25            THE COURT:    Maybe the answer is that they don't vote
                                                                      11

1    on the plan, so you don't have to disclose it in the

2    disclosure statement.

3             MR. COOK:    That's right.   As Mr. Togut once said in

4    the negotiation, I don't have any present clients, and once

5    they do come up with a claim, I've lost them as a client.

6    And what he's -- and his experts, and he has had lots of

7    experts, insurance, actuarial, and the like, they have

8    projected, and they have -- their report is summarized in the

9    disclosure statement.

10            THE COURT:     Let me interrupt you and just ask Mr.

11   Weisfelner, what you contend are the threshold legal issues,

12   not what are disclosure issues.    In other words, what's

13   adequately disclosed in the disclosure statement which you

14   contend makes the plan not confirmable, as a matter of law?

15   Just tick them off for me real quick.

16            MR. WEISFELNER:     Thank you, Judge, because I think

17   it is important to focus on those legal issues.

18            THE COURT:     The language of the injunction.   What

19   else?

20            MR. WEISFELNER:     It's basically three things.   First

21   and foremost, and what we think is a legal showstopper, is

22   the fact that this plan provides an inequality of treatment

23   amongst similarly-situated creditors in violation of Supreme

24   Court rulings, in violation of Combustion Engineering, and

25   specific mandates.
                                                                   12

1             THE COURT:   Now is that a voting designation issue?

2    Is it a classification issue?

3             MR. WEISFELNER:   Oh, it's just -- it's a

4    showstopper.   You could take a look at this plan.   It can go

5    out for a vote.   And no matter what the result of the vote

6    is, the plan can't be confirmed because of the way the vote's

7    been designed.

8             THE COURT:   What if everybody votes for the plan?

9             MR. WEISFELNER:   It doesn't matter.

10            THE COURT:   Why not?

11            MR. WEISFELNER:   Well, I'll tell you why not.

12            We have identical similarly-situated creditors --

13            THE COURT:   Right.

14            MR. WEISFELNER:   -- with identical claims against

15   Quigley and Pfizer, with the same sort of contention on their

16   part that all the Pfizer claims are derivative.

17            Well, they settled some 132,000 or more, I don't

18   have the exact numbers, I have it in my outline, but off the

19   top of my head they settled over 100,000 of these claims.

20   They tell us in the disclosure statement that the vast

21   majority of the claims they settled were non-malignant claims

22   that asserted derivative liability only against Pfizer.

23            Now those people got in the aggregate $430 million.

24   half of it has already been paid.

25            THE COURT:   But what's the provision of the
                                                                     13

1    Bankruptcy Code, if that's the appropriate reference, that's

2    being violated by that treatment?

3              MR. WEISFELNER:   Oh, any number of them, but first

4    and foremost, the inequality of treatment amongst similarly-

5    situated creditors.    It's a classification violation, it's a

6    treatment violation, it's an inability to comply with

7    applicable law, it implicates good faith, but it goes to the

8    fundamental precept of Chapter 11.    And we've seen cases of

9    very recent moment decided after this case was filed, and

10   after the plan was hatched, that speak directly to efforts by

11   affiliated companies, parent companies, to slip below the

12   radar and get themselves 524(g) injunctions based on their

13   affiliates or subsidiaries.   And Combustion Engineering

14   provided a very similar set of facts to the case we have here

15   today.

16             THE COURT:   You know, Combustion Engineering was a

17   little different.   You don't have to necessarily argue it

18   now.   I just want to understand what you contend are the

19   legal as opposed to the disclosure issues.

20             MR. WEISFELNER:   Sure.   And, again, and I do want to

21   go through the voting issue in detail because I think it's a

22   showstopper.   So we have the voting issue; unfair and

23   discriminatory treatment amongst similarly-situated

24   creditors.   We have a class of creditors who are being asked

25   to vote on this plan that have a two-hundred-and-fifteen-
                                                                     14

1    million-dollar incentive to vote yes.

2             THE COURT:   Do you think that's a designation issue

3    and I could designate those votes as a matter of law?

4             MR. WEISFELNER:    Your Honor, I think taken as a

5    whole, the classification scheme is violative of fundamental

6    principles of the Bankruptcy Code.    There is nothing between

7    now and tabulation of those votes that's going to change.

8             The fact of the matter is that we're looking to

9    approve a disclosure statement that's aimed at one audience

10   and one audience only, and that's asbestos claimants.   But we

11   have two different kinds.   We have the kinds that have gotten

12   the benefit of a settlement with Pfizer.   They have a two-

13   hundred-and-fifteen-million-dollar incentive to vote yes.

14   They don't care what the disclosure statement says.   They're

15   going to vote yes in order to get the second half of the

16   Pfizer settlement.

17            Then you have my clients who don't have the same

18   incentive.

19            THE COURT:   I understand.   What else -- what other

20   legal issues are there?

21            MR. WEISFELNER:    Issue number two, and I think

22   critically important, and it can be resolved, I think, as a

23   matter of fact and law if Pfizer will respond to two simple

24   questions.   The issue that I think stops this plan cold is

25   the scope of the 524(g) channeling injunction that Pfizer is
                                                                         15

1    bargaining for.    And despite all of the language that they've

2    inserted into their new documents which purports to track the

3    language of the statute, Your Honor needs only look at one

4    provision of the disclosure statement, which I'll point out

5    to you, and much more substantively, take a look at their

6    proposed modification of the temporary injunction.       Both of

7    those documents spell out, in my view, completely the fraud

8    that's being perpetrated on the Court in terms of the breadth

9    of the 524(g) injunction.        And let me show you want I mean.

10               THE COURT:   All right.

11               MR. WEISFELNER:   If you take a look at the newest

12   disclosure statement, and I'm looking at the black-lined

13   version, I guess the one that was just handed to you, at Page

14   59.   And, Your Honor, by the way, I want to just take a step

15   back.

16               On our number one issue, the voting issue, we got a

17   response from the debtor yesterday.       I don't know if you had

18   an opportunity to read it.       Actually, it was a joint response

19   by Pfizer and the debtor.        The one issue that they don't

20   mention anywhere in their response is the improper treatment

21   argument, the improper classification argument that I started

22   off with.    And I think there's a reason why they don't

23   respond to it.    They can't.

24               Anyway, look at Page 59.

25               THE COURT:   Okay.
                                                                       16

1               MR. WEISFELNER:   This is the new black-lined

2    version.   And up above, where you see all the black lining,

3    that's their attempt to, in effect, track the statute.      But

4    now take a look at the descriptive language where it says,

5    "The following types of claims," and this, apparently, is not

6    black-lined because it hasn't changed:

7               "The following types of claims and demands are

8    included in the definition of asbestos PI claims, and,

9    consequently, would be channeled."

10              And, here, we have, "claims, demands, or remedies

11   for personal injuries or wrongful death against Quigley or

12   Pfizer relating to or arising out of exposure to asbestos or

13   asbestos-containing products which were either manufactured,

14   sold, installed, handled, fabricated, released, used,

15   specified, made, distributed, or removed by Quigley,

16   regardless of when such personal injuries manifest for which

17   Quigley and any Pfizer protective party is alleged to have

18   legal responsibility."

19              Your Honor, I will demonstrate to you as a matter of

20   fact, based on admissions by Pfizer --

21              THE COURT:   Is this the Insulag or the FireX?

22              MR. WEISFELNER:   Exactly.

23              THE COURT:   All right.

24              MR. WEISFELNER:   And here is the question that you

25   should be asking the debtor because --
                                                                    17

1             THE COURT:   You're saying they may have committed

2    independent wrongs which exceed the exculpatory language.

3             MR. WEISFELNER:   Sure.   And, you know, historically,

4    we've all been focused on, and I admit I was confused by

5    this, you know, it was a product-specific issue.    And I think

6    we've gotten Pfizer to acknowledge as a matter of fact, but I

7    think it ought to be clear in the disclosure statement, that

8    they acknowledge that since they were the manufacturer and

9    distributor of Kilnoise, and that they were the manufacturer

10   and distributor of FireX, that no way, no shape, no form, are

11   they looking for a 524(g) injunction as relates to injuries

12   based on those products.   That's question number one.

13            Question number two, and I think the much more

14   difficult question for Pfizer, is do they allege, because the

15   language we just read together, Judge, gives me one answer,

16   and I think it's the improper answer as a matter of law, does

17   Pfizer contend that claims against it involving Insulag are

18   or are not to be channeled?   Now if they tell me that those

19   claims are not to be challenged, I'm sitting down.

20            THE COURT:   Channeled, you mean?

21            MR. WEISFELNER:   If they tell me that they're not to

22   be channeled --

23            THE COURT:   You said "challenged."

24            MR. WEISFELNER:   Yeah, no, channeled.    I think they

25   fully intend to channel all Insulag related claims.    And I
                                                                     18

1    think that intent demonstrates the plan is unconfirmable

2    because the facts, as admitted by Pfizer in prior court

3    cases, is that Pfizer had its logo prominently displayed on

4    Insulag product; Pfizer bought the raw asbestos for

5    production of Insulag; Pfizer sold Insulag to Bethlehem Steel

6    Pfizer considered the Old Bridge facility where Insulag was

7    manufactured to be a Pfizer facility --

8              THE COURT:   These sound like factual issues.   I'm

9    not getting --

10             MR. WEISFELNER:    No, but they're admitted by the

11   debtor.   They're admitted by Pfizer.   And I can show you

12   where in the record they've been admitted.

13             And my point, Your Honor, is, you know, we can

14   ignore their prior judicial admissions, but they're there in

15   the record.   But it brings to bear the fundamental question.

16   And you don't have to involve yourself in whether any of

17   these factual allegations are true.     If you assume they're

18   true, that we had a Pfizer label on Insulag, and you

19   understand the law of Courts as applied in Philadelphia, in

20   Maryland, in many jurisdictions where my clients have claims

21   pending, and as a consequence of the restatement of torts, I

22   think it's Section 400.     It says, listen, even assume that

23   Pfizer had nothing to do with manufacturing Insulag, and

24   Pfizer had nothing to do with the sale of Insulag.    The fact

25   of the matter is they had their label on the product.     That's
                                                                         19

1    not contested.    And the law of tort says that if you put your

2    label on somebody else's product, then you have the exact

3    same liability as a matter of law as the manufacturer of that

4    product.

5               Now, Your Honor, that's the hub of this case.

6               THE COURT:    The hub or the nub?

7               MR. WEISFELNER:    Or the nub.

8        (Laughter.)

9               MR. WEISFELNER:    It's the hub, the nub.    It's pretty

10   centrally involved.

11              My point being that if Pfizer is here today telling

12   you that for whatever its contribution is ultimately

13   determined to be, and that is a confirmation issue, that they

14   are looking for an injunction against their own direct

15   liability for actions they took on their own, having nothing

16   to do with the fact that they were the parent, or they

17   provided financing, or they provided insurance.        These are

18   the sorts of claims that every Court of competent

19   jurisdiction that's reviewed it from Combustion Engineering

20   to Congoleum have determined are not the appropriate

21   provision of a channeling injunction.

22              THE COURT:    I got it.   I got it.

23              MR. COOK:    Can I respond?

24              THE COURT:    Not yet.    What other threshold issues?

25              MR. WEISFELNER:    Your Honor, I think --
                                                                      20

1             THE COURT:     I'm just trying to figure out what are

2    the issues -- disclosure issues we can deal with.

3             MR. WEISFELNER:    Right.   And, Your Honor, again, I'm

4    not going to spend any of the Court's time dealing with

5    disclosure issues because, fundamentally, you know, it's a

6    joke to think that we're going to affect the way the vote

7    turns out on disclosure.    The guys who need confirmation of

8    this plan to collect the rest of their four-hundred-and-

9    thirty-million-dollar settlement, they're a foregone

10   conclusion.   They're going to vote yes.    The guys who believe

11   this plan doesn't work are going to vote no.

12            But, Your Honor, you can't allow that vote to go

13   forward because you have all of them in one class, they're

14   getting different treatment, they have different incentives,

15   and you had a pure and simple vote manipulation by Pfizer and

16   Quigley, third ground, fundamental legal ground for not

17   allowing this disclosure statement to go forward.    And, here,

18   you have to sort of give me the benefit of a couple of

19   minutes of explanation because, on its face, you're going to

20   say, I don't buy it.

21       (Laughter.)

22            MR. WEISFELNER:    And that's --

23            THE COURT:     Well, with that introduction, go ahead.

24            MR. WEISFELNER:    Because -- because I've heard you

25   on this topic before.
                                                                   21

1             THE COURT:   Oh, okay.

2             MR. WEISFELNER:   And that's bad faith.

3             THE COURT:   Well, I'm not going to decide it as a

4    matter of law.

5             MR. WEISFELNER:   And, Your Honor --

6             THE COURT:   I'm just not.    I can decide voting

7    impropriety, I can decide classification issues based on the

8    same facts you're going to allege --

9             MR. WEISFELNER:   Your Honor, in connection with

10   established facts that demonstrate that this debtor-in-

11   possession, who is the only proponent of the plan,

12   interestingly enough, is the only entity in the document that

13   makes a recommendation that people vote in favor of it.

14   Pfizer, for all of its contributions and for all of the facts

15   it's going to need to demonstrate at confirmation, isn't the

16   plan proponent.

17            Well, Your Honor, the fundamental issue that was put

18   before you in terms of Pfizer contribution and how well it

19   benefits claimants in this case, remember that that new

20   contribution only maintains the same seven-and-a-half-cent

21   distribution to my clients, it doesn't change that a whit,

22   doesn't change the seven-and-a-half cents for the future

23   clients, if you believe that that hundred million was enough

24   to change the ten-cent recovery to a hundred-cent recovery.

