Amicus Curiae Brief — Official Committee of Asbestos Claimants of Bestwall LLC, Petitioner v. Bestwall LLC

No. 25-1013

In the Supreme Court of the United States

OFFICIAL COMMITTEE OF ASBESTOS CLAIMANTS OF

BESTWALL LLC,

Petitioner,

v.

BESTWALL LLC,

Respondent.

On Petition for a Writ of Certiorari to the

United States Court of Appeals for the Fourth Circuit

BRIEF OF SENATOR RICHARD DURBIN,

SENATOR SHELDON WHITEHOUSE, AND

SENATOR JOSH HAWLEY AS AMICI CURIAE

IN SUPPORT OF PETITIONER

VARSHINI PARTHASARATHY

GUPTA WESSLER LLP

235 Montgomery Street

Suite 629

San Francisco, CA 94104

(415) 573-0336

DEEPAK GUPTA

Counsel of Record

JONATHAN E. TAYLOR

GREGORY A. BECK

GUPTA WESSLER LLP

2001 K Street, NW

Suite 850 North

Washington, DC 20006

(202) 888-1741

deepak@guptawessler.com

Counsel for Amici Curiae

March 25, 2026

-iTABLE OF CONTENTS

Table of authorities ......................................................... ii

Interest of amici curiae ................................................... 1

Introduction and summary of argument ...................... 2

Statement .......................................................................... 5

Argument .......................................................................... 8

I.

Congress has never given wealthy

corporations access to bankruptcy’s

protections without a showing of financial

distress ................................................................ 8

II. The good-faith requirement preserves

Congress’s intent to limit bankruptcy to

those who are actually “bankrupt” ................ 11

III. The increasing prevalence of bankruptcy

abuse by wealthy, non-distressed tortfeasors

underscores the need for review ................... 15

Conclusion ....................................................................... 18

