In recent years, multiple companies facing claims from mesothelioma victims have pursued a controversial legal maneuver referred to as a Texas Two-Step to evade legal liability. Now, in response to one of these attempts by Georgia-Pacific, a bipartisan group of U.S. senators — Dick Durbin (D-Illinois), Sheldon Whitehouse (D-Rhode Island), and Josh Hawley (R-Missouri) — have filed an amicus brief urging the Supreme Court to reject the strategy.
Mesothelioma Victims Denied Justice Through “Texas Two-Step” Bankruptcy Strategy
Several companies facing personal injury lawsuits filed by mesothelioma victims, and others diagnosed with asbestos-related diseases, have taken advantage of an unusual Texas bankruptcy statute to avoid having to pay victims. Johnson & Johnson, 3M, and Corizon Health have all established subsidiary companies to hold their asbestos liabilities and then had those subsidiaries declare bankruptcy to shield the parent company from having to pay the claims.
Georgia-Pacific’s version of this strategy saw the company “move” to Texas for less than five hours, followed by its offloading its mesothelioma and other asbestos-related liabilities onto a shell company called Bestwall. It then placed Bestwall into bankruptcy and claimed that the subsidiary’s bankruptcy protected the entire Georgia-Pacific enterprise from accountability for compensating victims. In their amicus brief, the senators noted that since Bestwall’s bankruptcy filing, the company 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.”
The senators go on to say that “all of Georgia-Pacific’s other creditors have continued to be paid in the ordinary course,” leaving only mesothelioma and other asbestos disease claimants, “the ordinary Americans who are Georgia-Pacific’s tort victims,” frozen out while the company conducted business as usual.
Senators’ Pleas Offer Hope to Mesothelioma Victims
The senators’ amicus brief makes three main arguments on behalf of mesothelioma victims affected by the Texas Two-Step strategy. First, they assert that the Supreme Court should overturn the Fourth Circuit’s uniquely high standard for dismissing bad-faith bankruptcies and adopt good-faith requirements similar to the Third Circuit. Second, that Congress intended only “honest but unfortunate” debtors in true financial distress to access bankruptcy relief, never intending corporations able to pay all debts to benefit from bankruptcy’s special protections. And third, that the Court must intervene to prevent the manipulation and abuse of the bankruptcy code by wealthy corporations from becoming routine.
The senators warned that giving mesothelioma defendants “a well-defined playbook and a friendly forum for sidestepping lawsuits” would lead to dire outcomes for victims. “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.” The senators emphasized that mesothelioma victims and other asbestos disease claimants deserve the opportunity to hold companies accountable for decades of deadly asbestos exposure.
If you or someone you love has been diagnosed with mesothelioma or another asbestos-related disease, having powerful advocates on your side can make all the difference. For more information on the help available to you, contact the Patient Advocates at Mesothelioma.net today at 1-800-692-8608.