25            But my point is in an ordinary case, you have
                                                                     22

1    Quigley as an independent fiduciary, and he sees that Pfizer

2    makes a voluntary decision to tell all of those settled guys,

3    hey, remember, I paid you four thirty to settle all of your

4    claims against Pfizer only, notwithstanding the fact that

5    historically Pfizer and Quigley settled together using the

6    same lawyers --

7               THE COURT:   You're eating into your two minutes.

8               MR. WEISFELNER:   Okay.   But I just want to tell you

9    why I think that this is something that does go to the issue

10   of whether or not the plan on its face is confirmable.

11              Where was my debtor in terms of taking a look at

12   these claims?

13              THE COURT:   I can't decide it as a matter of law,

14   Mr. Weisfelner.   And you're just never going to convince me

15   that an issue of good faith or bad faith can be decided as a

16   matter of law without hearing testimony and seeing your --

17              MR. WEISFELNER:   No, but, Your Honor, I do think in

18   terms of whether or not a disclosure statement describes a

19   plan, that it's fundamentally flawed.     It doesn't say as a

20   matter of law that it's the same standard, for example, as a

21   motion for summary judgment.    I mean, I think they're

22   similar.

23              THE COURT:   I understand that.   But how can I, where

24   I have disputed factual issues, basically confirmation, good

25   faith, bad faith issues, how can I deal with it?
                                                                   23

1             MR. WEISFELNER:   And, Your Honor, I don't think you

2    have to get to the good-faith issue in order to determine the

3    two issues I've highlighted.

4             THE COURT:   Okay.

5             MR. WEISFELNER:   But I do think you need to consider

6    them in the context of the case taken as a whole.   To the

7    extent that Your Honor has sort of a balancing issue to do, I

8    think the fact that Quigley has no independence here in terms

9    of protecting its estate --

10            THE COURT:   You're starting to raise factual issues.

11            MR. WEISFELNER:   Okay.

12            THE COURT:   Because they're going to stand up and

13   they're going to tell me why and give me evidence, and then

14   I'm going to have to have a trial of --

15            MR. WEISFELNER:   Oh, I'd like them to try, because I

16   have testimony from Quigley in terms of their CEO, the

17   chairman of the board, and every director, that says they

18   never considered these issues, never considered these issues,

19   the issues being do you move to subordinate or disallow that

20   new ninety-percent stub claim that Pfizer gratuitously now

21   allows to come into the estate because they need the vote.

22   Does Quigley think it's appropriate for those people who once

23   upon a time cut a deal and said, I'll only take ten percent,

24   to now take what they're going to take?

25            When I asked Quigley's CEO, what's the financial
                                                                     24

1    impact of that ninety-percent change, he goes, I have no

2    idea.   I said, well, can you give it to me within a range?

3    He goes, no, I don't think so.      I said, can you give it to me

4    within $100 million?   He said, no, I don't know.

5              THE COURT:   I'm not going to deal with the good

6    faith/bad faith issue on what is essentially a motion for

7    summary judgment.

8              MR. WEISFELNER:   Okay.    So, again, what I'd like an

9    opportunity to do, as a matter of law, is to demonstrate to

10   you why inequality of treatment renders this plan

11   unconfirmable on its face, and why Pfizer's effort to obtain

12   a channeling injunction for its liability on Insulag based on

13   its historic admissions in Courts of competent jurisdiction

14   render this plan unconfirmable.     It violates 524(g).

15             THE COURT:   Okay.   There was one other thing you

16   raised about an ongoing business requirement.

17             MR. WEISFELNER:   Your Honor, again, it's --

18             THE COURT:   I looked through the statute, and I've

19   heard about that.    But I looked through it and I couldn't

20   find it in 524(g).

21             MR. WEISFELNER:   Your Honor, every case that

22   interprets 524(g) talks about the necessity for an ongoing

23   business as being, again, you would think Mr. Togut's issue.

24   There has got to be an opportunity to get additional

25   recoveries in the event that everyone is prognostication
                                                                       25

1    about the size of the claims and the dollar amounts that are

2    being asserted are wrong so that there's additional cash

3    flow.   And the statute is interpreted by Circuit Courts

4    throughout the country who have looked at this as requiring

5    an ongoing business venture.

6                Now, Your Honor, I'll acknowledge that that's a fact

7    issue to determine at a confirmation hearing.

8                THE COURT:   You have a large third-party funder

9    here, so --

10               MR. WEISFELNER:   Yeah, but that's not an ongoing

11   business.    Every case, by definition under 524(g), has a

12   large third-party funder or else you're not getting a

13   channeling injunction.

14               THE COURT:   Okay.   In my view, you've identified two

15   threshold issues.    One is the language of the injunction,

16   whether it exceeds 524(g); and, two, what you've called an

17   unfair treatment issue, which, initially, to me, is a

18   classification issue, or to put it another way, maybe

19   everything could be resolved by separately classifying the

20   settling creditors in one class, and then unsettlers in

21   another.

22               MR. WEISFELNER:   Okay.   But then -- I mean, there

23   are cases that say you can't do that.

24               THE COURT:   Why not?   You just said they're being

25   treated differently.     Don't you have to do that?
                                                                    26

1             MR. WEISFELNER:   No, no, no.    But you can't take

2    similarly-situated creditors --

3             THE COURT:   But they're not.    You're telling me

4    they're not.

5             MR. WEISFELNER:   No, they are similarly-situated in

6    terms of their underlying fundamental character.    The problem

7    is not that they're not similar.    They're identical.

8             THE COURT:   It sounds like a voting incentive issue.

9             MR. WEISFELNER:   Say again?

10            THE COURT:   It's a voting incentive issue.

11            MR. WEISFELNER:   No.    It's also a fundamental

12   treatment issue.   I have people that are going into the same

13   class that are being treated differently.

14            THE COURT:   I thought that everybody is being

15   treated the same and getting their distribution and they're

16   releasing their claims against Pfizer.

17            MR. WEISFELNER:   Your Honor, again, and I think this

18   is fundamental, and maybe the point of clarification that

19   Your Honor really needs to focus on, or have me focus on,

20   because we haven't done a good enough job on this, you have

21   Pfizer, who contends historically that it's never been tagged

22   with asbestos liability.   You have Pfizer who historically,

23   and in their disclosure statement acknowledged, that they

24   went out historically and settled claims for Pfizer and

25   Quigley, and I forgot what the language is, where they
                                                                       27

1    thought, or their lawyers thought, that there were cognizable

2    theories of liability against Pfizer, not that they've ever

3    been judicially determined, but that's the rationale for

4    settling Pfizer and Quigley claims together.

5                Then, in the context of an overall bankruptcy

6    scheme, it's not an independent decision, Pfizer decides it's

7    now going to send the same army of lawyers out to settle

8    Pfizer-only claims.      It purposely decides not to settle the

9    Quigley liability, which historically went hand-in-hand.       And

10   the reason it does that, as was the reason in Combustion

11   Engineering, was to make sure that you had the stub claim of

12   Quigley by the same claimants voting as part of the plan.

13   And even though the record suggests that Mr. Togut said, as a

14   matter of recovery, you need to subordinate or release your

15   recovery to the tune of ninety percent, the initial

16   proposition was they were going to vote a hundred-cent claim.

17               Your Honor said, no, you can't vote a hundred-

18   percent claim because you're only getting a ten-cent

19   dividend.    Well, so they fixed it.   And they're no longer

20   getting a ten-cent dividend.     Now they get a hundred-percent

21   dividend.

22               But that guy who got a hundred-percent -- was going

23   to get a hundred-percent dividend from Quigley already got

24   paid from Pfizer on the same liability.

25               THE COURT:   But Pfizer is not a debtor.
                                                                     28

1             MR. WEISFELNER:   It doesn't matter.   Pfizer is here

2    as an affiliate of this debtor.   Guess what?   If this plan

3    doesn't get confirmed, guess where Pfizer goes in the

4    disclosure statement to collect the $430 million promised to

5    the settling plaintiffs?   Well, if this case doesn't get

6    confirmed, by the way, it's not four thirty.    Pfizer keeps

7    the other two fifteen.   But the first two fifteen, they're

8    going to tap the shared insurance.   They tell you right in

9    the disclosure statement that's what they're going to do.

10            So, I mean, to tell me that Pfizer can do whatever

11   it wants to do in terms of paying asbestos creditors, even

12   though Pfizer acknowledges the only reason they're paying is

13   because of what they deem to be derivative liability, and

14   then tell me that whatever Pfizer pays is irrelevant to what

15   a Quigley creditor is getting in terms of equality of

16   treatment ignores, quite frankly, Your Honor, all of the

17   judicial determinations regarding attempts by parents and

18   affiliates of getting the benefit of a bankruptcy for one of

19   their affiliates who's in Chapter 11.

20            THE COURT:   Let me hear the response on the two

21   legal issues that have been identified.

22            MR. WEISFELNER:   And, Your Honor, again, there is a

23   lot more on the issue of the channeling injunction.   I think

24   I'd like to be able to make an appropriate record.    There's

25   only a couple of more points I want to draw Your Honor's to.
                                                                       29

1             THE COURT:     More legal-type threshold --

2             MR. WEISFELNER:     More legal -- more of the legal-

3    type issues.

4             THE COURT:     Okay, go ahead.

5             MR. WEISFELNER:     Okay.   Your Honor, I hope you have

6    in front of you the declaration of my partner Greg Arnold.

7             THE COURT:     I have it handy.    It's a large document,

8    as I recall.

9             MR. WEISFELNER:     Well, Your Honor, let me, if I can,

10   provide you with another version of it, which I had, just so

11   that you could easily turn to the pages I'm going to make

12   reference to.   May I, Judge?

13            THE COURT:     I have it.   Just -- let me just get it.

14            MR. WEISFELNER:     Okay.   Well, without my tabs, it's

15   going to take a while to find the right page.      But, in any

16   event.

17            THE COURT:     I have his declaration.    It's a short

18   declaration with exhibits, right?

19            MR. WEISFELNER:     A short declaration with a lot of

20   exhibits, you're right, Your Honor.       And, Your Honor --

21            THE COURT:     Are you going to refer me to testimony,

22   deposition testimony?

23            MR. WEISFELNER:     No.   No.

24            THE COURT:     Okay.

25            MR. WEISFELNER:     Your Honor, I'm not going to
                                                                       30

1    produce deposition testimony.

2                THE COURT:   I'm just interested in the language --

3    the language in the document.

4                MR. WEISFELNER:   I'm going to show you from

5    interrogatories and from exhibits and evidence that was

6    submitted in the record.      Your Honor, for example, this is,

7    and I'm just going to approach so you can see it --

8                THE COURT:   Why don't you just tell me the exhibit

9    and the page?

10               MR. WEISFELNER:   Well, it's just so hard to find,

11   Judge.   But it's under Exhibit C.

12               THE COURT:   Okay.

13               MR. WEISFELNER:   It's about midway through Exhibit

14   C.

15               THE COURT:   Aren't the pages numbered?

16               MR. WEISFELNER:   No.   The exhibit pages aren't

17   numbered.

18               THE COURT:   Oh, all right.

19               MR. WEISFELNER:   This is --

20               THE COURT:   Why don't you just tell me what it says?

21               MR. WEISFELNER:   Your Honor, this is really one of

22   those things where you sort of want to see it visually.

23               THE COURT:   Okay.   Tell everybody what you're

24   referring to.

25               MR. WEISFELNER:   If you look at Tab No. 1.
                                                                          31

1                THE COURT:   Yeah.

2                MR. ZIRINSKY:   (Not identified)      Hold it, I'm not

3    there yet.

4                MR. WEISFELNER:     You will see a series of documents.

5                MR. ZIRINSKY:   Excuse me.    Where are we on this

6    document?

7                THE COURT:   Page 15 of Pfizer's response to

8    plaintiff's consolidated interrogatories master file.         Is

9    that what you're referring me to?

10               MR. WEISFELNER:     Your Honor, no.   I want you to

11   skip, I'm sorry, to Tab 3.       Is that a -- Tab 3 under Exhibit

12   C.

13               THE COURT:   But you're showing me exhibits on what

14   may or may not -- you may convince me that the injunction

15   can't say anything more than the statute says, and then we

16   don't have to get into these other issues about whether or

17   not --

18               MR. WEISFELNER:     But, Your Honor, that's sort of --

19   that's sort of putting blinders on.       They'll replicate the

20   statute verbatim.

21               THE COURT:   Yes.    Right.

22               MR. WEISFELNER:     But then they'll tell the world, or

23   they'll refuse to tell the world here today in open court,

24   did they intend the channeling injunction, yes or no, to

25   prohibit people from suing them based on Insulag.         That's --
                                                                        32

1               THE COURT:   But it's only if the liability arises

2    from what we've been calling a derivative relationship.       If

3    they have a direct -- if there's a direct claim, in other

4    words, it doesn't fall into I'm liable because I'm a manager,

5    I'm liable because I loaned money, or that kind of stuff.

6               MR. WEISFELNER:   Right.

7               THE COURT:   Why would the injunction cover that?

8               MR. WEISFELNER:   It shouldn't.    But my point, Judge,

9    is when you read what they describe in the disclosure

10   statement --

11              THE COURT:   We've gone through that already.

12              MR. WEISFELNER:   Okay.    And what they're going to

13   argue to a Court of competent jurisdiction when a claim gets

14   filed, they're going to say, this is the way the injunction

15   order reads.

16              They ought to, in open court, and as part of

17   disclosure, say, we do or don't intend for 524(g) to cover

18   Insulag.

19              THE COURT:   Okay.

20              MR. WEISFELNER:   And if it does, then I think you've

21   got a fatal confirmation flaw.       If they say, no, we

22   acknowledge that if we have separate liability in Insulag,

23   we're open.

