Senators: “Bestwall has created a legal stratagem that radically expands the authority of bankruptcy courts and makes a mockery of congressional intent”
WASHINGTON – U.S. Senate Majority Whip Dick Durbin (D-IL), Chair of the Senate Judiciary Committee, led fellow Senate Judiciary Committee colleagues U.S. Senators Sheldon Whitehouse (D-RI) and Josh Hawley (R-MO) in submitting an amicus brief to the Supreme Court in Bestwall LLC v. Official Committee of Asbestos Claimants, supporting hundreds of thousands of victims of the company’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.
The bipartisan trio of Senators urge the Court to overturn the Fourth Circuit’s decision to approve the stay of asbestos litigation against Georgia-Pacific, writing, “The bankruptcy system was not designed to provide solvent non-debtors with the option to simply decline to be held liable for alleged wrongdoing, but that is precisely what the Fourth Circuit’s decision countenances. That was not what Congress intended, and it is not a result that this Court should permit.”
The Senators continue, “Bestwall’s successful attempt to enjoin hundreds of thousands of legal claims against Georgia-Pacific exemplifies both the benefit of the Texas Two-Step to tortfeasors and the cost of the maneuver to the American people—and to the integrity of the bankruptcy system itself. Through its unprincipled, atextual interpretation of the Code’s provisions, Bestwall has created a legal stratagem that radically expands the authority of bankruptcy courts and makes a mockery of congressional intent.”
In recent years, wealthy corporations have attempted to use this maneuver — the “Texas Two-Step” — to exploit loopholes in bankruptcy law and dodge accountability. Companies like Georgia-Pacific, Johnson & Johnson, 3M, and Corizon Health have repeatedly tried to bypass the mass tort system, freezing in place hundreds of thousands of legal claims while continuing business as usual. This trend—financially stable companies trying to obtain all of the benefits of bankruptcy without any of the costs—shows no sign of abating.
In September 2023, 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.
Read the full amicus brief here.
The brief continues the work of Chair Durbin and the Senate Judiciary Committee to close loopholes in the bankruptcy system. In September, Durbin held a full committee hearing on evading accountability by manipulating bankruptcy, directly confronting Johnson & Johnson’s Worldwide Vice President of Litigation. He has also led efforts to condemn the shameful bankruptcy maneuvers by companies like 3M and Corizon Health, while highlighting the need for legislative reform. In 2022, Whitehouse led a subcommittee hearing on corporate efforts to side-step accountability through bankruptcy.