Asbestos Shakedown: Tort Lawyers Game Bankruptcy Courts For Huge Paydays

Foot dragging and evidence suppression never paid so well.

Imagine a bankruptcy court untangling a decades-old snarl: thousands of Americans, battling asbestos-related illnesses, chasing payouts from companies that mostly dissolved before disco died.

That’s the crux of Bestwall LLC v. Official Committee of Asbestos Claimants, a case striving to compensate victims of a carcinogen that lingers like bad karma. The courts face a riddle: how do you deliver justice when the guilty are corporate corpses?

Bankruptcy law offers a solution—let surviving firms like Bestwall LLC reorganize to pay claimants without being bankrupted for others’ sins. Bestwall, under Georgia-Pacific’s umbrella, pursued this solution to address claims equitably. But the plaintiffs’ lawyers–sleazy opportunists in tailored suits–have other plans: saddle Georgia-Pacific with every asbestos claim, no matter who made the stuff. It’s not about righting wrongs—it’s a cynical cash heist, using sick plaintiffs as pawns to extort a healthy company.

These legal leeches aren’t helping; they’re hijacking the process, gumming up courts with ploys to inflate their fees. The outcome? A judicial slog where victims’ relief gets buried under the attorneys’ avarice, as judges wade through dusty ledgers and corporate relics.

Asbestos litigation: Reader’s Digest version

Between the 1950s and late 1970s, thousands of Americans were exposed to asbestos-containing construction materials in industrial and residential settings. Asbestos is a known carcinogen, and prolonged exposure can lead to serious diseases, with symptoms often appearing decades later. The manufacturers of these materials have spent billions of dollars to settle many thousands of asbestos cases. Georgia-Pacific alone had invested nearly $3 billion to defend or settle thousands of suits filed against its Bestwall business by 2017, and the litigation is expected to continue for another two decades.

The plaintiffs’ attempt to lay blame exclusively on Georgia-Pacific is complicated by the fact that several large manufacturers produced insulation, roofing, and other asbestos-containing materials that were major contributors to exposure. For example, Johns-Manville’s insulation was ubiquitous in construction sites where Bestwall products were used before 1978.

Many of these firms filed for bankruptcy and set up trusts, leaving Bestwall as one of the few defendants still in business.This had led the remaining plaintiffs to seek damages from Georgia-Pacific—not because Georgia-Pacific was at fault, but simply because they continued to exist. As Trane Technologies explained in its amicus brief in the litigation:

“The most culpable asbestos manufacturers have long been out of business, so plaintiffs with asbestos-related health issues cannot sue the primary tortfeasors. Plaintiffs therefore regularly attempt to recover for their injuries from businesses only tangentially related to the use of asbestos-containing products.Those businesses, in turn, must assess the merits of cases that involve facts that are many decades old.”

Legal Scholar Lester Brickman made a similar point to the New York Times 2014, arguing that asbestos litigation “is a constant search for viable defendants.”

An equitable solution

Bestwall’s solution to this dilemma was a well-known legal pathway called a divisional merger. This option allowed the company to isolate its crushing asbestos liabilities and file for bankruptcy to create a trust that would pay asbestos claimants equitably.

The company temporarily moved its headquarters to Texas, restructured under state law, and split into two firms: Bestwall LLC, which assumed all asbestos liabilities, and New Georgia-Pacific (New GP), which retained all business unrelated to the litigation. Bestwall then moved to North Carolina and filed for Chapter 11 bankruptcy to create a trust to compensate current and future asbestos claimants equitably. At the time, Bestwall faced as many as 64,000 pending lawsuits.

Plaintiffs’ lawyers cry foul

Unsurprisingly, The Official Committee of Asbestos Claimants, which represents most current plaintiffs, objected, alleging the bankruptcy filing was a trick to dodge responsibility. The Committee claims that New Georgia-Pacific tried to park liabilities in a “poor” company while protecting its wealth. But this ignores how real businesses work, and the argument crumbles under scrutiny.

Like many large corporations, present-day Georgia-Pacific is the product of decades–in their case, a century–of mergers, acquisitions, and spin-offs. What started as the Georgia Hardwood Lumber Company in 1927 has since been listed and delisted from the New York Stock Exchange, acquired business lines in everything from consumer paper towels to residential building materials to pulp and paper and packaging–and, by the way, spun off their hardwood timber assets in 2000.

In what sense, then, is this expansive materials company of 2025 responsible for the actions of its corporate great-great-great grandfather?