24              THE COURT:   Well, let's find out.    All right.   So

25   what else about the channeling injunction?
                                                                      33

1              MR. WEISFELNER:    Your Honor, I think that's really

2    the core of it.   I think they've already acknowledged that

3    they're liable for Kilnoise, they already acknowledged that

4    they're liable for FireX, that they can't have those claims

5    channeled.

6              The real open issue is Insulag.    There is plenty of

7    reason why they're liable for Insulag as a matter of state

8    law.   They can't change that.   It has nothing to do with what

9    524(g)'s scope is.     And they could very simply respond to

10   this issue by saying, yes or no, do they intend to be covered

11   under the channeling injunction for Insulag liability.

12             MR. ZIRINSKY:    Can I respond, Your Honor?

13             THE COURT:    Let me hear the response on the two

14   legal issues we've identified.

15             MR. ZIRINSKY:    I take it the first one -- I kind of

16   lost track because it went on for a long time.

17             THE COURT:    Well, there's, one, it's the scope of

18   the channeling injunction, and I guess, although Mr.

19   Weisfelner has focused on Insulag, it's really a more general

20   question of whether you can get anything more than the

21   language says, which is kind of an indirect liability.    But

22   if you've directly done something and you're liable under

23   state tort law because you are an active participant, then

24   you're liable.

25             MR. ZIRINSKY:    Well, I'm not a tort lawyer, nor am I
                                                                    34

1    going to be --

2              THE COURT:   Well, to the extent you would be liable

3    under tort law.

4              MR. ZIRINSKY:   Let me just make it very, very clear,

5    Judge.   And we -- after our last conference with Your Honor

6    regarding modifications to the PI, we went back and we had a

7    lot of discussions with Quigley's counsel, with our client,

8    and they with their client, and we concluded that we never

9    intended that the 524(g) injunction be anything more than

10   what's in the statute.    And that's what we're prepared to

11   live with, whatever is in the statute.

12             THE COURT:   Well, there's an allegation that, and I

13   don't know if it can be resolved today, but there is an

14   allegation that Pfizer had some active role in manufacturing,

15   or at least producing or maybe distributing Insulag.

16             MR. ZIRINSKY:   No, we did not.

17             THE COURT:   All right.   But to the extent --

18             MR. ZIRINSKY:   I'm not going to -- I mean --

19             THE COURT:   But to the extent that could be

20   demonstrated --

21             MR. ZIRINSKY:   If somebody could --

22             THE COURT:   Let me just finish.

23             MR. ZIRINSKY:   I'm sorry.   Go ahead.

24             THE COURT:   To the extent that tort plaintiff could

25   demonstrate that post-confirmation, is that the type of claim
                                                                     35

1    that would be channeled?

2              MR. ZIRINSKY:    Well, if it --

3              THE COURT:   Simple question.

4              MR. ZIRINSKY:    Let me answer it, and I'm not trying

5    to be clever.

6              THE COURT:   Okay.   Well, good.

7        (Laughter.)

8              MR. ZIRINSKY:    I'm trying to answer the best I can.

9              THE COURT:   Okay.   That's really the nub or the hub

10   of the question.

11             MR. ZIRINSKY:    To the extent -- in my view, the

12   plaintiff -- a plaintiff would have to establish that their

13   claim, assuming they could sustain it with proof, okay, that

14   their claim does not fall within the specific language of

15   524(g).   Okay?

16             THE COURT:   So let me just give you -- let me give

17   you a hypothetical.

18             A person comes in and says that -- demonstrates that

19   Pfizer was distributing Insulag, which also happens to be a

20   product that Quigley manufactured and/or distributed.    Would

21   the 524 -- assuming that the distribution would subject

22   Pfizer to active -- make it an active tortfeasor under state

23   law, would the channeling --

24             MR. ZIRINSKY:    Independent of Quigley?

25             THE COURT:   Independent of Quigley.   Would the
                                                                     36

1    channeling injunction apply to that claim against Pfizer?

2              MR. ZIRINSKY:   I would answer it this way.   If

3    Pfizer was manufacturing or distributing Insulag, okay, on

4    its own, okay, and it had --

5              THE COURT:   Why couldn't it be concurrent -- what is

6    it, a concurrent tortfeasor or -- it manufactures and Quigley

7    distributes, or something like that?

8              MR. ZIRINSKY:   Well, I would say this.   If Pfizer

9    actually manufactured Insulag, I would say that it probably

10   would not fall within the 524(g), okay?   But I can tell you

11   as a matter of fact that Pfizer never manufactured --

12             THE COURT:   Well, why don't we just take out all the

13   excess language and just leave the statute the way -- what it

14   says and --

15             MR. ZIRINSKY:   Well, that's what we're doing.

16   That's what we're -- I mean, Mr. Weisfelner is --

17             THE COURT:   There was a little -- there was a tail

18   that was including -- there were some examples that were

19   given.   What was the page in the --

20             MR. WEISFELNER:   It's Page 59, Your Honor, of the

21   black-lined version of yesterday's disclosure statement.

22             THE COURT:   If that's what's intended --

23             MR. ZIRINSKY:   Well, let's be clear what language --

24             THE COURT:   Why don't we just track the statute and

25   just say what the statute says?
                                                                    37

1             MR. ZIRINSKY:   We tried to.   We -- well, asbestos PI

2    claims, we don't -- if we're going to the last part of the

3    black line here --

4             THE COURT:   Right.

5             MR. ZIRINSKY:   -- where it says, "Asbestos PI claims

6    shall include without limitation indirect asbestos PI claims,

7    asbestos PI deficiency claims, and trust expenses," these all

8    go to things that are covered by the statute.

9             THE COURT:   It's the following types of claims and

10   demands which has been the subject of concern.

11            MR. ZIRINSKY:   Well, this is a disclosure item.

12   This is not an operative provision of the proposed injunction

13   that's in the --

14            THE COURT:   What's the injunction in the plan?

15            MR. ZIRINSKY:   It's in the -- it's actually in the

16   plan.

17            THE COURT:   What's the -- is that in the Article 11,

18   I think it is?

19            MR. WEISFELNER:   Article 11.6.   But, Your Honor, you

20   know, we're going in circles.   We'll have a plan definition

21   that tracks the statute, and Pfizer, who's going to be able

22   to argue that this is what was intended.   And it comes down

23   to a very clear, you know, statement that Your Honor put your

24   finger right on.

25            Under Pennsylvania law, if you put your own label on
                                                                      38

1    a product that's manufactured by somebody else, then you're

2    subject to the same liability as the manufacturer.      That's

3    the state law.

4             MR. ZIRINSKY:    That's his contention.

5             THE COURT:    All right.   But we're not going to

6    resolve that today.

7             MR. ZIRINSKY:    Of course not.   That's his

8    contention.   Let him go argue that in State Court after

9    confirmation.

10            THE COURT:    So why don't you just track the statute

11   and the argument is over whether or not -- I guess he's

12   concerned that this disclosure is going to somehow affect

13   another Court's interpretation of it --

14            MR. WEISFELNER:    Well, of course.

15            THE COURT:    -- and just leave it at what -- you know

16   --

17            THE WITNESS:    But, Your Honor, again, as a matter of

18   law, if we can demonstrate to you by competent citations

19   through appropriate state of law that it is a fundamental

20   precept of product liability --

21            THE COURT:    You don't have to do that because if it

22   falls within the language of the statute -- in other words,

23   if it is the type of claim that can be channeled, then it

24   will be channeled.    If it's the type of claim that doesn't,

25   then it won't be channeled.
                                                                       39

1              MR. WEISFELNER:   Can I try -- can I try --

2              THE COURT:   And I'm not going to -- listen to me.

3    I'm not going to hear 200,000 hypotheticals of a type of

4    claim that, you know, is ambiguous.      That will be resolved,

5    like the language of a release would be resolved in future

6    litigation, when it comes up.

7              MR. WEISFELNER:   And I hear you.    And let me tell

8    you why again --

9              THE COURT:   So is this issue resolved?   Stop.

10             MR. ZIRINSKY:   I'm not finished.

11             THE COURT:   Everybody stop.    Is this issue about the

12   language of the injunction, which in the plan seems to track

13   the statute, resolved by simply taking out that language that

14   says, "The following types of claims and demands are included

15   in the definition of asbestos PI claims"?

16             MR. WEISFELNER:   With all due respect, Your Honor,

17   no.   And let me tell you why.

18             THE COURT:   Okay.

19             MR. WEISFELNER:   Let me tell you why.

20             There is a set procedure in virtually every

21   jurisdiction that has an abundance of asbestos litigation on

22   how one goes about pleading and proving one's case.     Let me

23   give you an example because what Pfizer is really attempting

24   to do is to have Your Honor change the established law --

25             THE COURT:   Just tell me how it gets resolved.
                                                                     40

1               MR. WEISFELNER:   Here's how it works.

2               THE COURT:   Just tell me how it -- what should it --

3    what should the plan say?

4               MR. WEISFELNER:   The provision on -- I mean, I

5    haven't thought through the language, but, I mean, give me

6    some time and I will.    But, for example, in New York City,

7    there is an operative case management order most recently

8    amended in October of 2003.    It's got an objective to bring

9    about fair, expeditious, and inexpensive resolution of

10   asbestos cases by having standardized pleadings and discovery

11   so parties can obtain the necessary information to evaluate

12   the claims.

13              What Pfizer wants is to be able to say, if you file

14   a complaint and you don't say that you were exposed to

15   Insulag, and you don't go on to say, and Pfizer has a direct

16   liability for Insulag, then you are automatically out of the

17   picture.

18              Well, Your Honor, absent this bankruptcy, and absent

19   the kind of protection they're looking for in their

20   channeling injunction, that's not the way it works.    The way

21   it works is you come forward as a worker, for example, you

22   indicate where you worked; you generally don't know what

23   products or multiple products you may have been exposed to.

24   If you were in Bethlehem Steel and you were in their furnace

25   rooms, there were lots of products over different periods of
                                                                        41

1    time that you were exposed to.    And the way the Courts of

2    competent jurisdiction have set up this procedure is you are

3    entitled to plead consistent with State Court pleading rules.

4    Pfizer to change that.

5             THE COURT:     Well, but they're proceeding under a

6    Federal statute.

7             MR. WEISFELNER:     Your Honor, You're right, they're

8    proceeding under a Federal statute.       But that doesn't change

9    the substantive provisions of State law and how one proves --

10   and, Your Honor, I've got to tell you something.      If we're

11   talking about someone who has a direct claim against Pfizer

12   that relates to Pfizer's direct activity, let me suggest,

13   with all due respect, Your Honor has no jurisdiction to

14   change the rules of how that non-debtor party pursues this

15   non-debtor party.

16            THE COURT:     I'm not changing any pleading rules.

17            MR. ZIRINSKY:     He's asking you to abolish 524(g).

18            THE COURT:     Okay, I got it.    Why don't you respond

19   to his second point, the class -- what I've called the

20   classification issue.

21            MR. ZIRINSKY:     The classification -- well, I want to

22   go back in time, Your Honor, and I actually spent some time

23   yesterday reading Mr. Weisfelner's objections at the last

24   round on the disclosure statement on the treatment of claims.

25   And, basically, what they said there was that the right way
                                                                      42

1    to do this in terms of classification was to discount the

2    vote.    They never said anything about it's improper to have

3    the -- that it's improper to have the claims in the same

4    class.

5                He also said that we should value the claims based

6    upon, in his view, historical values, or historical

7    settlement values.       And as Your Honor will recall, Your Honor

8    determine that we should use TDP values for purposes of

9    determining or estimating the amount of the claims for voting

10   purposes.

11               Your Honor wrote a decision, and we accepted Your

12   Honor's ruling.    We also told -- and what we did, Your Honor,

13   is we addressed Your Honor's point that creditors of Quigley,

14   and I think that's where I think we need to make the record

15   clear, that this plan only deals with claims against Quigley,

16   okay, in terms of treatment of claims against Quigley under

17   1129.    Mr. Weisfelner is raising 1129 issues.     524(g)is a

18   separate provision of the Code which deals with the

19   channeling injunction.

20               So the question is are these claims against Quigley

21   being properly classified?

22               THE COURT:    Right.

23               MR. ZIRINSKY:    And what we did --

24               THE COURT:    I think it's a classification issue.

25               MR. ZIRINSKY:    Yes.   And what we did -- and what we
                                                                    43

1    did after digesting Your Honor's decision, thinking about it,

2    you know, we came back, we asked you to reconsider, but we

3    accepted it.   And what we told you at the time was if, you

4    know, the benefit that the futures rep had negotiated, which

5    was this ten-percent provision, was actually intended to give

6    more money to the claimants -- Quigley claimants who hadn't

7    settled with Pfizer and to the future demand holders who

8    weren't at the table, other than through Mr. Togut.   So there

9    was an economic benefit.

10            And I think Your Honor even at one of those hearings

11   commented that sometimes they'll get what they ask for, which

12   is going to be less money.

13            Now when we went back, we decided, after discussions

14   with Quigley, after discussions with Mr. Togut, that the

15   right thing to do if we were going to address Your Honor's

16   concerns about how we were going to tally the votes, that if

17   we were going to eliminate this ten-percent provision, that

18   we decided to do the right thing, and just -- this is a

19   classic example of no good deed goes unpunished.   We came

20   back and we negotiated with Mr. Togut, and the experts, the

21   actuaries, and it took us several months to get to the -- you

22   know, to scrub all the numbers and get to the right

23   conclusions.   But Pfizer agreed to contribute more money in

24   order to -- and it came out to somewhere around $50 million

25   in additional cash contribution in order to keep everybody
                                                                      44

1    even so that by eliminating the ten-percent provision, we

2    weren't going to dilute the distributions that otherwise

3    would have gone to people.    So we thought we were doing the

4    right thing.   Okay?