-iiTABLE OF AUTHORITIES

Cases

Carolin Corp. v. Miller,

886 F.2d 693 (4th Cir. 1989) .................................... 4, 15

Central Virginia Community College v. Katz,

546 U.S. 356 (2006) ......................................................... 8

Cohen v. de la Cruz,

523 U.S. 213 (1998) ......................................................... 8

Continental Illinois National Bank & Trust Co. of

Chicago v. Chicago, Rock Island & Pacific

Railway Co.,

294 U.S. 648 (1935) ......................................................... 9

Czyzewski v. Jevic Holding Corp.,

580 U.S. 451 (2017) ....................................................... 17

Georgine v. Amchem Products, Inc.,

83 F.3d 610 (3d Cir. 1996) ........................................... 17

Harrington v. Purdue Pharma L.P.,

603 U.S. 204 (2024) ....................................................... 15

In re 15375 Memorial Co. v. Bepco, L.P.,

589 F.3d 605 (3d Cir. 2009) ......................................... 13

In re Bestwall LLC,

71 F.4th 168 (4th Cir. 2023) .......................................... 2

In re Cedar Shore Resort, Inc.,

235 F.3d 375 (8th Cir. 2000) ........................................ 10

In re Combustion Engineering, Inc.,

391 F.3d 190 (3d Cir. 2004) ......................................... 12

In re Integrated Telecom Express, Inc.,

384 F.3d 108 (3d Cir. 2004) ............................. 11–13, 16

-iiiIn re Little Creek Development Co.,

779 F.2d 1068 (5th Cir. 1986) ................................ 11, 14

In re LTL Management, LLC,

64 F.4th 84 (3d Cir. 2023) .................................. 4, 10, 17

In re SGL Carbon Corp.,

200 F.3d 154 (3d Cir. 1999) ................................... 11, 17

In re Victory Construction Co., Inc.,

9 B.R. 549 (Bankr. C.D. Cal. 1981) ............................ 11

Marrama v. Citizens Bank of Massachusetts,

549 U.S. 365 (2007) ......................................................... 3

Ortiz v. Fireboard Corp.,

527 U.S. 815 (1999) ....................................................... 16

Shapiro v. Wilgus,

287 U.S. 348 (1932) ........................................... 13, 14, 16

Williams v. U.S. Fidelity & Guaranty Co.,

236 U.S. 549 (1915) ....................................................... 10

Wright v. Union Central Life Insurance Co.,

304 U.S. 502 (1938) ....................................................... 10

Statutes

11 U.S.C. § 1112.............................................................. 4, 11

11 U.S.C. § 524.................................................................... 13

28 U.S.C. § 1407.................................................................. 16

Act of March 2, 1867, 14 Stat. 517 ...................................... 9

Bankruptcy Act of 1841, 5 Stat. 440 .................................. 9

Bankruptcy Act of 1898, 30 Stat. 544 .............................. 10

-ivLaw review articles

Michael A. Francus,

Designing Designer Bankruptcy,

102 Tex. L. Rev. 1205 (2024) ............................. 7, 12, 17

Michael A. Francus,

Texas Two-Stepping Out of Bankruptcy,

120 Mich. L. Rev. Online 38 (2022) ........................ 5, 10

Diane B. McColl,

Good Faith in Chapter Eleven Reorganizations,

35 S.C. L. Rev. 333 (1984). .......................................... 14

Samir D. Parikh,

Mass Exploitation,

170 U. Pa. L. Rev. Online 53 (2022) ............................ 7

Thomas E. Plank,

The Constitutional Limits of Bankruptcy,

63 Tenn. L. Rev. 487 (1996) .......................................... 9

Joseph E. Simmons,

Reconstructing the Bankruptcy Power: An

Originalist Approach,

131 Yale L.J. 306 (2021) ................................................ 9

Lindsey D. Simon,

Bankruptcy Grifters,

131 Yale L.J. 1154 (2022) ............................................ 16

Charles Jordan Tabb,

The History of the Bankruptcy Laws in the

United States,

3 Am. Bankr. Inst. L. Rev. 5 (1995) ....................... 9, 10

Other authorities

7 Collier on Bankruptcy ¶ 1112.07 (16th ed. 2022)......... 11

-v168 Cong. Rec. S683 (daily ed. Feb. 15, 2022) ............ 8, 16

Evading Accountability: Hearing on Corporate

Manipulation of Chapter 11 Bankruptcy Before

the Senate Committee on the Judiciary, 118th

Congress (2023) ............................................................ 18

H.R. Rep. No. 103-835 (1994),

as reprinted in 1994 U.S.C.C.A.N. 3340 ................... 12

H.R. Rep. No. 109-31 (2005),

as reprinted in 2005 U.S.C.C.A.N. 88 ......................... 3

H.R. Rep. No. 95-595 (1977),

as reprinted in 1978 U.S.C.C.A.N. 5963 ................... 12

Letter from Senators Richard J. Durbin,

Elizabeth Warren, and Richard Blumenthal

and Representatives Carolyn B. Maloney and

Raja Krishnamoorthi, to Alex Gorsky,

Chairman and CEO, Johnson & Johnson

(Nov. 10, 2021) ........................................................ 15, 18

Letter from Senators Richard J. Durbin,

Elizabeth Warren, and Richard Blumenthal

and Representatives Carolyn B. Maloney and

Raja Krishnamoorthi, to Joaquin Duato,

Vice-Chairman of the Executive Committee,

Johnson & Johnson (Dec. 17, 2021) ............................. 7

Press Release,

Whitehouse, Hawley, Sykes, Gooden

Introduce Bipartisan Legislation to Deter

‘Texas Two-Step’ Bankruptcy Trick

(July 23, 2024) ................................................................. 6

S. Rep. No. 95-989 (1978),

as reprinted in 1978 U.S.C.C.A.N. 5787 ................... 12

-1INTEREST OF AMICI CURIAE

Amici curiae are the following members of the U.S.

Senate1:

Senator Richard Joseph Durbin, the Ranking

Member of the Senate Judiciary Committee and the

senior United States senator from Illinois, a seat he has

held since 1997.

Senator Sheldon Whitehouse, the Ranking Member

of the Senate Judiciary Committee Subcommittee on

Federal Courts, Oversight, Agency Action, and Federal

Rights and the junior United States senator from Rhode

Island, a seat he has held since 2007.

Senator Josh Hawley, the Chairman of the Senate

Judiciary Subcommittee on Crime and Counterterrorism

and the senior United States senator from Missouri, a

seat he has held since 2019.

Amici possess deep experience with the nation’s

bankruptcy laws. They hold leadership positions on, and

are members of, the Senate committee and subcommittee

with legislative jurisdiction over the Bankruptcy Code.

And while they represent different states and are

members of different political parties, amici share a grave

concern regarding the manipulation and misuse of the

bankruptcy system. They have previously filed briefs to

raise similar concerns, including one in support of a prior

petition in this case, and one cited by Judge King in an

earlier dissent. See Brief of Members of Congress as

Amici Curiae Supporting Petitioner, Official Comm. of

1

No counsel for a party authored this brief in whole or in part,

and no person or entity, other than amici or their counsel, made any

monetary contribution to its preparation or submission. Both parties

received timely notice of intent to file this brief.

-2Asbestos Claimants v. Bestwall LLC, No. 23-675 (U.S.

