A bipartisan trio of U.S. Senators issued a scathing statement opposing Georgia-Pacific’s attempt to file for bankruptcy, create an asbestos trust fund, and avoid lawsuits from people affected by asbestos exposure.
This strategy is called the “Texas Two-Step” and is a legal maneuver employed by many asbestos manufacturing companies and other companies involved in the production and sale of asbestos goods. The strategy involves creating a shell subsidiary company to absorb legal liabilities, and then having the subsidiary file for bankruptcy to avoid facing lawsuits.
Asbestos exposure is the only known cause of mesothelioma, which is a rare cancer that forms in the lining of the lungs or abdomen. An estimated 2,500-3,000 people in the U.S. are diagnosed with mesothelioma cancer each year, and the average life expectancy following diagnosis is 12-14 months.
The companies involved in the production and sale of asbestos are legally responsible to compensate the victims of the cancer. However, companies have used the Texas Two-Step strategy to minimize the compensation amount they would have to pay people. This has led to backlash from people – including U.S. Congress members – who claim the Texas Two-Step is unethical as it denies victims their chance to take the wrongdoing companies to court.
Background of Georgia-Pacific and Bestwall, LLC
Georgia-Pacific created the shell company Bestwall, LLC to absorb legal liabilities from tens of thousands of asbestos lawsuits. The name Bestwall is a nod to the former wallboard, joint compound and drywall manufacturer Bestwall-Gypsum, which Georgia-Pacific purchased in 1965.
Bestwall filed for Chapter 11 reorganization bankruptcy in 2017. This type of bankruptcy is what companies use for the Texas Two-Step.
Georgia-Pacific sold a range of products containing asbestos:
- Wallboards
- Drywall adhesive
- Acoustical plaster
- Roof coating
- Joint compounds
- Other compound types (bedding, spackling, laminating and topping)
As part of the bankruptcy attempt, Georgia-Pacific committed $1 billion in 2020 to fund the Bestwall trust. This money would help settle pending claims and compensate future claimants who have been affected by asbestos diseases like mesothelioma.
The Bestwall asbestos trust fund is for anyone diagnosed with mesothelioma or asbestos-related lung cancer who meets any one of these three criteria:
- Worked for Bestwall-Gypsum or Georgia-Pacific
- Worked with or around any Bestwall-Gypsum or Georgia-Pacific asbestos-containing products
- Are family members of Bestwall-Gypsum or Georgia-Pacific workers
However, Georgia Pacific’s trust has not been approved yet due to several objections from asbestos claimants and other creditors. In 2023, the Fourth Circuit Court of Appeals allowed Georgia-Pacific to continue the bankruptcy process while any pending lawsuits against the parent company remained paused.
In February 2024, Chief Bankruptcy Judge Laura Beyer in Charlotte, North Carolina, upheld this ruling, stating the U.S. Constitution does not require a company to be in “financial distress” when filing for bankruptcy.
Senators Urge U.S. Supreme Court to Intervene
U.S. Senate Majority Whip Dick Durbin (D-IL), Chair of the Senate Judiciary Committee, led fellow Senate Judiciary Committee colleagues and U.S. Senators Sheldon Whitehouse (D-RI) and Josh Hawley (R-MO) in submitting an amicus brief to the U.S. Supreme Court regarding the bankruptcy case Bestwall LLC v. Official Committee of Asbestos Claimants. The brief supports hundreds of thousands of victims of the company’s asbestos-linked products.
According to the statement from the U.S. Senate Committee on the Judiciary, Georgia-Pacific is attempting to file for bankruptcy “to avoid facing the legal claims of victims in court.” The company’s strategy involves moving to Texas “for less than five hours,” according to the Senators’ statement, “offloading its asbestos-related liabilities onto a shell company called Bestwall, putting Bestwall into bankruptcy, and then claiming that Bestwall’s bankruptcy protected the entire Georgia-Pacific enterprise from accountability.”
The U.S. Senators also wrote, “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… 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.”
According to a report from Reuters, the attorneys general from 24 states have joined the three Senators in asking the Supreme Court to reject the bankruptcy plan.
Sources & Author
- Durbin, Whitehouse, Hawley Call on Supreme Court to Reject Georgia-Pacific’s Bankruptcy Maneuver to Evade Accountability to Hundreds of Thousands of Asbestos Victims. U.S. Senate Committee on the Judiciary. Retrieved from: https://www.judiciary.senate.gov/press/releases/durbin-whitehouse-hawley-call-on-supreme-court-to-reject-georgia-pacifics-bankruptcy-maneuver-to-evade-accountability-to-hundreds-of-thousands-of-asbestos-victims. Accessed: 02/14/2024.
- Georgia-Pacific unit’s “two-step” bankruptcy survives dismissal, again. Reuters. Retrieved from: https://www.reuters.com/legal/government/georgia-pacific-units-two-step-bankruptcy-survives-dismissal-again-2024-02-23/. Accessed: 02/25/2024.
Sources & Author