5             There were some additional things that were

6    negotiated, as Your Honor has heard, including an additional

7    -- on a present-value basis, almost an additional 50 million

8    in value to deal with future costs of the trust, and to also

9    provide Quigley with a guaranteed source of revenue from its

10   claims handling business for a period of at least five years

11   following confirmation.    They were also baked into that

12   change, which is reflected in the amended plan, as Mr. Cook

13   has described to you.

14            My point, very simply, is that if you look at this

15   in terms of claims against Quigley that are deemed classified

16   under this plan, and according to 1129, the structure of

17   1129, and acceptance provisions of the Code, all of these

18   claimants are identical or similarly-situated, and should be

19   classified in the same class.    The fact that certain of the

20   claimants against Quigley also have settlements with Pfizer

21   should not affect --

22            THE COURT:     Well, but it's a little more than that

23   because those settlements depend, or at least fifty percent

24   of them, depend on confirmation.    So they have a very strong

25   interest in voting --
                                                                    45

1               MR. ZIRINSKY:   Well, sure they do.

2               THE COURT:   Let me just finish.   A very strong

3    interest -- I'm not necessarily saying there's anything wrong

4    with it, but they have a strong interest, or a different

5    interest in voting in favor of confirmation.     And those kinds

6    of voting interests are a legitimate basis to argue that they

7    should be separately classified.      I think the Second Circuit

8    did it in Chateaugay with the workers' comp issue.

9               MR. ZIRINSKY:   I mean, I think that is a

10   confirmation issue, Your Honor, which we'll be prepared to

11   address.   But I don't think that --

12              THE COURT:   But what factual issue do I have to

13   resolve --

14              MR. ZIRINSKY:   Well, I think the fact is that

15   asbestos plaintiffs settle -- do multiple settlements, okay?

16   It's not as if Pfizer and Quigley are the only two defendants

17   in the asbestos -- world of asbestos.

18              THE COURT:   But this is a case where the settlement

19   is tied to the vote, really, indirectly --

20              MR. ZIRINSKY:   It's not

21              THE COURT:   -- because they don't get the settlement

22   unless the plan is confirmed, right?

23              MR. ZIRINSKY:   That's true.

24              THE COURT:   So they have an incentive.   That's

25   really, to me, what the argument is, that they have an
                                                                       46

1    incentive to settling claimants, or a different incentive to

2    vote in favor of the plan than the non-settling claimants.

3    And that may be okay, as long as they're separately

4    classified.

5                MR. ZIRINSKY:   I think it's okay.   I mean, we think

6    it's okay.    We don't think there's anything wrong with that

7    because creditors --

8                THE COURT:   Separate class --

9                MR. ZIRINSKY:   -- creditors frequently have

10   different incentives to vote for or against a plan.

11               THE COURT:   Yeah, I know.   But this is an incentive

12   as a class.    I understand that every creditor votes his, her

13   or its conscience for a variety of reasons.      But this is

14   something --

15               MR. ZIRINSKY:   You know, some creditors have ongoing

16   business relationships with the debtor and they want to see

17   the debtor reorganize.      Others don't, and so they have

18   different incentives in that regard.      There are always lots

19   of potential incentives that can influence how individual

20   creditors are going to vote or against the plan.

21               If everybody, you know, were basing their decision

22   solely on the identical incentives, then you would assume

23   everybody would vote the same.      And that's, obviously, not

24   the case.

25               But, in any event, we certainly don't think that's
                                                                      47

1    an issue that goes to the confirmability of the plan as a

2    matter of law.    We think that potentially may be a

3    designation issue, if that's something that Mr. Weisfelner

4    wants to raise.

5               THE COURT:   Could I deal with that as a matter of

6    law?

7               MR. ZIRINSKY:   I'm sorry?

8               THE COURT:   Could I deal with that as a matter of

9    law?

10              MR. ZIRINSKY:   I don't believe so.   I don't believe

11   so.    I also think there is --

12              THE COURT:   What about if the sole basis of the

13   designation is that they have a separate interest in voting

14   that's not available to the other creditors, which is a basis

15   to designate, by the way?

16              MR. ZIRINSKY:   Well, I think we would also have an

17   opportunity, though, to -- you know, we also have to look at

18   the designation of votes cast by Mr. Weisfelner's clients.

19              THE COURT:   For what reason?

20              MR. ZIRINSKY:   Well, I think that a large --

21              THE COURT:   By the way, that's not before me now.

22              MR. ZIRINSKY:   No, but --

23              THE COURT:   Unless you want to separately classify -

24   -

25              MR. ZIRINSKY:   -- but you raised it.   I mean,
                                                                      48

1    designation of votes is not before you today, either.

2              THE COURT:    Right.

3              MR. ZIRINSKY:    Today what's before you is approval

4    of a disclosure statement.       And I think that the whole issue

5    of designating votes is, you know, far broader than what Mr.

6    Weisfelner would like the Court to hear.      I think it goes to

7    the fact that a multitude of clients represented by Mr.

8    Weisfelner who have appeared and voted as Quigley creditors

9    according to discovery taken from them, appeared on a list of

10   Pfizer-only creditors.    They have no claims against Quigley.

11             So, you know, on those, over 1,400 of those people

12   voted against the plan last time around.

13             THE COURT:    How can you tell that they have no

14   claims against Quigley, or that they only have claims against

15   Pfizer?

16             MR. ZIRINSKY:    They were produced on a list by one

17   of Mr. Weisfelner's law firm clients as clients of that firm

18   who had Pfizer-only claims.

19             THE COURT:    Couldn't they have both?

20             MR. WEISFELNER:    Of course.    And that was the point.

21   You know --

22             MR. ZIRINSKY:    Well, the testimony was not -- that

23   wasn't the testimony.

24             My point very simply is that I don't think as a

25   matter of law the fact that people have an agreement with
                                                                       49

1    Pfizer to settle their claims on certain terms is a vote

2    designation issue.      I mean, and I don't think it certainly is

3    a matter of law that affects the confirmability of the plan.

4               If Mr. Weisfelner wants to come into court at the

5    confirmation hearing saying all those votes should be wiped

6    out because -- he's going to have to make that case.       And we

7    can argue it.    And there may be other facts, and we would

8    certainly put evidence on in terms of how these settlements

9    were negotiated.

10              THE COURT:    But what evidence -- what more evidence

11   would I need, for instance, to decide the classification

12   issue?

13              MR. ZIRINSKY:    Well, I mean, for example, we would

14   offer evidence as to efforts to settle with Mr. Weisfelner's

15   clients.   I mean, they have the same opportunities to settle

16   that all the other plaintiffs do.

17              THE COURT:    Well, let's assume that everybody had

18   the same opportunity to settle.     How would that affect the

19   determination?

20              MR. ZIRINSKY:    Well, if you want to go to the issue

21   --

22              THE COURT:    That's where you're going is --

23              MR. ZIRINSKY:    Well, if you want to go to the issue

24   of, quote, "equality of treatment," the fact that they

25   voluntarily chose not to settle doesn't meant that they
                                                                   50

1    didn't have the same opportunity to settle.

2              THE COURT:    That may go to the equality of

3    treatment.   But there's still a lingering voting issue here,

4    or a classification issue.

5              MR. WEISFELNER:    Your Honor, before we lose sight of

6    it, because you asked me a question that I wasn't able to

7    give you an appropriate answer for.     In terms of what

8    specific provisions of the Bankruptcy Code and confirmation

9    requirements are violated by what we contend is improper

10   treatment, and, luckily, I did have a copy of Combustion

11   Engineering that spells it out, the policy of equality of

12   distribution among creditors, as the Court indicates, there

13   are several sections of the Code that are designed to ensure

14   equality of distribution from the time the bankruptcy

15   petition is filed.     Section 1122(a) provides that only

16   substantially similar claims may be classified together under

17   a plan.   Section 1123(a)(4) requires a plan of reorganization

18   provide the same treatment for each claim or interest of a

19   particular class.

20             And here is the one I forgot that's critical:

21   524(g), the channeling injunction, states that, "Present

22   claims and future demands that involve similar claims must be

23   paid in substantially the same manner."

24             And as the Court in Combustion Engineering

25   determined, having people in the same class have an
                                                                     51

1    opportunity to get paid from an affiliate who's looking for

2    an injunction is violative not only of the provisions of the

3    Bankruptcy Code that are applicable in non-asbestos cases,

4    but are in particular violative in the Bankruptcy context of

5    524(g).

6              Now, Your Honor, again --

7              THE COURT:   But let me just --

8              MR. ZIRINSKY:   Can I --

9              THE COURT:   Combustion Engineering involved a

10   situation where the debtor had used its own money --

11             MR. ZIRINSKY:   Exactly.

12             THE COURT:   I know.

13             Here, you have a third party who admittedly is going

14   to pay additional money to the claimants and the non-settlers

15   are going to lose the right to sue that third party.   But

16   it's not the debtor paying different amounts to similarly-

17   situated creditors.

18             MR. WEISFELNER:   Your Honor, that is a distinction

19   between this case and Combustion Engineering.   But the

20   fundamental issues that Combustion Engineering shot down --

21   you know, we know in a general commercial setting that the

22   whole issue of artificial impairment for voting purposes is

23   something that in a commercial setting, some Courts say,

24   well, there's no prohibition against artificial impairment.

25             Combustion Engineering stands for the proposition
                                                                      52

1    that in an asbestos case where the fundamental principle

2    under 524(g) is to ensure equality amongst similarly-situated

3    creditors, utilizing stub claims to land the vote and giving

4    different economic treatments at the end of the day to

5    identical creditors --

6             MR. ZIRINSKY:    We took out the stub claims.

7             THE COURT:    All right.

8             MR. WEISFELNER:    Okay.

9             MR. ZIRINSKY:    We don't have stub claims.

10            MR. WEISFELNER:    No, you're right.   You voluntarily

11   allowed the stub claims now to come back into the --

12            MR. ZIRINSKY:    They were never --

13            THE COURT:    Please.

14            MR. WEISFELNER:    But my point is if one tracks the

15   Code sections that are at issue here, the point of the fact

16   is that there is no --

17            THE COURT:    I don't think Mr. Zirinsky was done.

18            MR. WEISFELNER:    Okay.   I just wanted to make sure

19   that he was addressing 524(g) at the same time he was talking

20   about other Code sections like -- it's not just a vote

21   designation issue.

22            MR. ZIRINSKY:    It's hard to get a word in edgewise

23   with Mr. Weisfelner.

24            THE COURT:    All right.   Let's keep it on a civil

25   tone and move it along.
                                                                        53

1                MR. ZIRINSKY:    Let me just make a couple points,

2    Your Honor.    As Your Honor very accurately and aptly

3    observed, Combustion Engineering, they used a debtor's

4    assets.   Here, we didn't touch the debtor's assets.     As a

5    matter of fact, as indicated, you know, Pfizer could have, if

6    it chose to -- it didn't -- but Pfizer could have gone out

7    and settled with all these people and tapped into the

8    insurance.    We used Pfizer's own money.    We didn't tap into

9    the insurance.    Okay?     Because we wanted to preserve a fund

10   that would be available for Quigley creditors.       So Pfizer

11   did that.    It used its own money, had no adverse economic

12   impact on Quigley at all.

13               Secondly, the whole issue of classification is based

14   on the nature of the claim, and not the, you know, the

15   economic incentives that creditors may have.      And as Mr.

16   Weisfelner has said repeatedly, all of these claims have the

17   same -- are of the same nature.      They're all of the same

18   nature.

19               I also want to just point out, Your Honor, that the

20   fact that people are getting, you know, paid money to settle

21   claims against Pfizer, a lot of people get paid money by a

22   lot of different defendants to settle claims.      I would also

23   want to point out that Mr. Weisfelner's own clients in this

24   case were very active participants in other cases where they

25   were proponents of the very structure that is -- or similar
                                                                        54

1    structures that are being used here.

2                THE COURT:   All right.   But, you know what, Mr.

3    Zirinsky?    That's not the issue.    The issue is that they're

4    getting paid by Pfizer only if they vote -- only if the plan

5    is confirmed.    And that's a very strong incentive to vote for

6    the plan.    The fact that they may have gotten money in other

7    cases really doesn't have that same impact.      I mean, that's

8    the way it is in all of their cases.

9                MR. ZIRINSKY:   No, I mean, I would concede that

10   there is an incentive.      There's no question that people have

11   an incentive to want to see the plan confirmed.

12               THE COURT:   Okay.   And then the question is, given

13   their rights, whether they should be separately classified.

14   That's the classification issue.      There are other issues, I

15   understand.    There are good faith/bad faith issues which

16   involve other facts.     But that's the issue.   All right.

17               Why don't we just turn our attention to the

18   disclosure issues?

19               MR. WEISFELNER:   Your Honor, my list is very short.

20   And, again, I told you before that I think that they are

21   secondary to the primary issue.

22               THE COURT:   Well --

23               MR. WEISFELNER:   But here is some stuff I just don't

24   understand.

25               THE COURT:   Okay.
                                                                        55

1              MR. WEISFELNER:    I don't understand Pfizer retaining

2    100 percent of the equity of reorganized Quigley.

3              THE COURT:    Is that a disclosure issue?

4              MR. WEISFELNER:    No.    I think it's -- I don't -- the

5    fact that I don't understand it, I guess, is a disclosure

6    issue.

7              THE COURT:    Well, but if they say they're doing it,

8    then they've disclosed it.