Jan. 22, 2024); In re Bestwall LLC, 71 F.4th 168, 195

(King, J., dissenting) (4th Cir. 2023) (citing Brief of

Senator Richard Durbin, et al. as Amici Curiae

Supporting Appellees, In re Aearo Techs., LLC, No. 222606 (7th Cir. Feb. 1, 2023)).2

Amici are troubled by the increasing prevalence of

bankruptcy abuse by wealthy corporations with no

financial distress. In recent years, multiple profitable

corporations have leveraged Chapter 11’s protections to

immunize themselves from liability while denying

thousands of injured claimants—including amici’s

constituents—their day in court. If maintained, the

decision below would validate this manipulation of the

bankruptcy system and encourage other corporations to

follow suit. Fully solvent corporations that lack any

semblance of financial distress should not be given the

green light to use bankruptcy to sidestep litigation.

Congress certainly did not intend to authorize such

maneuvers when it created the Bankruptcy Code.

INTRODUCTION AND

SUMMARY OF ARGUMENT

The question presented by this case is whether an

entity with a conceded ability to pay all of its debts can

invoke the Bankruptcy Code to circumvent state tort law.

In answering “yes” to that question, the Fourth Circuit

reached a decision that gives profitable companies a

virtually failproof roadmap to isolate their asbestos

liabilities in the bankruptcy system and delay justice for

thousands of plaintiffs.

2

Unless otherwise specified, all internal quotation marks,

citations, and alterations are omitted from quotations throughout.

-3Amici are members of Congress who write to urge the

Court to reject this long-running attempt at bankruptcy

abuse. Congress established our bankruptcy system to

give the “honest but unfortunate debtor” a “fresh start,”

Marrama v. Citizens Bank of Massachusetts, 549 U.S.

365, 367 (2007), as the “last resort” for those with no other

option. H.R. Rep. No. 109-31, pt. 1, at 4 (2005), as

reprinted in 2005 U.S.C.C.A.N. 88, 90. Yet in recent

years, corporations have sought to extend bankruptcy’s

reach to contexts progressively further afield from the

Bankruptcy Code’s text and purpose—not to obtain badly

needed financial relief, but to exploit the bankruptcy

system to evade litigation from tort victims.

Through dubious readings of the Code, financially

healthy corporations have invented elaborate loopholes in

an attempt to secure the debt-discharging benefits of

bankruptcy without subjecting themselves to its creditorprotecting burdens. These maneuvers were expressly

designed to consolidate, delay, or prevent lawsuits

brought against the companies by individuals who allege

that they suffered serious harm. Even when unsuccessful,

these misuses of the Code allow corporations to continue

business as usual, while victims are denied the chance to

seek relief.

The poster child for this tactic is the so-called “Texas

Two-Step.” Through this maneuver, a corporation

transfers its tort liability to a shell company created for

the sole purpose of discharging that liability in

bankruptcy. The shell company—which often receives a

funding commitment from its asset-rich “parent”—then

moves to a favorable jurisdiction and files for bankruptcy.

In the process, it obtains an automatic stay that halts all

litigation against not only the bankrupt shell company,

but also its non-bankrupt parent and affiliates.

-4In most circuits, that transparent attempt to

manipulate Chapter 11 would be dismissed for lack of

good faith under 11 U.S.C. § 1112(b). Because the shell

company is not in financial distress, those circuits

recognize, its petition “cannot serve the rehabilitative

purpose for which Chapter 11 was designed.” In re LTL

Mgmt., LLC, 64 F.4th 84, 101 (3d Cir. 2023). But the

Fourth Circuit applies a different test: It dismisses a

bankruptcy petition for lack of good faith only if it is both

objectively futile and filed in subjective bad faith. See

Carolin Corp. v. Miller, 886 F.2d 693, 700–01 (4th Cir.

1989). Because the shell company has a funding

agreement—and can pay its current and future debts—

its reorganization effort will not be objectively futile. So,

in the Fourth Circuit, its subjective bad faith is ignored.

Congress provided no mechanism in the Code for

entities with a conceded ability to timely and fully pay all

debts to leverage bankruptcy’s extraordinary powers

against their creditors. But the existence of even one

jurisdiction with a test like the Fourth Circuit’s means

that every perpetrator of bankruptcy abuse will seek

refuge there. Indeed, it is “not by coincidence” that

“debtors formed by divisional mergers and bearing

substantial asbestos liability seem to prefer filing in the

Fourth Circuit.” LTL, 64 F.4th at 98 n.8.

In this case, Bestwall’s successful attempt to enjoin

hundreds of thousands of legal claims against GeorgiaPacific exemplifies both the benefit of the Texas TwoStep to tortfeasors and the cost of the maneuver to the

American people—and to the integrity of the bankruptcy

system itself. Through its unprincipled, atextual

interpretation of the Code, Bestwall has created a legal

stratagem that radically expands bankruptcy’s

protections and makes a mockery of congressional intent.

-5The bankruptcy system was not designed to provide

wealthy non-debtors with the option to simply decline to

be held liable for alleged wrongdoing, but that is precisely

what the Fourth Circuit’s decision allows. That was not

what Congress intended, and it is not a result that this

Court should permit.