At the same time, companies regularly restructure to manage potential risks—think of it as telling a sick worker to work from home so that an entire factory doesn’t get a cold.

Georgia-Pacific could have filed for bankruptcy itself, dragging its entire business – most of which is unrelated to decades-old asbestos claims – into chaos. Instead, it isolated the asbestos problem in Bestwall, which has a funding agreement ensuring New GP backs the trust with real money.

And courts have continuously upheld Bestwall’s and GP’s plan to resolve plaintiff claims without needlessly bankrupting a healthy business. Most recently, the Fourth Circuit Court of Appeals confirmed in 2023 that this setup complies with bankruptcy jurisdiction rules; it’s a valid way to handle claims.

The Committee then shifted its focus, asserting that the bankruptcy court couldn’t block suits against New GP because the company wasn’t in bankruptcy. But that’s more legal trickery than sound argument, because those lawsuits target New GP for the same asbestos claims Bestwall is handling. If they go forward, Bestwall’s employees get tied up in court, draining resources needed to build the trust.

The bankruptcy court’s decision, upheld by the Fourth Circuit, keeps things orderly so Bestwall can focus on paying claimants. In fact, the Fourth Circuit concluded that if anyone was preventing the plaintiffs from resolving their asbestos claims, it was their own lawyers:

“...[T]he main interference with the timely resolution of the claims in Bestwall’s bankruptcy proceeding appears to be Claimant Representatives’ challenge to the preliminary injunction, thereby prolonging the bankruptcy process and preventing the claimants from obtaining prompt relief.

It is not clear why Claimant Representatives’ counsel have relentlessly attempted to circumvent the bankruptcy proceeding, but we note that aspirational greater fees that could be awarded to the claimants’ counsel in the state-court proceedings is not a valid reason to object to the processing of the claims in the bankruptcy proceeding [our emphasis].”

Put simply, the Committee’s objection is probably more about securing a bigger payday than seeking justice for its clients.

Suppressing evidence?

The Committee also complained about Bestwall’s request for claimants to fill out personal injury questionnaires (PIQs), which are necessary to demonstrate that the company’s products caused the plaintiffs’ injury. The Committee called the request burdensome, claiming PIQs demand sensitive medical and exposure details, are duplicative of state court discovery, and burden claimants, especially those with limited records or health issues.

This could be an attempt by the plaintiffs’ lawyers to game the bankruptcy proceedings by blaming several companies for the same illness—driving their clients' recovery (and their fees) higher than is fair. The same manipulation has been documented in other asbestos cases. “Plaintiffs attorneys had withheld evidence of their clients’ exposure to asbestos-containing products manufactured by other companies in order to maximize recovery,” Legal Newsline reported in 2016.

According to Reuters, the judge presiding over that litigation declared that “every settlement was ‘infected with the impropriety of some law firms.’" A November 2015 analysis co-authored by a former Delaware Superior Court judge concluded that the problem is systemic in US asbestos litigation:

“We now know with greater certainty that the practice of withholding highly relevant information has resulted in a system rife with evidentiary abuse affecting every major asbestos jurisdiction nationwide. And importantly, it is difficult to overlook or discount the fact that this abuse, which amounts to a denial of due process, is largely facilitated by the secrecy in the trust claiming process…”

The reality is that PIQs are standard in big bankruptcy cases like this. Asbestos claims number in the thousands, and many involve complex medical and exposure histories. Without clear data, Bestwall can’t fairly estimate who’s owed what or how big the trust needs to be. The fact that the plaintiffs’ lawyers have tried to stonewall this information-gathering effort – which would validate their clients’ claims – is curious.

As with the broader bankruptcy dispute, the courts have affirmed Bestwall’s PIQ requirement, endorsing its necessity for fair claim estimation.The bankruptcy court even held the claimants and their lawyers in contempt for violating the questionnaire order, later sanctioning them over $400,000 in fees. A district court then dismissed the plaintiffs’ attempt to appeal the contempt order and the sanctions.

Conclusion

The Committee’s push, now at the Supreme Court’s doorstep, paints Bestwall as a villain dodging responsibility. But the truth is simpler: asbestos litigation is a mess, with thousands of claims stretching back decades and through not just one but umpteen iterations of the “company.” Bestwall’s bankruptcy offers a structured way to pay victims without bankrupting a healthy business. The courts have backed this approach because it balances fairness to claimants with practical business realities.

The Committee’s objections, meanwhile, misrepresent a legal process designed to solve a massive problem while trying to create a new one.