9              MR. WEISFELNER:    Look, I think from a confirmation

10   perspective, though, under 524(g), the trust is to own at

11   least half of the equity of the reorganized entity.         And

12   under this plan, it doesn't.       So I don't know how --

13             THE COURT:    Well, wait a minute.    Is Pfizer

14   retaining the equity in Quigley?

15             MR. COOK:    The answer is no.    And if you look at the

16   plan --

17             THE COURT:    I would agree with you, that would be a

18   threshold legal issue.    But --

19             MR. WEISFELNER:    Okay.    But let him finish because

20   when he says "no,", it's, "no, but."

21             THE COURT:    Sorry I interrupted you, Mr. Weisfelner.

22             MR. COOK:    I didn't say, no, but.    I said, no, let's

23   look at the plan.

24             MR. WEISFELNER:    Okay.

25       (Laughter.)
                                                                          56

1                MR. COOK:    It will be real clear.    Start with Page

2    20 of the plan, stock transfer date.       It means the date on

3    which the Quigley stock right is exercised.        Notwithstanding

4    any contrary contained in the plan, if the Bankruptcy Court

5    confirms the plan pursuant to 1129(b), the stock transfer

6    date shall occur on the effective date.       Okay?

7                MR. WEISFELNER:    Well, then I'm confused.   Why does

8    Pfizer --

9                MR. COOK:    Can I finish?   Can I finish?

10               And then we go to Quigley's stock right, also

11   defined at Page 17 of the plan.       It means the right granted

12   by Pfizer to the asbestos PI trust to acquire 100 percent of

13   the common stock of reorganized Quigley, which is exercisable

14   by the trust, no earlier than the satisfaction of each of the

15   following conditions:      The one-year anniversary of the

16   effective date has occurred, and the asbestos PI trust --

17               THE COURT:    Oh, this is -- there's a delay in the

18   transfer?    Is that what it is?

19               MR. COOK:    Right.   And then we look at 524(g)(b) --

20   whatever that -- it's (b)(III).

21               THE COURT:    Does 524(g) require that the stock be

22   transferred on the effective date?

23               MR. COOK:    No.   It says, "To own or by the exercise

24   of rights granted as such under such plan would be entitled

25   to own if specified contingencies occur."         And it talks about
                                                                    57

1    a majority of the voting shares.

2             THE COURT:     Okay.

3             MR. COOK:    524(g)(b)(III).

4             THE COURT:     All right.   What other -- I mean, that's

5    what it says.

6             MR. WEISFELNER:     Okay.   But why don't we get a

7    discussion or an explanation as to why?     Why is Pfizer --

8             THE COURT:     That's what it says.

9             MR. WEISFELNER:     What?

10            THE COURT:     That's what it says, because that's

11   going to be your comment to every single thing in this

12   disclosure statement:    Why?

13            MR. WEISFELNER:     No, no, no.   I mean, listen, I

14   think I know why it's being done, and I think Quigley ought

15   to be required to disclose it.

16            THE COURT:     Why do you --

17            MR. WEISFELNER:     It's being done so that Pfizer can

18   retain a tax benefit, and that in order for Pfizer to retain

19   a tax benefit where it utilizes Quigley's historic losses to

20   shelter its income, it's got -- Quigley has got -- the stock

21   of Quigley has to be owned by Pfizer through the calendar

22   year for tax reporting purposes.     That's a benefit to Pfizer.

23   Pfizer's relative benefit versus contribution is going to be

24   an issue, if we ever get to a confirmation hearing, and

25   creditors are entitled to know these facts to help them not
                                                                      58

1    only structure whether they are to vote yes or no, but to

2    determine whether or not they ought to oppose confirmation.

3    I mean, it's a simple issue.    Why not tell us why this unique

4    provision is being included in the plan?    I mean, it's like

5    we're hiding something from somebody.

6             THE COURT:    Mr. Zirinsky?

7             MR. ZIRINSKY:    I'm sorry, Your Honor.   I wanted to

8    confer with my co-counsel on a question Your Honor had

9    previously raised.

10            THE COURT:    Did you hear what Mr. Weisfelner said?

11            MR. ZIRINSKY:    I don't have a problem with

12   disclosing it, Your Honor.    But, you know, I mean, we can

13   disclose everything.   We can disclose what time, you know,

14   Mr. Street gets up in the morning, if that's a relevant

15   disclosure item.

16            THE COURT:    All right.   Well, let me hear -- let me

17   hear what other disclosure issues you have.

18            MR. WEISFELNER:     Your Honor, I think the only other

19   fundamental disclosure issue relates to those claims, and we

20   think that there are a predominance of these claims that are

21   part of the Pfizer settlement that are intended to vote the

22   plan, and now intend to vote 100 percent of their claim, not

23   ten percent of their claim, which claims, as a matter of

24   state law, have, subsequent to the Pfizer settlement

25   agreement, been determined not to have claims under state law
                                                                     59

1    anymore, the so-called tort reform claims.

2              THE COURT:   And why should that be disclosed?

3              MR. WEISFELNER:   Well, Your Honor, I think it's

4    incumbent upon a debtor-in-possession to describe to the

5    voting public why it's allowing creditors not only to vote on

6    a plan that have no claim, but why it's allowing creditors to

7    participate in a trust that have no claim.

8              THE COURT:   Well, but does the trust automatically

9    eliminate creditors from tort reform states whose claims have

10   been put on the suspense docket?

11             MR. WEISFELNER:   You know, if it doesn't, it ought

12   to.   But I don't --

13             THE COURT:   Or does the trust simply say, bring in

14   your proof and if we think, you know, you --

15             MR. WEISFELNER:   No, but how can these guys --

16             THE COURT:   Let me just finish.

17             As I read the plan while -- or as I read the trust

18   agreement distribution procedures quickly, the

19   administrators, if that's the right phrase, can take into

20   account historical settlements from the states and things

21   like that.   But there's no bright line that says if you're in

22   a tort reform state, and your claim doesn't meet certain

23   criteria, you don't get paid; but if you're not in a tort

24   reform state and you have the same type of claim, you do get

25   paid.
                                                                   60

1             The bottom line is whether or not you're in a tort

2    reform state that recognizes the claim, the trust makes a

3    determination without regard to where you reside whether or

4    not you've demonstrated your claim.

5             So what I would really have to do is go through

6    200,000 claims to canvass whether or not there's enough there

7    to be a creditor, and that just doesn't work.

8             MR. WEISFELNER:    Here is my point because it's

9    slightly different, but I recognize the practical issues that

10   Your Honor is suggesting.   And this is just sort of

11   Bankruptcy 101.

12            If one has a claim on file, then one is presumed to

13   be entitled to vote.   If that claim is subject to challenge,

14   and these claims are, and if my debtor won't object to them,

15   I will, those claims will be objected to.   When they're

16   objected to, they can only vote on the plan as, when, and if

17   Your Honor allows them for voting purposes.

18            Now, Your Honor, if you do the math, if the claims

19   that are within the states where tort reform has passed

20   aren't allowed to vote because they no longer have claims --

21            THE COURT:    Why wouldn't they have claims under the

22   Bankruptcy Code?

23            MR. WEISFELNER:    Your Honor, you can't have a claim

24   under the Bankruptcy Code if you don't have a claim under

25   state law.   Bankruptcy law doesn't elevate or acknowledge --
                                                                        61

1               THE COURT:   Don't they have a contingent claim under

2    state law?

3               MR. WEISFELNER:   Do they have a --

4               THE COURT:   In other words, it's not like their

5    claim has been adjudicated not to exist, or they've released

6    a claim.

7               MR. WEISFELNER:   No, no, no.   It's a matter of

8    statute that the claim doesn't exist under state law.     My

9    point is if those people ultimately come down with a -- or

10   manifest a disease, I guess they're Mr. Togut's problem.

11              THE COURT:   But if somebody comes to the

12   administrator, do they have to demonstrate that they have a

13   claim under their state law, or that they have the symptoms

14   that match the criteria in the trust distribution procedure?

15              MR. WEISFELNER:   We're talking about two different

16   things.

17              THE COURT:   But I think --

18              MR. WEISFELNER:   We're talking about payment versus

19   voting.

20              THE COURT:   But I think anybody who can come --

21   everybody is similarly situated, and it's not just -- my

22   point is it's not just the trust reform state claimants.       I

23   would have to look at the claims of everybody because they

24   wouldn't have claims.

25              MR. WEISFELNER:   But, specifically, I've got a whole
                                                                    62

1    category of people that may or may not have a claim.

2             THE COURT:   But they may not have claims under state

3    law, my point is, but they may be able to demonstrate under

4    the trust distribution procedures based on possibly different

5    criteria for proof, that they're entitled to payment.

6             MR. WEISFELNER:   Okay.   And here is the part that I

7    guess I'm a little confused about.   If I represent a claimant

8    that isn't in a tort reform state and does have all the right

9    medical criteria, why is it that as a matter of bankruptcy

10   law I have to share a limited fund with someone who, as a

11   matter of state law, doesn't have a claim no matter what the

12   procedures are that people put in place?

13            THE COURT:   What if the person doesn't have a claim

14   under state law, but satisfies the criteria for payment under

15   the trust distribution procedures?

16            MR. WEISFELNER:   Then I think that, you know, the

17   real question is whether or not -- you know, there are future

18   claimants who, ultimately, are going to be able to satisfy

19   the trust criteria to get paid.    We're not suggesting, are

20   we, that we're going to estimate how many of those people

21   there are today and allow them to vote on this plan?

22            524(g) requires super majority approval of today's

23   creditors.   Now I'm not going to ask the Court to examine

24   every one of the 130,000 claims.   I am going to ask the Court

25   in my claims objection, since Quigley, as my fiduciary, isn't
                                                                     63

1    doing it, I am going to ask Your Honor consistent with the

2    Bankruptcy Code, if these people ultimately move for

3    allowance of their vote to determine on their face whether or

4    not they've got a state law claims that's entitled to vote.

5              Now if they ultimately manifest a disease and they

6    become other than what the state statute threw out, then I

7    acknowledge that they'll be a future claim representative and

8    they'll talk to the trust and maybe they'll get paid.      That's

9    not my issue.

10             My issue is who gets to vote.   Certainly, the guys

11   who are part of tort reform statute states where their claims

12   have been disallowed as a matter of state law, in our view,

13   should not be entitled to vote.   And you know what?   If they

14   are entitled to vote, their vote shouldn't carry the same

15   weight as someone who's got a malignant disease who's on the

16   verge of death.

17             THE COURT:   It doesn't carry the same weight.

18             MR. WEISFELNER:   Well, sure it does.   Sure it does.

19   We're now at the point where Quigley's and Pfizer's position

20   is that we're going to vote on this plan one dollar, one

21   claim.   And we fixed the historic problem because the guy who

22   had the stub claim for only ten cents, we're now letting him

23   file a full claim.

24             THE COURT:   I never said it was one dollar, one

25   vote.
                                                                      64

1             MR. WEISFELNER:     Well, then, you know, then, I don't

2    know what they're doing in terms of solicitation because it's

3    their intent under the motion that's currently before you, if

4    you approve the disclosure statement they're going out for a

5    vote, and they are not asking Your Honor to disease-weight

6    the votes.

7             MR. ZIRINSKY:     That's just totally false.   That's

8    just wrong.   And the other thing is --

9             THE COURT:     What other disclosure issues are there?

10            MR. ZIRINSKY:     Judge, can I just comment?

11            THE COURT:     Yeah.

12            MR. ZIRINSKY:     Mr. Weisfelner's clients are on the

13   suspense dockets, okay, where they are --

14            THE COURT:     Yeah.   That doesn't solve the issue.    If

15   he's right, then I have to hear cross-objections to claims

16   and --

17            MR. ZIRINSKY:     For example, the state of Texas --

18   the statute he refers to, Texas is one of the states.     The

19   statute that he's referring to expressly says that this

20   statute does not affect the rights or claims of people to

21   assert claims in bankruptcy cases.

22            THE COURT:     Well, how could a state law affect the

23   rights of somebody --

24            MR. ZIRINSKY:     They don't.

25            THE COURT:     -- to assert a claim in bankruptcy?
                                                                      65

1               MR. ZIRINSKY:   They don't.   That's the whole point.

2    This is a total straw man.

3               THE COURT:   All right.

4               MR. REINSEL:    Your Honor, we're here on behalf of

5    the committee as well.     Just so that we're --

6               THE COURT:   Just identify yourself.

7               MR. REINSEL:    Ron Reinsel from Caplin & Drysdale,

8    Chartered on behalf of the unsecured committee.     We're very

9    involved in the trust itself.     I want to just be clear what

10   we're saying about the quote/unquote, "tort reform" to

11   claims.

12              And Your Honor is right.   We have a single trust

13   procedure and you meet the criteria of that trust or you

14   don't.    With respect to tort reform states as all getting

15   lumped in in one lump here may be substantially incorrect.       I

16   don't know what Mr. Weisfelner is talking about it and what

17   Your Honor has directed where claims have been put on a

18   quote/unqoute, "suspense docket."

19              It does not mean that they don't have claims.   It is

20   simply a scheduling procedure such that more serious claims

21   will be heard and adjudicated and paid first.      You'll have --

22   if you've gotten the exposure and everything else, but not

23   yet manifested, you'll be gotten to later in line.

24              THE COURT:   You're saying it's a preference statute?

25              MR. REINSEL:    It is simply a timing -- it's a timing
                                                                      66

1    issue.   It's a perfect -- exactly.   It's a statutorily

2    created preference under the state law.    The trust has a

3    different interest which it wants to adjudicate the claims,

4    get them all taken care of, whether -- and it will do that in

5    its own sequencing.    It's a matter of sequencing and

6    scheduling, not whether or not the claim exists.