STATEMENT

In recent years, a growing number of wealthy

corporations have exploited the Bankruptcy Code to

exempt themselves from mass-tort litigation. The

maneuver at issue here is the “Texas Two-Step.” In

pursuing this maneuver, a corporation facing liability

attempts to limit its exposure (and evade adverse jury

verdicts) by reincorporating in Texas, Delaware, or

another state with a similar divisive merger statute,

dividing itself in two, and offloading its liability onto a

newly formed shell company. See Michael A. Francus,

Texas Two-Stepping Out of Bankruptcy, 120 Mich. L.

Rev. Online 38, 40 (2022). That shell company—which

often receives a funding commitment from its asset-rich

“parent”—then moves to a favorable jurisdiction and files

for bankruptcy, receiving an automatic stay for both itself

and its non-bankrupt parent that promptly stops all

pending litigation. Id. at 41. Once the automatic stay

issues, the entire corporate enterprise stands to benefit

from the bankruptcy court’s protections, shielding

valuable assets from victims’ reach while allowing the

parent company to continue business as usual. See id.

Under the auspices of the Code, highly profitable

corporations have used the Texas Two-Step to obtain

sweeping preliminary injunctions without ever filing for

bankruptcy themselves. These injunctions have barred

personal-injury claimants like amici’s constituents—

including critically ill and terminal cancer patients—from

-6pursuing state-law remedies against the entities that

caused their injuries. In other words, through systematic

abuse of bankruptcy laws, these companies have

successfully “shield[ed] themselves from liability for

corporate misconduct.” Press Release, Whitehouse,

Hawley, Sykes, Gooden Introduce Bipartisan

Legislation to Deter ‘Texas Two-Step’ Bankruptcy Trick

(July 23, 2024), https://perma.cc/NUK8-C7JS (statement

of Sen. Hawley). And they have denied hundreds of

thousands of Americans an opportunity to seek

restitution in a court of law.

Georgia-Pacific pioneered the scheme after it faced

thousands of personal-injury lawsuits stemming from

asbestos poisoning. In 2017, the company “moved” to

Texas for less than five hours and promptly divided itself

into two new entities: New GP was entrusted with the old

Georgia-Pacific’s profitable assets and business

operations, while Bestwall was shouldered with virtually

all its asbestos liabilities. See App. 5a, 128a. Three months

later, Bestwall filed for bankruptcy, receiving a

preliminary injunction that protected the entire GeorgiaPacific enterprise from asbestos litigation—and barred

all current and future asbestos plaintiffs from litigating

against New GP and its affiliates. See App. 5a–6a.

Despite its bankruptcy petition, Bestwall is far from a

debtor in distress. Bestwall exists solely to carry forward

the asbestos-related liabilities of Georgia-Pacific, which it

concedes it is fully able to pay as a result of its so-called

“funding agreement” with New GP. See App. 92a. That

agreement is backed by New GP’s billions of dollars in

assets, and it guarantees that Bestwall is able to fully

satisfy its asbestos-related financial obligations. See App.

128a–129a. Since its bankruptcy filing, however, Bestwall

has paid zero dollars to its approximately 56,000 current

-7asbestos claimants, a number that rises with every

passing day as more and more victims are diagnosed with

cancer. See App. 29a. 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.3

Georgia-Pacific is far from alone in pursuing the

Texas Two-Step: CertainTeed replicated the move in

2019, Trane Technologies followed suit in 2020, and

Johnson & Johnson attempted it (twice) in 2021 and 2023.

See Francus, Texas Two-Stepping Out of Bankruptcy,

120 Mich. L. Rev. Online at 41–42; Michael A. Francus,

Designing Designer Bankruptcy, 102 Tex. L. Rev. 1205,

1230 n.150 (2024). In each case, the new, liability-laden

shell declared bankruptcy, enjoining all pending tort

claims despite its expressly guaranteed access to the

coffers of its non-bankrupt, asset-rich corporate affiliates.

The Texas Two-Step has thus severely undermined

and distorted a system designed to help “struggling

businesses as a last resort.” Letter from Senators

Richard J. Durbin, Elizabeth Warren, and Richard

Blumenthal and Representatives Carolyn B. Maloney

and Raja Krishnamoorthi, to Joaquin Duato, ViceChairman of the Executive Committee, Johnson &

Johnson at 1 (Dec. 17, 2021), https://perma.cc/XYF24QUC. It allows corporations “to avoid legal

accountability for their own wrongdoing,” and “to dodge

3

See, e.g., Samir D. Parikh, Mass Exploitation, 170 U. Pa. L.

Rev. Online 53, 69 (2022) (arguing that “divisive mergers that involve

funding agreements that push insolvency risk onto victims should be

viewed as fraudulent transfers because the financial backstop—[the

non-bankrupt parent’s] assets—could very well prove to be a

mirage”).

