Georgia-Pacific, one of the world’s most significant manufacturing firms, faces tens of thousands of asbestos lawsuits, all demanding hefty sums for alleged damages. In an effort to buy themselves more time, Georgia-Pacific found a way to put their litigations on hold. In June 2023, an appeals court ruled allowing this manufacturing giant to continue its litigation pause.
Georgia-Pacific’s subsidiary, Bestwall, is in bankruptcy, and an ‘automatic stay’ protects them from litigation. The appeals court extended this stay to Georgia-Pacific. This ruling has raised questions and sparked debates.
An automatic stay for Georgia-Pacific
In a 2-1 decision, the 4th U.S. Circuit Court of Appeals extended bankruptcy’s ‘automatic stay’ to protect Georgia-Pacific. This ruling means that Georgia-Pacific can avoid ongoing litigations while Bestwall, its subsidiary, stays in bankruptcy. The court reasoned that the extension would provide Bestwall a better chance to reorganize its business in bankruptcy.
Litigation pause
Circuit Judge Steven Agee, who wrote for the majority in the 4th Circuit, attributed the extension of the temporary litigation pause largely to the plaintiffs. The judge accused the plaintiffs of trying to ‘circumvent the bankruptcy proceeding’ rather than settling their asbestos claims within Bestwall’s bankruptcy.
Bankruptcy as a corporate strategy
Bestwall’s bankruptcy filing, as per Circuit Judge Robert King, appears to be ‘little more than a corporate shell game’. According to King, it seems like an attempt to shield Georgia-Pacific from lawsuits without subjecting the company to bankruptcy court oversight. This controversy adds another layer of complexity to the situation.
Implications for the future
The implications of this ruling are significant and far-reaching. Other companies with mass tort liabilities might attempt similar strategies. Some companies, such as Johnson & Johnson, have already tried a similar approach, termed the ‘Texas two-step.’
While it may seem beneficial for Georgia-Pacific to maintain the bankruptcy pause, it is also essential to consider the broader implications. Time will tell how this ruling impacts the landscape of corporate litigation and bankruptcy. For now, the saga remains in progress, and all parties involved await the next developments with bated breath.