U.S. Senators Dick Durbin, Sheldon Whitehouse, and Josh Hawley submitted an amicus brief to the Supreme Court on Mar. 25, calling for the rejection of Georgia-Pacific’s use of a bankruptcy maneuver known as the "Texas Two-Step" in a case involving asbestos victims.
The issue centers on whether financially stable companies can use bankruptcy procedures to avoid accountability for mass tort claims. The Senators argue that such tactics undermine legal protections for victims and threaten the integrity of the bankruptcy system.
According to the brief, Georgia-Pacific temporarily relocated its operations to Texas, transferred its asbestos-related liabilities to a shell company called Bestwall, and then placed Bestwall into bankruptcy. This move has resulted in no payments being made to approximately 56,000 current asbestos claimants while other creditors continue receiving payments as usual. “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,” Durbin, Whitehouse and Hawley wrote.
The Senators further stated that if this position is upheld by courts it could create a playbook for corporations seeking protection from lawsuits without facing financial distress themselves: “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... Corporations facing mass-tort liability will have a well-defined playbook and a friendly forum for sidestepping lawsuits.”
They concluded by warning against transforming bankruptcy into what they described as a "corporate shell game": “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.’”
Durbin previously chaired Senate Judiciary Committee hearings addressing similar tactics used by major companies such as Johnson & Johnson and Corizon Health. The Committee heard testimony from individuals affected by these maneuvers including Lori Knapp whose family was denied access to court proceedings after her father died from mesothelioma linked to Georgia-Pacific products.
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