-8their legal obligations to victims.” 168 Cong. Rec. S683

(daily ed. Feb. 15, 2022) (statement of Sen. Durbin).

ARGUMENT

The Fourth Circuit insisted that its decision did not

“address the merits of whether solvent debtors may seek

bankruptcy protection.” App. 16a. Yet by refusing to

revisit the bankruptcy court’s statutory good-faith ruling,

it effectively held that any bankruptcy petition is filed in

good faith so long as the debtor is able to pay all current

and future liabilities. See id. In other words, the Fourth

Circuit all but gave any wealthy tort defendant an

unassailable, step-by-step plan to leverage bankruptcy to

isolate its asbestos liabilities in its jurisdiction—and

thereby gain a strategic advantage over its creditors and

victims. Congress didn’t authorize such a result when it

enacted the Code, and this Court shouldn’t permit it.

I.

Congress has never given wealthy corporations

access to bankruptcy’s protections without a

showing of financial distress.

In enacting the modern Bankruptcy Code and the

early bankruptcy laws that preceded it, Congress

intended to “afford[] relief only to an honest but

unfortunate debtor.” Cohen v. de la Cruz, 523 U.S. 213,

217 (1998) (emphasis added). The Bankruptcy Act of 1800,

the first bankruptcy law passed after the Constitution’s

ratification, was designed primarily to benefit creditors,

and it provided no protection to debtors able to meet their

obligations. See Cent. Va. Cmty. Coll. v. Katz, 546 U.S.

356, 373–74 (2006).

A few decades later, in the Bankruptcy Act of 1841,

Congress “conferr[ed] upon the debtor the right by

voluntary petition to surrender his property, with some

exceptions, and relieve himself of all future liability in

-9respect of past debts.” Cont’l Ill. Nat. Bank & Tr. Co. of

Chicago v. Chicago, R.I. & P. Ry. Co., 294 U.S. 648, 670

(1935).

With basic exemptions for essential items—up to a

maximum of $300—the debtor had to “surrender all his

property” (except that made exempt) to receive a

discharge of his debts. Charles Jordan Tabb, The History

of the Bankruptcy Laws in the United States, 3 Am.

Bankr. Inst. L. Rev. 5, 17 & n.98 (1995) (citing

Bankruptcy Act of 1841, ch. 9, §§ 3–4, 5 Stat. 440, 443,

repealed by, Act of Mar. 3, 1843, ch. 82, 5 Stat. 614).

After the financial crisis caused by the Civil War,

“overwhelming pressure for another federal bankruptcy

law” led Congress to enact the Bankruptcy Act of 1867.

Id. at 19. That statute made bankruptcy available to all

debtors, regardless of creditor approval, and introduced

bankruptcy proceedings for corporations. See Joseph E.

Simmons, Reconstructing the Bankruptcy Power: An

Originalist Approach, 131 Yale L.J. 306, 337 (2021).

Despite its considerable expansion of the bankruptcy

system, the 1867 Act retained an explicit insolvency

requirement for all proceedings. See Thomas E. Plank,

The Constitutional Limits of Bankruptcy, 63 Tenn. L.

Rev. 487, 546 (1996) (citing Act of Mar. 2, 1867, ch. 176,

§ 11 (voluntary), § 39 (involuntary), 14 Stat. 517, 521, 536

(repealed 1878)).

In the Bankruptcy Act of 1898, which ushered in the

modern system of bankruptcy legislation, Congress

extended the availability of voluntary proceedings and

limited the grounds for denying discharge. See Tabb, The

History of the Bankruptcy Laws in the United States, 3

Am. Bankr. Inst. L. Rev. at 23–24. It also “gave the

trustee important powers to avoid … fraudulent

transfers”—or transfers made with “actual intent to

-10hinder, delay, or defraud any creditor of the debtor.” Id.

at 26 (citing Bankruptcy Act of 1898, ch. 541, § 67e, 30

Stat. 544, 564, amended by, Act of June 22, 1938

(Chandler Act), ch. 575, 52 Stat. 840, repealed by,

Bankruptcy Reform Act of 1978, Pub. L. No. 95-598, 92

Stat. 2549); Francus, Texas Two-Stepping Out of

Bankruptcy, 120 Mich. L. Rev. Online at 43. But

bankruptcy’s purpose remained consistent with its

historical origins. It was designed, as this Court

explained, “to relieve the honest debtor from the weight

of oppressive indebtedness,” and to “permit him to start

afresh free from the obligations and responsibilities

consequent upon business misfortunes.” Williams v. U.S.

Fid. & Guar. Co., 236 U.S. 549, 554–55 (1915).

So even as Congress expanded the categories of

persons and entities to whom relief was made available

over time, it didn’t change the longstanding requirement

that debtors be actually “bankrupt.” See, e.g., Wright v.