7              THE COURT:   All right.   Well, as I said, it sounds

8    to me like if you can -- regardless of what state you're in,

9    if you meet the criteria under the trust distribution

10   procedures, you should be in -- you're a creditor, by

11   definition, because you're going to get paid from the estate.

12             MR. WEISFELNER:   And, Your Honor, you know, we'll

13   certainly demonstrate as a matter of fact at a confirmation

14   hearing that while in New York and Maryland the statutes talk

15   about deferrals, in Texas, Ohio and Florida, the claims are

16   dismissed.

17             THE COURT:   Okay.   What other disclosure issues?

18   You've talked about the delay in the transfer of the stock,

19   the tort reform issue.    What are the other disclosure issues?

20             MR. WEISFELNER:   Again, Your Honor, I think these

21   issues pale in comparison, but in point of fact, Quigley's

22   lease is scheduled to expire before confirmation or the

23   effective date is scheduled to occur.    That's nowhere

24   referenced.

25             We understand that Charles Raeburn, one of three
                                                                     67

1    Quigley directors, and the plan contemplates the continuance

2    in office of the same directors, has resigned his position

3    with Pfizer and would otherwise like to resign his position

4    at Quigley.   That's not referenced anywhere in the disclosure

5    statement.

6             THE COURT:    Well, I have to at some point disclose

7    who's going to run the debtor post-petition, but it doesn't

8    have to be in the disclosure statement, as I understand it,

9    although it frequently is.

10            MR. WEISFELNER:     No, but -- right.

11            THE COURT:    At post-confirmation, I mean.

12            MR. WEISFELNER:     But, instead, we have an

13   affirmative statement that the same directors are going to

14   continue in office.   I agree with Your Honor that you don't

15   have to tell me who the new directors are, but if you tell me

16   that the same three guys are rolling over, and one of them is

17   taking a powder, I think that's got to be required --

18            MR. COOK:    Again, I can respond.     I don't know where

19   Mr. Weisfelner got his information about Mr. Rayburn's

20   intentions.   Yes, he is retiring from Pfizer; yes, his term

21   on board will end by its terms; but he has asked specifically

22   to stay on if the board wants it.    And the board will be

23   meeting shortly to take that up.

24            THE COURT:    Okay.   Anything else?

25            MR. WEISFELNER:     Your Honor, and it goes to sort of
                                                                     68

1    the continuity of business issue, we had for years the

2    contemplation that Pfizer was going to dedicate to, or donate

3    to Quigley a number of drug lines.    And if one sort of thinks

4    about it, one can assume that that was -- originally

5    contemplates the deal with the 524(g) continuity of business,

6    or that there be some business on an ongoing basis.

7               There is no discussion in the disclosure statement

8    about the very recent decision to drop those drug lines.

9    Remember that Your Honor considered and approved the

10   retention by Quigley of an expert to analyze and assess the

11   cash flow when benefits could be derived from those drug

12   lines.    So the estates incurred expense with regard to that

13   effort.    But there is no discussion or description about the

14   reason for dropping those lines.

15              And, again, I'm --

16              THE COURT:   Why do they have to discuss it in the

17   disclosure statement?    This is the deal that they're

18   proposing.    There are differences between this deal and the

19   prior deal, but I don't know that they have to discuss every

20   reason for every change that they've made.

21              MR. WEISFELNER:   This is not every change, Your

22   Honor.    This was a fundamental provision of their plan

23   designed to acknowledge one of the requirements of 524(g).

24   It's now gone.    It's replaced with a single business.

25              And by way of disclosure, I think it would be
                                                                       69

1    critically important to acknowledge that Mr. Street, the CEO

2    and chairman of the board, has stated in deposition testimony

3    that he doesn't believe that the claims handling business is

4    viable, he doesn't believe that Quigley has an opportunity on

5    a reorganized basis to land any third-party business, and

6    that he has --

7                MR. COOK:    Excuse me.

8                MR. WEISFELNER:      Let me finish.

9                THE COURT:    Let him finish.

10               MR. WEISFELNER:      And that he has gone to Pfizer and

11   asked Pfizer to pay for a consultant to determine the

12   feasability of a claims handling business.        I mean, at a

13   minimum, you would think that the debtor would be required to

14   disclose the views of its own chief executive officer and

15   chairman of its board as to the future feasibility of this

16   business.    And I think since it's so directly related to, you

17   know, continuity under 524(g) and, you know, using the old

18   drug lines and then yanking it out of the plan literally at

19   the last minute between the last version of the plan and this

20   one, that some explanation is appropriate.

21               MR. COOK:    Okay.    The claims handling business:

22   First of all, it's a fact issue.        Mr. Street is not here.

23   What you've heard are Mr. Weisfelner's self-selected --

24               THE COURT:    I thought I read deposition testimony

25   where he testified that it was losing $300,000 a year.
                                                                        70

1             MR. COOK:    Sure.    Sure.   It was.   And he was

2    testifying -- he testified on June 4th.

3             The recent plan modification was done on June 7th.

4    By that time, we have landed a new five-year contract from

5    Pfizer for $25 million, $5 million a year.

6             THE COURT:    I guess -- let me cut this short.

7             MR. COOK:    Sure.

8             THE COURT:    The answer is if there is this

9    continuity problem, that may be a feasibility issue.          If they

10   have to remain in business for some at least foreseeable

11   period, and the issue is that they can't conduct this beyond

12   the five-year contract where they're going to pay them $5

13   million a year, that sounds to me like a feasibility issue.

14            MR. COOK:    That's what I began with, Your Honor.

15            MR. WEISFELNER:      I agree.

16            THE COURT:    Anything else?

17            MR. WEISFELNER:      No, Your Honor.

18            THE COURT:    It's your turn, Mr. Zipes.

19            MR. ZIPES:    Thank you, Your Honor.      Good afternoon.

20   Greg Zipes with U.S. Trustee's Office.

21            The U.S. Trustee obviously has concerns, overall

22   concerns about this case.     But this Court said that a dual-

23   track may be appropriate, and U.S. Trustee's Office filed an

24   objection in an attempt to be helpful in light of this

25   Court's direction.
                                                                         71

1                THE COURT:   Okay.

2                MR. ZIPES:   The disclosure statement has to have

3    adequate information, and I don't think there's any doubt

4    that this is a fact-intensive type review of what's adequate

5    information.    The U.S. Trustee -- one of the U.S. Trustee's

6    basic concerns in this case is the close connections between

7    Pfizer and the debtor, and, in fact, explicit connections

8    that are not in the disclosure statement at this time.

9                And we understand that the debtors and Pfizer will

10   have a different view on our take on this case, but that's

11   not really relevant for the disclosure statement.       The

12   disclosure statement is simply designed to give creditors who

13   are voting on this plan enough information that they can

14   determine that what's before them is the best possible dollar

15   amount that they can get.        And these issues are relevant in

16   that matter.

17               Your Honor, we have identified the pre-petition

18   explicit agreement between Pfizer and the debtor.       They do

19   appear to be engaged in a joint enterprise.       That is our

20   position.    Again, we understand that wouldn't be their

21   position.    And it continues even to the reply that Quigley

22   and the debtors filed the other day where Quigley is stating

23   that there are frivolous and baseless claims against Pfizer.

24               This is not the debtors', in our view, place to be

25   opining on claims against Pfizer.       And that's part of their
                                                                        72

1    joint reply to our objection, and also to the ad hoc

2    committee's objection.

3                So all that we're saying is we proposed language.

4    We believe that the language says this is the U.S. Trustee's

5    opinion in this case.     We didn't say, these are the facts in

6    the case.    This is the U.S. Trustee's opinion on the case.

7    And we would ask that this language, as we proposed it, be

8    put in.

9                We are maybe somewhat naive that creditors will at

10   least flip through the first five or six pages of this

11   disclosure statement.     And in the first -- on the fifth page

12   there is an executive summary, which is interesting because

13   disclosure statements should be explicit enough without an

14   executive summary.

15               But we would want certain language that --

16               THE COURT:   You just said nobody is going to read

17   through the whole thing.

18         (Laughter.)

19               MR. ZIPES:   Exactly.   Your Honor, so that's why we

20   ask that some of our language go in the executive summary and

21   not on Page 67, or wherever the debtors are proposing to put

22   it.

23               Your Honor, we would be willing to make some

24   reference in the executive summary that the U.S. Trustee has

25   concerns, and then refer it back to another section, if
                                                                      73

1    anybody is interested, then, in reading about our concerns,

2    and just give us a section in the disclosure statement where

3    we can articulate our concerns about this case.

4             MR. COOK:    Your Honor, I think we -- and I have

5    spoken to Mr. Zipes before this hearing and before we got --

6    or after we got his objection.     And we sent him language.

7    And you'll see it at Page 67.     The addition of language in

8    the disclosure statement was at his specific behest.

9             THE COURT:    67?    I'm looking at the black-lined

10   copy.

11            MR. COOK:    Yeah, the black-lined version.   And what

12   you see under Paragraph 3, he wanted us to describe the

13   negotiations, and we did that.

14            I mean, as far as his litigation position, this is

15   not --

16            THE COURT:    Well, I don't think there's anything

17   wrong with saying that the U.S. Trustee has filed a motion

18   and contends that Quigley is not sufficiently independent of

19   Pfizer and has breached its fiduciary duty.     That motion is

20   sub judice.

21            MR. COOK:    Yeah.   We have that -- I believe we have

22   a reference to that motion in --

23            THE COURT:    Where is that?

24            MR. ZIPES:    There's a reference to the motion, but

25   it doesn't have any reference to what's in that motion or
                                                                        74

1    what the allegations are.      It's simply a statement --

2              THE COURT:    You know what?    I get this issue,

3    though, when I have lawsuits pending.      And I get these

4    dueling disclosure statements where the parties put the

5    pleadings in.   I don't really know that it's appropriate to

6    essentially incorporate literally all of your allegations

7    into a disclosure statement.

8              Do you say that they're -- you know, you say that

9    they lack independence and they haven't acted in the best

10   interests of the Quigley creditors.      What more has to be

11   said?

12             MR. ZIPES:    And that's not in the disclosure

13   statement right now.

14             THE COURT:    It's not?    There's no reference to the

15   motion?

16             MR. ZIPES:    There is a reference to the motion, but

17   there's no --

18             THE COURT:    Where is it?

19             MR. COOK:    51.    51 of the black line.

20             THE COURT:    All right.    Paragraph 14?

21             MR. COOK:    Yes.

22             THE COURT:    It should say that the U.S. Trustee

23   contends that Quigley is not independent of Pfizer and has

24   breached its fiduciary duty.      And then the motion of sub

25   judice, or whatever it says here about there's going to be an
                                                                         75

1    evidentiary hearing.      That's all.

2        (Counsel confer.)

3                MR. COOK:    Yeah.    And that's hotly, you know,

4    contested whatever it is.

5                THE COURT:    You can say that the debtor denies the

6    allegations, the motion is sub judice, and there will be an

7    evidentiary hearing.

8                MR. COOK:    Right.

9                MR. WEISFELNER:      Your Honor, I don't care but for

10   symmetry's sake.    And one would think that the motion to

11   appoint the trustee discussed one paragraph above --

12               THE COURT:    Well, yeah.    It should be --

13               MR. WEISFELNER:      -- to have the same sort of --

14               THE COURT:    You can -- maybe you can combine it

15   somehow and say the U.S. Trustee and the ad hoc committee

16   have made motions to the effect of appointing a trustee or

17   dismissing it.    But the allegations, the underlying

18   allegations are essentially the same.

19               MR. COOK:    We'll come up with some language promptly

20   for that.

21               THE COURT:    Okay.

22               MR. ZIPES:    And, Your Honor, could we just have a

23   reference in the executive summary to refer people to that?

24   Because these are significant issues.

25               THE COURT:    Mr. Cook?
                                                                        76

1               MR. COOK:    Yeah.    We'll give them a reference in the

2    executive summary just because I'm weakening.

3          (Laughter.)

4               MR. WEISFELNER:      Your Honor, one other point, and --

5               THE COURT:    All right.   Mr. Weisfelner heard you say

6    you're weakening.

7          (Laughter.)

8               THE COURT:    He didn't miss a beat.   He stood right

9    up.

10         (Laughter.)

11              MR. COOK:    Well, once I heard that --

12              THE COURT:    All right.   I'm still on Mr. Zipes.    Go

13   ahead, Mr. Zipes.      What else?

14              MR. ZIPES:    Well, Your Honor, I agree, we can work

15   on language in light of what you said.

16              THE COURT:    I thought you had three points, though?

17              MR. ZIPES:    We just didn't have time to catch up.

18              We had other points, as well.     I haven't had a

19   chance -- Mr. Cook did send language.       We did ask that he

20   send language to us.      We haven't had a chance to fully digest

21   that language.

22              THE COURT:    Okay.

23              MR. ZIPES:    And it may be sufficient; it may not be.

24   I don't want to have to come back to the Court, Your Honor.

25   I think, hopefully, we can work it out in light of what you
                                                                   77

1    just stated.

2             THE COURT:   Okay.   Okay.   Mr. Weisfelner?

3             MR. WEISFELNER:   Your Honor, the only other sort of

4    disclosure issue and whether there's a modification, frankly,

5    I just don't want it to be held against me.

6             THE COURT:   Nothing would be held against you.

7             MR. WEISFELNER:   I appreciate that, Judge.

8             You know, they have a whole discussion about the AIG

9    payments, the amount of money that was paid to Pfizer by AIG

10   and then, conversely, the amount of money that goes from

11   Pfizer to Quigley under the forty-year trust, and their

12   present value calculations which they discuss in a footnote

13   are really all dependent on one major assumption, and that is

14   that Quigley and Pfizer are entitled to half of those monies.

