Durbin, Whitehouse, Hawley Call On Supreme Court To Reject Georgia-Pacific’s Attempt To Use A Bankruptcy Maneuver To Evade Accountability To Hundreds Of Thousands Of Asbestos[...]

Durbin, Whitehouse, Hawley Call On Supreme Court To Reject Georgia-Pacific's Attempt To Use A Bankruptcy Maneuver To Evade Accountability To Hundreds Of Thousands Of Asbestos Victims

Senators: "Allowing Bestwall's position to prevail here would fuel abuses that are already transforming a system of last resort into a 'corporate shell game' that allows well-heeled corporations 'to evade accountability for any harm caused by [their] products' and deny 'tens of thousands of people their day in court.'"

WASHINGTON - U.S. Senate Democratic Whip Dick Durbin (D-IL), Ranking Member of the Senate Judiciary Committee, along with U.S. Senators Sheldon Whitehouse (D-RI) and Josh Hawley (R-MO) submitted an amicus brief to the Supreme Court in Official Committee of Asbestos Claimants of Bestwall LLC v. Bestwall LLC, supporting the hundreds of thousands of victims of exposure to Georgia-Pacific's asbestos-linked products. To avoid facing the legal claims of victims in court, Georgia-Pacific "moved" to Texas for less than five hours, offloaded its asbestos-related liabilities onto a shell company called Bestwall, put Bestwall into bankruptcy, and then claimed that Bestwall's bankruptcy protected the entire Georgia-Pacific enterprise from accountability.

In recent years, companies like Georgia-Pacific, Johnson & Johnson, 3M, and Corizon Health have repeatedly tried to use this maneuver - the "Texas Two-Step" - to bypass mass tort lawsuits, freezing in place hundreds of thousands of legal claims while continuing business as usual. This trend of financially stable companies trying to obtain all of the benefits of bankruptcy without any of the costs shows no sign of abating.

The amicus brief makes three main arguments concerning Congress' intent when enacting the bankruptcy code. First, the amicus brief argues that the Supreme Court should grant certiorari to overturn the Fourth Circuit's uniquely high standard for dismissing a bankruptcy filed in bad faith and to adopt a requirement of good faith in bankruptcy similar to that of the Third Circuit.

The Senators wrote, "Since its bankruptcy filing, however, Bestwall has paid zero dollars to its approximately 56,000 current asbestos claimants, a number that rises with every passing day as more and more victims are diagnosed with cancer… Except for Bestwall's creditors-that is, the ordinary Americans who are Georgia-Pacific's tort victims-all of Georgia-Pacific's other creditors have continued to be paid in the ordinary course."

Second, it argues that Congress intended that only "honest but unfortunate" debtors in true financial distress can access bankruptcy relief, and that it never intended for corporations which can afford to pay all their debts to benefit from bankruptcy's special protections.

Third, the amicus brief argues that the Court must intervene in this case to prevent manipulation and abuse of the bankruptcy code by wealthy corporations from becoming routine, and to avoid providing corporations with a reliable legal playbook to avoid liability to tort victims and gain a strategic advantage in litigation.

The Senators continued, "If Bestwall's position becomes law-if concededly non-bankrupt corporate entities can forestall their creditors and victims through bankruptcy filings in the Fourth Circuit for years on end-those abuses are likely to become routine, making 'every case that rare case.' That, then, is the logical consequence of denying certiorari in this case: Corporations facing mass-tort liability will have a well-defined playbook and a friendly forum for sidestepping lawsuits, undermining both the ability of individuals to hold companies accountable and the integrity of the bankruptcy system."

The Senators concluded, "Allowing Bestwall's position to prevail here would fuel abuses that are already transforming a system of last resort into a 'corporate shell game' that allows well-heeled corporations 'to evade accountability for any harm caused by [their] products' and deny 'tens of thousands of people their day in court.'"

Read the full amicus brief here.

When he was Chair of the Senate Judiciary Committee, Durbin held a full committee hearing to draw attention to the way in which corporations use the "Texas Two Step" to exploit loopholes in bankruptcy law and dodge accountability. The Committee heard testimony from Ms. Lori Knapp, whose father died from mesothelioma caused by asbestos exposure in Georgia-Pacific drywall products. The Knapp family was denied their day in court because Georgia-Pacific manipulated bankruptcy law to shield itself from lawsuits. During the hearing, Durbin directly confronted Johnson & Johnson's Worldwide Vice President of Litigation.

Durbin has also led efforts to condemn the shameful bankruptcy maneuvers by companies like 3M and Corizon Health, while highlighting the need for legislative reform.

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