Union Cent. Life Ins. Co., 304 U.S. 502, 513–14 (1938)

(“The subject of bankruptcies is nothing less than the

subject of the relations between an insolvent or

nonpaying or fraudulent debtor, and his creditors,

extending to his and their relief.”). Across its iterations of

the early bankruptcy laws, “Congress designed Chapter

11 to give those businesses teetering on the verge of a

fatal financial plummet an opportunity to reorganize on

solid ground and try again, not to give profitable

enterprises an opportunity to evade contractual or other

liability.” LTL, 64 F.4th at 103 (quoting In re Cedar Shore

Resort, Inc., 235 F.3d 375, 381 (8th Cir. 2000)).

-11II.

The good-faith requirement preserves Congress’s

intent to limit bankruptcy to those who are

actually “bankrupt.”

A. In the modern Bankruptcy Code, Congress has

continued to allow courts presented with extreme

examples of bankruptcy abuse by asset-rich debtors to

dismiss petitions on the grounds that the bankruptcy

filing was not filed in “good faith.” See In re Little Creek

Dev. Co., 779 F.2d 1068, 1071 (5th Cir. 1986); accord In re

Victory Const. Co., Inc., 9 B.R. 549, 551–60 (Bankr. C.D.

Cal. 1981) (tracing the historical origins of the good-faith

requirement), vacated on other grounds, 37 B.R. 222

(B.A.P. 9th Cir. 1984). “Every bankruptcy statute since

1898 has incorporated literally, or by judicial

interpretation, a standard of good faith for the

commencement, prosecution, and confirmation of

bankruptcy proceedings.” Id.; see also 7 Collier on

Bankruptcy ¶ 1112.07 (16th ed. 2022) (“[T]he requirement

of good faith has been held to be an implicit condition to

the filing and maintenance of a bankruptcy case for over

a century.”).

The modern statutory basis that allows bankruptcy

courts to dismiss petitions for lack of good faith is 11

U.S.C. § 1112(b). Because “good faith necessarily

requires some degree of financial distress on the part of a

debtor,” In re Integrated Telecom Express, Inc., 384 F.3d

108, 121 (3d Cir. 2004), requiring it “prevents abuse of the

bankruptcy process by debtors whose overriding motive

is to delay creditors without benefitting them in any way.”

In re SGL Carbon Corp., 200 F.3d 154, 161–62 (3d Cir.

1999). In this way, the good-faith standard ensures that

courts can “use [their] equitable powers to reach an

appropriate result in individual cases.” H.R. Rep. No. 95595, at 405–06 (1977), as reprinted in 1978 U.S.C.C.A.N.

-125963, 6362; see S. Rep. No. 95-989, at 117 (1978), as

reprinted in 1978 U.S.C.C.A.N. 5787, 5903 (same).

B. Congress did not displace the good-faith

requirement when it enacted Section 524(g). That

provision—which was codified in response to the JohnsManville bankruptcy—authorizes the discharge of

asbestos claims against third parties only in tightly

prescribed circumstances. See Francus, Designing

Designer Bankruptcy, 102 Tex. L. Rev. at 1208.

In the 1980s, the Manville corporation, once the “the

world’s largest asbestos manufacturer,” filed for

bankruptcy to manage a “deluge of lawsuits,” “with

estimated liabilities running into the billions.” Id. As part

of this filing, it split into two, creating a Trust and a

successor corporation. “The Trust operated for the

benefit of tort victims and housed all tort liability (via an

injunction channeling all tort claims to the Trust) along

with assets to compensate those tort victims.” Id. “And

the successor corporation continued carrying on

Manville’s business operations, free of tort litigation and

tort liability.” Id. Congress viewed the Manville

bankruptcy as a “good model for managing asbestos mass

torts, which, at the time, clogged the federal courts.” Id.

So it codified the model in Section 524(g), establishing an

“asbestos trust/injunction mechanism … for use by any

asbestos company facing a similarly overwhelming

liability.” H.R. Rep. No. 103-835, at 41 (1994), as

reprinted in 1994 U.S.C.C.A.N. 3340, 3350.

Section 524(g), as that legislative history makes clear,

is “a consequential benefit of an otherwise good faith

filing,” not a “valid justification for a Chapter 11 filing.”

Integrated Telecom, 384 F.3d at 128; see In re

Combustion Eng’g, Inc., 391 F.3d 190, 234 & n.46 (3d Cir.

2004). Its protections “assume the existence of a valid

-13bankruptcy, which, in turn, assumes a debtor in financial

distress.” Integrated Telecom, 384 F.3d at 128.