15            If you were to change that assumption, for example,

16   and look at historically as between Quigley and Pfizer who

17   tapped into the AIG insurance coverage, you'll see that the

18   predominant user of those proceeds was Quigley.

19            THE COURT:   But it's on a first time -- first

20   come/first serve basis, right?

21            MR. WEISFELNER:   I understand that on a going-

22   forward basis.   My only point is that we want an opportunity

23   to be able to demonstrate to Your Honor at an appropriate

24   point in time that the AIG transaction and the benefits

25   derived by the estate versus Pfizer are other than as
                                                                     78

1    disclosed in the disclosure statement.     I don't want them to

2    have to put in all sorts of contention statements.     All I

3    want is the opportunity to prove that to you at an

4    appropriate point in time without being told by Mr. Zirinsky

5    that I forgot to raise it.

6             You know, we think that the description in the

7    disclosure statement of the benefits of the AIG settlement as

8    between Quigley and Pfizer are fundamentally flawed.

9             THE COURT:   Well, now is the time to clear it up.

10   This is a disclosure issue, from what you're telling me.

11            MR. WEISFELNER:     Okay.

12            THE COURT:   What are you -- what is it that it

13   should say?

14            MR. WEISFELNER:     Again, if you take a look at it,

15   you have X number of dollars, 450 or $405 million that goes

16   from AIG to Pfizer over a period --

17            THE COURT:   Over ten years.

18            MR. WEISFELNER:     -- of ten years.   You then have

19   that same dollar amount being paid by Pfizer to the Quigley

20   trust over forty years.

21            THE COURT:   Because that's what the representative

22   negotiated.

23            MR. WEISFELNER:     Yeah.   And you think about it, you

24   remember his -- you know, he wanted the money coming in every

25   year.
                                                                        79

1               THE COURT:   Right.

2               MR. WEISFELNER:     Well, does that make any sense to

3    you?    Just think about it.     Give me the money today --

4               THE COURT:   Let's get back to the disclosure issue,

5    please.    That's the deal.

6               MR. WEISFELNER:     Well, I tried to, but you -- no, I

7    know.    But you're the one who said, but it was what Togut

8    negotiated.

9               THE COURT:   I know.

10              MR. WEISFELNER:     Okay.

11              THE COURT:   But that's the deal.    We're not --

12              MR. WEISFELNER:     No, you're right, it is the deal.

13   But now --

14              THE COURT:   So -- and it's -- the deal is disclosed,

15   right?

16              MR. WEISFELNER:     But now they're trying to disclose

17   the function of that deal.       And what they're saying is that

18   on a present value basis, the present value, that ten-year

19   stream of income, and your present value of the forty-year

20   stream of income, guess what?       The forty-year stream of

21   income is worth more than the ten-year stream of income.       Now

22   how do you get there?

23              You get there by an underlying assumption that's

24   contained in the present value formulation.       And that is if

25   you take a look at all the money that Pfizer gets from AIG,
                                                                      80

1    there is some large portion of that amount of money that you

2    have to assume Quigley was never entitled to.     And only then

3    are you able to take a ten-year stream of income, compare it

4    to a forty-year stream of income, and determine that the

5    present value of the forty-year stream is worth more than the

6    present value of a ten-year stream.

7                And I just want Your Honor to be aware of it so that

8    when it comes up, as it inevitably will when we try good

9    faith and we try the relative contribution of Pfizer for the

10   benefits it's going to receive, that no one accuse me of not

11   having raised it.

12               I don't know how they fix it.   They fix it by

13   saying, I guess, that our constituency contends that their

14   methodology for discounting that cash flow bears no

15   resemblance to the facts, the law, or equity.

16               THE COURT:   You think they should say that?

17               MR. WEISFELNER:   I mean, I'd love them to say it.

18   Do I think they will say it?     Not unless Your Honor tells

19   them to.

20       (Laughter.)

21               MR. ZIRINSKY:   Your Honor, Mr. Weisfelner is very

22   good at glossing over.      He said at least three times in that

23   last statement that how can a forty-year stream of payments

24   have a higher present value than a ten-year stream of

25   payments.    There, obviously, were a lot of other components
                                                                    81

1    that went into that.

2             I think what Mr. Weisfelner is complaining about is

3    that the disclosure statement actually discloses in detail

4    how that -- how all that works.

5             THE COURT:    I thought --

6             MR. ZIRINSKY:    So I don't understand what the

7    objection is.

8             THE COURT:    I thought what the objection was that

9    historically you said Quigley was getting seventy percent --

10   or the benefit of seventy percent of the AIG payments, and

11   the -- basically, the settlement splits it fifty/fifty.    And

12   their response was whatever historically occurred doesn't

13   mean it's going to occur in the future because the payments

14   are on a first come -- the money is paid out on a first

15   come/first serve basis basically, based on claims, or

16   something like that.

17            MR. ZIRINSKY:    That's part of it.   But the other

18   part of it is, and it's in the disclosure statement, is that

19   part of the 405 from AIG actually represented a current

20   receivable from AIG to Pfizer.    It's Pfizer money.

21            There was also a smaller receivable that was payable

22   to Quigley.   And so we took out the Pfizer receivable and the

23   Quigley receivable, divided the balance fifty/fifty, and then

24   did the computation.   But the bottom line is that the full

25   405, the entire amount, is being contributed to the 524(g)
                                                                        82

1    trust.

2                THE COURT:   Okay.   All right.   It just doesn't sound

3    like there's anything more to disclose.

4                MR. ZIRINSKY:    And this will all be documented, and

5    if he wants to challenge it at confirmation, you know, we'll

6    put the documents in.       We'll show Your Honor exactly how it

7    was done.

8                MR. WEISFELNER:    And, Your Honor, my only point is

9    you will hear a lot about this if we get to a confirmation

10   hearing.

11               THE COURT:   All right.

12               MR. ZIPES:   Your Honor, there was just one other

13   point.   I -- hopefully, we will be able to work out the

14   language.

15               But as we looked at this plan and disclosure

16   statement, it doesn't really state in simple language what's

17   happening here.    And we proposed in our objection certain

18   language that should probably go into the executive summary:

19               "Although the plan provides for an increase in

20   Pfizer's contribution, this increased contribution will only

21   inure --" and I don't think this is contested "-- to the

22   benefit of those asbestos claimants who settled with Pfizer

23   prior to the bankruptcy filing date.      Those who did not

24   settle will receive the same distribution, or anticipated to

25   receive the same distribution, as was proposed under previous
                                                                    83

1    plans, and no more."

2             For someone reading that, someone getting this, you

3    know, that's a helpful piece of information, and that's not

4    really anywhere -- you can't read the disclosure statement

5    and see that.

6             MR. COOK:     If it's as non-controversial as he said,

7    I'm happy to consider it, and we'll kill a few more trees and

8    put it in.

9             THE COURT:    It sounds to me like -- this sounds a

10   little argumentative, which -- it was said before that the

11   purpose of the increased contribution was to keep the non-

12   settling people at the same level, and raise the payments to

13   the people who went from ten percent to ninety percent.

14   That's what it was.    Okay.

15            What I'm inclined to do with the disclosure

16   statement is I want to reserve decision on the two or two-

17   and-a-half legal issues that were raised, specifically, the -

18   - whether the language of the injunction, regardless of the

19   disputes that have been raised, exceeds the permissible scope

20   of 524(g).   The bottom line is I think that can be resolved

21   by just putting 524(g), which you have in the plan, and not

22   describing by example the types of claims.

23            I think the more serious issue that I have is this

24   what I call the classification issue.    Maybe it's an unequal

25   treatment issue.   But, certainly, I can look at that as a
                                                                       84

1    legal issue, whether the mere connection between the Pfizer

2    settlement and the confirmation of the plan somehow makes it

3    unconfirmable as a matter of law as presently proposed,

4    whether the settling creditors have to be separately

5    classified, which may cure at least any of that.

6                I don't know if you can confirm the plan, then, but

7    that's an issue I'm going to reserve decision on.

8                I know I have briefs.     Do parties want to submit any

9    more legal authority, particularly on the classification

10   issue?   Not this general stuff about similarly situated

11   claims should be separately --

12               MR. ZIRINSKY:   No, but we'd like to specifically

13   address that issue, Your Honor.       So we'd like some time to

14   put it --

15               THE COURT:   All right.   You want to submit

16   simultaneous briefs?

17               MR. ZIRINSKY:   That would be fine.

18               MR. WEISFELNER:   Well, it's their plan.   I mean, I'd

19   like an opportunity to respond to whatever their argument is.

20               THE COURT:   All right.   When can you submit a --

21               MR. ZIRINSKY:   I'd say within a week.

22               THE COURT:   So the Pfizer/Quigley brief, I'll give

23   you a week from tomorrow.     So that's the 20th.

24               Can you respond within a week?

25               MR. WEISFELNER:   Certainly.
                                                                     85

1             THE COURT:   Okay.    I'll give you a week to reply,

2    which brings us to August --

3             MR. ZIRINSKY:    It's July 27th.

4             THE COURT:   July 27th is their --

5             MR. ZIRINSKY:    We would be at August 3rd, I think.

6             THE COURT:   Okay, August 3rd.     And I don't need any

7    more argument on that.   I'll reserve decision on that.

8             The informational issues are of less concern once we

9    get over these issues.   Okay?

10            What's next?

11            MR. COOK:    A status conference on the trustee motion

12   and the --

13            THE COURT:   Right.     What's happening with the

14   Wellington agreement motion, Mr. Dremluk?

15            MR. DREMLUK:    Judge, where we stand at this point is

16   I've got an e-mail from my co-counsel in California who --

17            THE COURT:   So you're the guy who had his Blackberry

18   on who was causing the interference --

19       (Laughter.)

20            THE COURT:   -- despite my request.

21            MR. DREMLUK:    Well --

22            THE COURT:   Yes, sir.

23            MR. DREMLUK:    I will not be able to confer with co-

24   counsel until late -- I will not be able to confer with co-

25   counsel until later today.
                                                                         86

1               THE COURT:    Do you want to adjourn your motion?

2               MR. DREMLUK:     I'm thinking one of two things.

3    Number one is to adjourn the motion for a very short period

4    of time.

5               THE COURT:    Because I'm ready to decide it right

6    now.

7               MR. DREMLUK:     Or, secondly, to argue the motion with

8    the understanding that we may be able to work something out

9    later.    Either way is fine with me, but --

10              THE COURT:    It's your motion.   You tell me what you

11   want to do.

12              MR. DREMLUK:     You know, I'd like to be able to

13   confer with co-counsel, so if we could kick this over for a

14   week.    Would that work?

15              THE COURT:    I don't have a problem with that.     Do

16   you have any problem with that?

17              MR. COOK:    No. Your Honor.

18              THE COURT:    All right.   Just let me know.   It

19   doesn't mean you necessarily come back one week from today.

20   Just let me know if you want to go forward with the motion if

21   you think that's how you want to spend your time.

22              MR. DREMLUK:     Okay.

23              THE COURT:    Okay.

24

25              MR. COOK:    Trustee motion.   I know most of the
                                                                        87

1    discovery is done.    I understand there is some surviving

2    issues between Pfizer and the ad hod committee.       And I'll let

3    them tell you what there is.      But we're done.

4             THE COURT:     You're ready to go?

5             MR. COOK:     Yeah.    We will be.

6             MR. ZIRINSKY:     Your Honor, if I may, I'd like Mr.

7    Bae to address the status of discovery on the trustee's --

8             THE COURT:     Certainly.    He's been sitting so quietly

9    for two hours here.

10            MR. BAE:     Good afternoon, Your Honor.

11            We have not yet received discovery from the ad hoc

12   committee with respect to the trustee motion.       Mr. Arnold and

13   I have been communicating.      The expectation is that Mr.

14   Arnold will produce responsive documents, and we intend to

15   take the depositions of the ad hoc committee members next

16   week if they're able to produce the members.        And, shortly

17   thereafter, we will be prepared to proceed to a hearing.

18            THE COURT:     Mr. Arnold, does that sound right?

19            MR. WEISFELNER:       Yes.

20            THE COURT:     He speaks for you?

21            MR. WEISFELNER:       Notice how I do that so gracefully,

22   to talk for him.

23       (Laughter.)

24            MR. WEISFELNER:       I think the only opened issue, and,

25   frankly, I will admit that I think he's got the better end of
                                                                       88

1    the argument than me so I'm going to appeal to Your Honor's -

2    -

3               THE COURT:   Then you can sit down and we can go to

4    lunch.

5          (Laughter.)

6               MR. WEISFELNER:   I can -- I'll appeal to Your

7    Honor's sense of equities here.

8               It is absolutely the case that I told the judge

9    whenever we were last here that we were ready to try the

10   trustee motion from our perspective.

11              THE COURT:   That was hyperbole?

12              MR. WEISFELNER:   No, I meant it.   And I still mean

13   it.   We're ready to go.

14              THE COURT:   Okay.

15              MR. WEISFELNER:   Nevertheless, we had told Pfizer

16   that we thought it would be instructive to take the

17   depositions of Messrs. Ruben and Rosen.

