Cancer patient asks court to end Georgia-Pacific asbestos bankruptcy

By Dietrich Knauth

Feb 17 (Reuters) - A cancer patient on Friday asked a U.S. bankruptcy court to dismiss the long-running bankruptcy of a Georgia-Pacific subsidiary, arguing that it serves no purpose other than to prevent asbestos-related lawsuits from proceeding in other courts.

The bankruptcy case began in 2017, when Georgia-Pacific, a unit of industrial conglomerate Koch Industries, spun off its liabilities for asbestos litigation into a new company, Bestwall, which then filed for bankruptcy. Wilson Buckingham, who was diagnosed with mesothelioma in 2020 and who sued Georgia-Pacific, was one of thousands of plaintiffs whose lawsuits was blocked by the move.

Buckingham's attorneys argued Friday that the Bestwall bankruptcy should face the same fate as the bankruptcy of a Johnson & Johnson-created subsidiary, which an appeals court dismissed last month.

In his court filing, the first to challenge Georgia-Pacific in the wake of the J&J JNJ.N unit's bankruptcy dismissal, Buckingham alleged that Bestwall's bankruptcy used a "nearly identical" strategy, known as the "Texas two-step."

J&J had created the subsidiary, LTL Management, to absorb liabilities for lawsuits alleging that its baby powder and other talc products caused cancer. LTL immediately filed for Chapter 11.

The U.S. Third Circuit Court of Appeals in Philadelphia found that neither J&J nor LTL were in "financial distress" at the time of the LTL bankruptcy filing.

J&J has challenged the Third Circuit ruling. It maintains that its baby powder and other talc products are safe.

Representatives for Koch and Georgia-Pacific did not immediately respond to a request for comment Friday.

Asbestos claimants previously tried to dismiss the Bestwall bankruptcy, but U.S. Bankruptcy Judge Laura Beyer denied that request in July 2019. The official committee appointed to represent asbestos claimants has appealed that decision.

In his court filing, Buckingham argued that the Third Circuit's ruling on "financial distress" was particularly relevant to Bestwall, because Georgia-Pacific was able to pay in dividends to its parent company Koch Industries last year, according to Buckingham's motion.

The Third Circuit ruling does not apply to courts in North Carolina, where the Bestwall case is proceeding. But Buckingham argued that the recent ruling, combined with the lack of progress in the Bestwall case, require the bankruptcy court to consider dismissal with "fresh eyes."

The Bestwall case began with promises to "fairly compensate" asbestos claimants, but five years of stagnation in bankruptcy court have shown that those assurances by Bestwall, Georgia-Pacific, and Koch Industries have "proven untrue," Buckingham's attorneys wrote. With a bankruptcy settlement out of reach, cancer victims should be allowed to resume their lawsuits, according to Buckingham's motion.

Several major companies, including Johnson & Johnson and 3M Co, have turned to the bankruptcy courts in an attempt to manage their mass tort liabilities, a practice Reuters detailed last year. Plaintiff attorneys have called the cases an improper manipulation of the bankruptcy system, while the companies say the Chapter 11 filings are aimed at compensating claimants fairly and equitably.

Military service members who have sued 3M over allegedly defective earplugs have already seized on the LTL ruling to push for the dismissal of a bankruptcy case blocking their claims against 3M and its subsidiary Aearo.

The case is In re: Bestwall LLC, U.S. Bankruptcy Court for the Western District of North Carolina, No. 17-31795

For Bestwall: Gregory Gordon and Daniel Prieto of Jones Day.

For Buckingham: Jon Ruckdeschel of Ruckdeschel Law Firm

(Reporting by Dietrich Knauth, Editing by Rosalba O'Brien)


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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