The plain text of the provision confirms this

understanding. For example, a debtor may invoke

Section 524(g) only if “future demands” faced by the

debtor outside of bankruptcy are “likely to threaten the

plan’s purpose.” 11 U.S.C. § 524(g)(2)(B)(ii)(III). That

condition can’t be satisfied if the volume of claims doesn’t

actually endanger the debtor’s viability. As another

example, it would make no sense for Section 524(g) to

require that the debtor fund the trust with “a majority of

the voting shares” of itself, its parent, and/or its

subsidiaries unless those entities were genuinely

distressed. Id. § 524(g)(2)(B)(i)(III).

In enacting Section 524(g), Congress thus did not alter

or otherwise “eviscerate any limitation that the good faith

requirement places on Chapter 11 filings.” Integrated

Telecom, 384 F.3d at 128. Without sufficient financial

distress, a debtor’s “desire to take advantage of the

protections of the Code,” including Section 524(g),

“cannot establish good faith.” In re 15375 Mem’l Corp. v.

Bepco, L.P., 589 F.3d 605, 620 (3d Cir. 2009). Otherwise,

anyone who wanted to discharge a debt would have a valid

reason to file.

C. As this Court held in Shapiro v. Wilgus, 287 U.S.

348 (1932)—the earliest case discussing the standard in

the bankruptcy context—the good-faith requirement

ensures that wealthy debtors do not abuse the Code as

“part and parcel of a scheme whereby the form of a

judicial remedy was to supply a protective cover for a

fraudulent design.” Id. at 355. In that case, a

Pennsylvanian was “unable to pay his debts as they

matured” but “believed that he would be able to pay them

in full” if given more time. Id. at 352. Because

-14Pennsylvania law didn’t permit the appointment of a

receiver, he formed a Delaware corporation and, on the

same day, conveyed all his property to the new company

for a promise to pay his debts. See id. Three days later, a

federal court put the company in receivership and

enjoined claims by its creditors. See id. at 352–53.

This Court found the debtor’s scheme plainly

incompatible with equitable principles of good faith. See

id. at 357. The “aim of this receivership,” Justice Cardozo

explained for the Court, was “not to administer the assets

of a corporation legitimately conceived for a normal

business purpose,” but to put the debt “in such a form and

place that levies would be averted”—“a purpose which

has been condemned in Anglo-American law since the

Statute of Elizabeth.” Id. at 354–55. It didn’t matter that

the debtor intended only to delay creditors long enough

to pay them in full, or that he “acted in the genuine belief”

that the plan was “fair and lawful.” Id. at 357. The

receivership was “part and parcel of a scheme” in which

the “judicial remedy was to supply a protective cover for

a fraudulent design.” Id. at 355. It therefore lacked the

“scrupulous good faith” that equity requires, and the

creditors’ claims could proceed notwithstanding the

injunction. Id. at 357.

The good-faith requirement, in this way, safeguards

the core purpose of the bankruptcy system. It “prevents

abuse of the bankruptcy process,” and it “protects the

jurisdictional integrity of the bankruptcy courts by

rendering their powerful equitable weapons … available

only to those debtors and creditors with ‘clean hands.’”

Little Creek, 779 F.2d at 1072; see Diane B. McColl, Good

Faith in Chapter Eleven Reorganizations, 35 S.C. L.

Rev. 333, 336 (1984).

-15But in the Fourth Circuit—and the Fourth Circuit

alone—debtors like Bestwall can establish their good

faith by pointing to a funding commitment from their

wealthy, non-bankrupt “parent,” thus establishing that

reorganization will not be objectively futile, and thereby

avoiding any further scrutiny. Carolin, 886 F.2d at 70001. The more assets a debtor can access, then, the more

easily it can demonstrate its “good faith” to secure

bankruptcy’s protections. That absurd outcome doesn’t

just defy common sense. It also undermines Congress’s

“simple bargain” in enacting the Code—that a “debtor

can win a discharge of its debts” only if it “proceeds with

honesty and places virtually all its assets on the table for

its creditors.” Harrington v. Purdue Pharma L.P., 603

U.S. 204, 209 (2024) (emphasis added).

III. The increasing prevalence of bankruptcy abuse

by wealthy, non-distressed tortfeasors

underscores the need for review.

This case is just one example of recent abuse within

the bankruptcy system. Georgia-Pacific’s pursuit of the

Texas Two-Step maneuver inspired a wave of companies

to attempt the same or similar strategies, using

bankruptcy to sidestep litigation without ever declaring

bankruptcy themselves. See, e.g., Letter from Senators

Richard J. Durbin, Elizabeth Warren, and Richard

Blumenthal and Representatives Carolyn B. Maloney

and Raja Krishnamoorthi, to Alex Gorsky, Chairman and

CEO, Johnson & Johnson at 2 (Nov. 10, 2021),

https://perma.cc/N7TC-SPKX (“Exploitation of the

bankruptcy system by large companies to avoid

accountability is unsurprising, but it is also

unacceptable.”). The practice, still new but increasingly

common, even has a name: “bankruptcy grifting.”

