Fourth Cir. Ponders Broad Effect of Bestwall on All Bankruptcies

The Fourth Circuit pressed a Georgia-Pacific LLC unit and people with asbestos-related claims on whether a Chapter 11 debtor can be solvent, noting that a dispute over a bankruptcy court’s subject matter jurisdiction has never come up in this context since the law was initially ratified.

Arguments over the legitimacy of Bestwall LLC’s Chapter 11 case Thursday at the US Court of Appeals for the Fourth Circuit were fraught with concerns from a three-judge panel focusing on whether a potential reversal of a bankruptcy court’s decision to keep the case alive would create new law that affects other chapters of the US Bankruptcy Code.

“We interpret the law, we don’t create it,” Judge A. Marvin Quattlebaum Jr. said.

A committee representing claimants who said they got mesothelioma from exposure to asbestos in Georgia-Pacific products argued that a bankruptcy court doesn’t have subject matter jurisdiction because Bestwall, a liability-holding unit of the building materials manufacturer, shouldn’t be in Chapter 11.

Bankruptcy is only for those who are unable to pay their debts, the committee argues. Georgia-Pacific, as Bestwall’s parent entity, is financially sound, the committee said.

Judge G. Steven Agee noted that there hasn’t been a case that pointed to subject matter jurisdiction “defects” since 1788, when US bankruptcy law first was ratified. The only chapter in the bankruptcy code that points to insolvency as a requirement is Chapter 9, which is for municipalities, Agee said.

Finding that Bestwall has the ability to pay, and is willing to, could change the law constitutionally, Agee noted. Under the junior creditors’ argument, “it would void all Chapter 13 cases,” in part because it would restrict bankruptcy courts on the solvency issue and subject matter jurisdiction, he added.

Lawyers for the claimants’ committee argued that dismissing the Bestwall bankruptcy wouldn’t change existing law.

Bestwall is trying to force creditors to take its offer, even though the committee has proposed a separate plan twice, committee attorney David Fredrick of Kellogg Hansen Todd Figel & Frederick PLLC, said.

“No debtor has had the audacity to try what Bestwall is doing,” he added.

Bestwall, which has been in Chapter 11 for nearly eight years, argued that sending it back into the tort system would harm claimants who need a resolution.

Tens of thousands of claimants have died since Georgia-Pacific began litigating asbestos cases, so reaching an end through Bestwall’s bankruptcy is needed, Bestwall attorney Noel Francisco of Jones Day, said. Francisco was US solicitor general during President Donald Trump’s first term.

There were 64,000 lawsuits against Georgia-Pacific in September 2017, two months before Bestwall filed bankruptcy and absorbed that litigation, according to court records. Georgia-Pacific has spent nearly $2.9 billion over four decades to resolve more than 430,000 asbestos suits, court records said.

It can take decades for mesothelioma to manifest in a person, Francisco said, noting that “no one knows what the world is going to look like in 50-60 years” so claimants and families of those who have died need recoveries now.

Robinson & Cole LLP also represents the committee. Robinson Bradshaw & Hinson PA also represents Bestwall.

The case is In re Bestwall LLC, 4th Cir., No. 24-01493, hearing 5/8/25.