A federal appellate court ruled on Tuesday that drugmaker Pfizer

can face asbestos liability suits in state court over products once manufactured by a bankrupt subsidiary, dragging out a dispute that has already lasted more than 30 years.

At issue is insulating products made by Pfizer unit Quigley Co Inc that contained asbestos. Quigley, which Pfizer bought in 1968, at one time faced suits by more than 160,000 plaintiffs. It filed for bankruptcy in 2004.

Pfizer reached a deal that year with lawyers representing more than 80 percent of claimants, which provided for about $430 million in settlement payments. Quigley filed for bankruptcy protection as part of that arrangement, which was aimed at resolving cases dating back to the late 1970s.

The bankruptcy court later ruled that an injunction it issued in the case stayed some suits that were still pending against Pfizer. In May 2011, a federal judge in New York reversed that order, and the U.S. 2nd Circuit Court of Appeals upheld that ruling Tuesday.

Pfizer said in a statement it was evaluating its options.

It is important to note that the court's ruling is procedural and does not address the merits of the underlying claims, which we strongly dispute, the company said. In the history of this litigation, Pfizer has never been found derivatively or directly liable for injuries allegedly caused by Quigley's asbestos-containing products.

The suits in question were filed starting in 1999 by plaintiffs lawyer Peter Angelos in Pennsylvania state court. Angelos, one of the best-known asbestos lawyers in the country, also owns the Baltimore Orioles baseball team.

Angelos, according to the 2nd Circuit, had argued Pfizer was liable because the company allowed its label to be put on Quigley's asbestos-contaminated products, and therefore was not covered by the injunction protecting Quigley from lawsuits.

The appellate court ruled that Angelos was correct under the language of what is known as 524(g), the section of the bankruptcy code that deals specifically with asbestos liability cases.

We are confident that the Angelos reading of the statutory language at issue here is the correct one, the court's three judges said in the 34-page ruling.

The case is In re Quigley Company Inc, U.S. Court of the Appeals for the Second Circuit, Nos. 11-2635, 11-2767.

(Reporting By Ben Berkowitz; Editing by Tim Dobbyn)