Lindsey D. Simon, Bankruptcy Grifters, 131 Yale L.J.

-161154, 1207 (2022). The label describes cases where a joint

tortfeasor “latch[es] onto a bankruptcy case,” receiving

benefits such as “channeling injunctions and releases”

without incurring any of the associated costs. Id.

This Court has rejected similar schemes for nearly a

century. Like the Pennsylvania debtor in Shapiro,

Georgia-Pacific created Bestwall not for a “normal

business purpose,” but “for the very purpose of being

sued.” 287 U.S. at 355. There is no dispute that New GP

is “highly solvent and cash rich” and, therefore, could not

have attained the injunction by filing its own petition.

Integrated Telecom, 384 F.3d at 124. Nor is there any

dispute that Bestwall could pay all current and

anticipated talc claims in full under its funding agreement

with New GP.

As in Shapiro, in other words, Bestwall’s creation and

bankruptcy are “parts of a single scheme to hinder and

delay creditors in their lawful suits,” a purpose long

“condemned in Anglo-American law.” 287 U.S. at 353–54.

For eight years and counting, the sweeping injunction has

shielded Georgia-Pacific’s profitable operations and

assets from asbestos claimants. And for critically ill and

dying cancer patients, this delay is devastating. As amici

have stated, it deprives them of “their day in court,” 168

Cong. Rec. S683, and provides inspiration for other deeppocketed tortfeasors to escape liability by doing the same.

To be sure, certain tortfeasors have “faced enormous

potential liabilities and defense costs.” Ortiz v. Fireboard

Corp., 527 U.S. 815, 829 (1999). But the extraordinary

nature of these cases—in which lucrative enterprises face

staggering liability only because they harmed thousands

in the first place—does not justify dismissing the forum

Congress provided to resolve mass claims: multi-district

litigation. 28 U.S.C. § 1407. If there is to be “innovation in

-17the management of mass tort litigation,” that “reform

must come from the policy-makers, not the courts.”

Georgine v. Amchem Prods., Inc., 83 F.3d 610, 634 (3d

Cir. 1996). While “the Bankruptcy Code presents an

inviting safe harbor for such companies,” its “lure creates

the possibility of abuse which must be guarded against to

protect the integrity of the bankruptcy system and the

rights of all involved.” SGL Carbon, 200 F.3d at 169.

In insisting that good faith can be decided after plan

confirmation—and downplaying the grave practical

implications of its rule—the Fourth Circuit effectively

endorsed bankruptcy abuse in its jurisdiction as an endrun around mass-tort liability. See App. 16a. Other courts

have already observed that debtors “seem to prefer filing

in the Fourth Circuit.” LTL, 64 F.4th at 98 n.8.

Commentators have noted this forum-shopping problem

as well. See Francus, Designing Designer Bankruptcy,

102 Tex. L. Rev. at 1233 (predicting that debtors like

Bestwall will “continu[e] to forum shop to jurisdictions

that do not impose a financial distress requirement”).

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, making “every case that rare case.”

Czyzewski v. Jevic Holding Corp., 580 U.S. 451, 470

(2017). That, then, is the logical consequence of denying

certiorari in this case: Corporations facing mass-tort

liability will have a well-defined playbook and a friendly

forum for sidestepping lawsuits, undermining both the

ability of individuals to hold companies accountable and

the integrity of the bankruptcy system.

Allowing Bestwall’s position to prevail here would fuel

abuses that are already transforming a system of last

-18resort into a “corporate shell game” that allows wellheeled corporations “to evade accountability for any harm

caused by [their] products” and deny “tens of thousands

of people their day in court.” Letter from Senators

Richard J. Durbin, et al. to Alex Gorsky, at 1.“That’s not

what Congress intended when it created bankruptcy.”

Evading Accountability: Hearing on Corporate

Manipulation of Chapter 11 Bankruptcy Before the S.

Comm. on the Judiciary, 118th Cong., at 00:24:57 (2023)

(statement of Sen. Durbin), https://perma.cc/GS3BTJ6M; see id. at 01:50:06 (statement of Sen. Hawley)

(“We need to give more Americans the ability to get that

recourse [against wealthy, corporate tortfeasors] in

court.”). And that is not a result that this Court should

allow to continue.

CONCLUSION

The petition for certiorari should be granted, and the

decision below should be reversed.

Respectfully submitted,

DEEPAK GUPTA

Counsel of Record

JONATHAN E. TAYLOR

GREGORY A. BECK

GUPTA WESSLER LLP

2001 K Street, NW

Suite 850 North

Washington, DC 20006

(202) 888-1741

deepak@guptawessler.com

-19VARSHINI PARTHASARATHY

GUPTA WESSLER LLP

235 Montgomery Street

Suite 629

San Francisco, CA 94104

(415) 573-0336

March 25, 2026

Counsel for Amici Curiae