18              THE COURT:   Who are they?

19              MR. WEISFELNER:   I'm glad you asked.   They are the

20   lawyers who historically represented Pfizer and Quigley on a

21   national basis in connection with their efforts to settle

22   claims.   They settled a whole bunch of claims before the

23   contemplation of a Pfizer/Quigley related bankruptcy; they

24   settled them jointly for both Pfizer and Quigley; they then

25   went out looking to settle Pfizer claims only.     And we
                                                                     89

1    thought it would elucidate for Your Honor at an early stage,

2    that being the trustee/conversion hearing, on these critical

3    issues that we think go to good faith that relate to

4    conversion or trustee, and that Your Honor would be better

5    served hearing some of those issues at that hearing, rather

6    than wait for, if there is to be a confirmation hearing, a

7    confirmation hearing.

8             And, for that reason, while it was a second thought,

9    and it was something that we had otherwise decided we weren't

10   going to do, we thought with the expansion of time to get us

11   ready for a hearing, and since there was a lot more time

12   afforded, that we would seek their depositions.

13            THE COURT:     Okay.

14            MR. BAE:   Your Honor, we would have been in a

15   position to proceed to an evidentiary hearing right away.

16   The reason Your Honor asked for a status conference and gave

17   us thirty days was so that Pfizer can get discovery.   The

18   purpose of the -- giving Pfizer thirty days to get discovery,

19   I don't believe, was intended to enable the ad hoc committee

20   to drum up more issues and to get more discovery from Pfizer.

21            We can keep on doing this forever and continue to

22   adjourn the hearing, but the point is, at some point, we

23   should get to the hearing, resolve these baseless

24   allegations, and the purpose of the delay was so that Pfizer

25   can get its discovery.    And that's what we're trying to do,
                                                                       90

1    and it's all we should be doing.

2                MR. ZIRINSKY:    If I may just add a couple of things,

3    Your Honor.    I mean, this is, again, the good faith issue is

4    a confirmation issue.       I don't think Mr. Weisfelner really

5    needs an opportunity to try the issue twice.      If he wants

6    discovery in connection with objections to confirmation,

7    he'll certainly have an opportunity to take whatever

8    discovery he seeks, subject to our reserving whatever

9    objections we'll have at the time.

10               But, you know, this is really not the gravamen of

11   his trustee motion.      The gravamen -- this is a good-faith

12   issue --

13               THE COURT:   I tend to agree.

14               MR. WEISFELNER:    Yeah, well, unfortunately, so do I,

15   which is why --

16               THE COURT:   Okay, good.   Then we're all agreed on

17   that one.

18       (Laughter.)

19               THE COURT:   So what do you need?   Two weeks to

20   complete discovery?

21               MR. BAE:   Your Honor, in light of -- I have not

22   received any documents yet, or written responses.      And what I

23   would request is once we complete the discovery, that Mr.

24   Arnold and I communicate with the Court and suggest a date at

25   that point.
                                                                       91

1                I'm reluctant to suggest a two-week period --

2                THE COURT:   Is that --

3                MR. BAE:   -- and only to have to come back and say

4    we're not done.

5                MR. WEISFELNER:   Judge, I guess my point is I think

6    we're going to need a chunk of time to try the trustee

7    conversion motions.

8                THE COURT:   You're going to have to tee it up some

9    way.   You can't just come in and start with a lot of

10   evidence.

11               MR. WEISFELNER:   Sure.

12               THE COURT:   We might need a -- we'll probably need

13   some sort of a pretrial order so we know what the issues are

14   that are going to be tried.

15               MR. WEISFELNER:   I agree, which is why I want to

16   start getting some of the dates set now.

17               THE COURT:   I'm not going to start fixing trial

18   dates.

19               MR. ZIRINSKY:   And once we have the documents --

20   once we have their documents, Judge, we can quickly proceed

21   to take our depositions and proceed.       It's just a question of

22   when we'll have the documents.        That's really the key thing.

23               THE COURT:   Look, the only thing I can do, and it

24   sounds like the only thing that makes sense, is to have a

25   status conference in thirty days, if that's appropriate, and
                                                                      92

1    figure out if you've completed your discovery.

2               MR. BAE:   Okay.   That's fine with us, Your Honor.

3               MR. WEISFELNER:    Your Honor, I would just hope that

4    we could get a shorter period of time because I think we can

5    get completed in way shorter of a time frame than that.

6               THE COURT:   If you both certify to me tomorrow that

7    all the discovery is completed, then you can come back

8    earlier.   I'll give you a hearing date.    Okay?   This is

9    really a holding date to make sure that I don't lose track of

10   it.

11              MR. WEISFELNER:    Thank you, Judge.

12              MR. BAE:   Thank you, Your Honor.

13              THE COURT:   Let me just give you a date for that.

14              MR. ZIRINSKY:   Your Honor, if I just may bring up on

15   the PI order, we did really attempt to track --

16              THE COURT:   I'm going to get to that in a minute.

17   Let me just give you a date on that.

18              MR. ZIRINSKY:   Okay.

19              THE COURT:   Let's just use Tuesday, August 14th as a

20   holding date for the status conference on both matters.       As I

21   said, if you complete all the issues before then and you're

22   ready to go, just let me know.

23              But I am going to want some sort of a pretrial order

24   in this so we know what the contentions are and we know what

25   we're trying.
                                                                     93

1              MR. WEISFELNER:   Okay.

2              MR. ZIPES:   Your Honor, I was standing up to say

3    that I don't see any reason why we can't start on that

4    pretrial order even --

5              THE COURT:   You can certainly start on it.   It makes

6    sense.   You know, there have been lengthy pleadings.   You

7    kind of have a general idea what the allegations are.    But

8    you're going to have to list your witnesses, your documents.

9    But you can start on your contentions now, certainly.    All

10   right.

11             Now the preliminary injunction.   Go ahead.

12             MR. ZIRINSKY:   Your Honor, the proposed order we

13   submitted to Your Honor and circulated yesterday represented

14   our attempt to track the language of 524(g) into the

15   preliminary injunction and to try to comply with Your Honor's

16   request for a suggestion that the current PI be modified to

17   comply with what a 524(g) injunction will be upon

18   confirmation of the plan.   And that's what we attempted to

19   do.   So the language Your Honor sees in there does track the

20   language of 524(g).

21             Now we haven't gotten comments yet from anyone.      We

22   can either do it now, or, if Your Honor would prefer, perhaps

23   we can let Mr. Arnold give us a markup and see if we can work

24   out any differences.

25             THE COURT:   We can do that.   But let me tell you
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1    some issues.    I've looked at this thing.

2             MR. WEISFELNER:      Well, Your Honor, I mean, before --

3    if I could, because notwithstanding the fact that we got it

4    late yesterday, one page I want you to focus on, aside from

5    all the other verbiage, because it's exactly what they intend

6    to do as part as the plan, but they're not being forthcoming.

7    They acknowledged that just now from Mr. Zirinsky's

8    statements.    Page 7.

9             THE COURT:      That's the one I was open to.

10            MR. WEISFELNER:      Okay.   And footnote, or little

11   Romanette II after that which sounds like the statute.      Now

12   you have the gloss:

13             Without limiting the generality of the foregoing,

14   any claim seeking recovery for damages allegedly caused by

15   the presence of --" and then the whole litany of stuff "--

16   shall be conclusively presumed to be enjoined by this order."

17            So, again, my hypothetical Insulag claim where they

18   slap their label on an Insulag bag and, as a matter of law,

19   they are liable, that's conclusively presumed to violate this

20   order.

21            MR. ZIRINSKY:      He's leaving out the words,

22   "manufactured, sold, or distributed by Quigley," which are --

23            MR. WEISFELNER:      Yeah, but my point is --

24            THE COURT:      He's saying that Pfizer may have also

25   been involved in that process with Insulag.
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1               MR. ZIRINSKY:   But I thought the conversation

2    earlier was if Pfizer, the little hypothetical that you and I

3    were talking about, was that Pfizer actually distributed the

4    product.

5               Here, we're talking specifically about products

6    manufactured, sold, or distributed by Quigley.

7               THE COURT:   What if Pfizer manufactures a product

8    that Quigley distributes?

9               MR. WEISFELNER:   What if Pfizer puts its label on a

10   bad --

11              THE COURT:   Just, you know, just take out that

12   paragraph.   I had a problem with "conclusively presumed,"

13   also.    It might create a presumption, but I had a problem

14   with "conclusively presumed."

15              MR. ZIRINSKY:   You want to just take out the

16   paragraph entirely?

17              THE COURT:   Take it out.   You're getting the same

18   injunction that you're going to get under the plan, if it's

19   confirmed, and what the statute authorizes.

20              The next problem I have is on Page 8 with the

21   paragraph that puts the burden of proof on the contemnor to

22   show that they're not in contempt.     What I had intended

23   during -- it was the telephone conversation, was, in essence,

24   a kind of a 9011 certification that a person who files a

25   claim in any other court that whatever 9011 says has made a
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1    reasonable investigation, it's not designed to harass, et

2    cetera, so that you can come to this Court, even if that

3    Court doesn't have a comparable rule of sanctions.

4             MR. WEISFELNER:   And, Judge, again, I'm not as

5    schooled in this area as I'd like to be, but the whole notion

6    that someone has to certify under Rule 11 a good-faith basis

7    for alleging a Pfizer liability, while it sounds right, all

8    I'm suggesting is it's not the way the State Courts prosecute

9    these claims.

10            THE COURT:   But if you take your argument to the

11   extreme, a 524(g) injunction under a Federal statute will

12   have no meaning because that's not the way it works in State

13   Court.

14            MR. WEISFELNER:   No, no, no.   But, Your Honor, we're

15   talking about two different things.   We're talking about a

16   temporary injunction pending confirmation.   Your Honor, we

17   are going to know before the confirmation hearing is done, it

18   will be before Your Honor and a District Court judge or a

19   District Court judge is going to preside, we will know as a

20   matter of fact and as a matter of law whether they're

21   entitled to a 524(g) injunction as it involves Insulag and as

22   it involves the fact that they allowed Pfizer's label to go

23   on Insulag brochures and sales products, whether they were

24   involved in the manufacture or distribution or not, and

25   whether, as a matter of law, that makes them liable, and
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1    whether, as a matter of law, that liability can be channeled.

2             THE COURT:     If it doesn't satisfy -- you know, we're

3    going around and around.    If it doesn't satisfy the

4    exculpation provisions of 524(g), then it's not part of the

5    channeling injunction.

6             MR. WEISFELNER:     Right.   And all I'm saying is --

7             THE COURT:     And we're not going to decide that issue

8    as to every single claim.

9             MR. WEISFELNER:     I understand that.   But my point is

10   we were supposed to have an order that allowed people who had

11   claims to go back into the State Court system and pursue

12   their rights as if the injunction was never issued, but in

13   anticipation of a 524(g) injunction.

14            MR. ZIRINSKY:     No, that's not true at all.

15            MR. COOK:    We were always going to have a --

16            THE COURT:     If you're telling me -- well, I mean, I

17   can have a separate hearing on this.     If you can't agree on

18   it, I'll just, you know, I'll try the hearing --

19            MR. WEISFELNER:     Judge, we want to be afforded an

20   opportunity to agree.

21            THE COURT:     I'll give you an opportunity.

22            MR. WEISFELNER:     Okay.

23            MR. ZIRINSKY:     Judge, can we just go back to the

24   last comment where, on Page 7, just I think there's a

25   technical correction that Your Honor should agree with.     The
                                                                       98

1    language that we -- that last paragraph we said we would

2    delete, the last sentence is -- really relates back to the

3    prior language which is also contained -- tracks the statute,

4    be as used in this paragraph the term "related party" means.

5    That definitional section, we believe, should stay in.

6              THE COURT:    All right.   That's not -- the

7    objectionable part was the other part.      By the way, you had

8    something about findings we made during conference calls.       I

9    don't make findings during conference calls.

10             MR. ZIRINSKY:    Okay.

11             THE COURT:    All right?   I'll give you an opportunity

12   to confer on it.   All I'm saying is that if we try this,

13   we're going to wind up in a place where you're probably going

14   to have an injunction, or preliminary injunction that tracks

15   524(g).

16             MR. WEISFELNER:     And all we're saying is, Judge,

17   that's all they're entitled to.      Let's get to it.

18             MR. COOK:    That's all we've asked for.

19             MR. WEISFELNER:     But that's not what this order

20   says.

21             THE COURT:    No.   There's a little more in here than

22   this, the shifting burdens of proof and conclusion of

23   presumptions and things like that.      And it's product-oriented

24   also as opposed to relationship oriented, which is what the

25   exculpation should be.    That's all.
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1               I will -- you tell me what you want to do on this

2    issue.

3               MR. ZIRINSKY:    Your Honor, I'm happy to take their

4    comments and perhaps what we should do is come back --

5               THE COURT:    Well, why don't you take his comments

6    and then settle a proposed modified preliminary injunction.

7    And then if there are any remaining issues, we'll just deal

8    with them.

9               MR. WEISFELNER:    And if we can get a hearing date,

10   Judge?    I mean, this has been going on for many, many years.

11              THE COURT:    I don't have to set a hearing date for

12   this.    If you can't resolve it --

13              MR. WEISFELNER:    You will.

14              THE COURT:    -- if it can't be resolved without a

15   hearing date, then we'll set a hearing date.

16              MR. WEISFELNER:    Great.    Okay.   Thank you, Judge.

17              THE COURT:    All right.    Anything else?

18              MR. COOK:    I think we have it.     Thank you.

19              THE COURT:    Thank you very much.     Have a nice

20   weekend.

21       (Proceedings concluded at 12:46 p.m.)

22                                   *****

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1                            CERTIFICATION

2             We certify that the foregoing is a correct transcript

3    from the electronic sound recording of the proceedings in the

4    above-entitled matter to the best of our knowledge and ability.

5

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     _________________________________            July 13, 2007
8    Cathryn Lynch, N.J. Cert. No. 565
     Certified Court Transcriptionist
9    Rand Transcript Service, Inc.

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