Bestwall says ACC's bad faith arguments are without merit

By Heather Isringhausen Gvillo | Nov 14, 2018

CHARLOTTE, N.C. – Bestwall LLC, formerly part of Georgia Pacific LLC, argues that its corporate restructuring plan does not prejudice asbestos claimants and the Official Committee of Asbestos Claimants’ bad-faith arguments are meritless. 

“The ACC’s myriad, shifting dismissal arguments are without merit, and there is no basis to transfer venue to districts in Delaware, Georgia or any other state,” Bestwall’s Oct. 26 brief states.

Bestwall became its own company on July 31, 2017 after Old Georgia Pacific underwent a corporate restructuring. As a result, Bestwall and Georgia Pacific LLC were created. Bestwall succeeded to certain assets and liability of Old Georgia Pacific, including certain assets of the historical Bestwall Gypsum business and Old Georgia Pacific’s asbestos liability.

The Official Committee of Asbestos Claimants, or ACC, filed a motion to dismiss or alternatively transfer venue on Aug. 15 through attorney Glenn C. Thompson of Hamilton Stephens Steele & Martin PLLC. 


Cassada  

He wrote that Bestwall filed its bankruptcy proceeding “in an attempt to manipulate the provisions of the Bankruptcy Code, exploit venue loopholes, and gain approval from a court in a jurisdiction it perceives is a favorable jurisdiction for asbestos-related bankruptcies all for the benefit of the debtors’ corporate shareholder, affiliates, and ultimate corporate parents.”

Thompson calls Bestwall a “corporate sacrificial lamb” for Georgia Pacific LLC, formerly known as Georgia Pacific Corporation, due to its recent corporate restructuring.

Bestwall filed an objection on Sept. 28, arguing that its bankruptcy filing has a proper reorganizational purpose and there was no showing of subjective bad faith.

“Bestwall has fulfilled its obligations as a debtor in possession and funded millions of dollars for the ACC and the FCR to participate in this case,” the objection states. “None of this is consistent with the notion that Bestwall has engaged in ‘sham transactions’ for the purpose of harming claimants.”

On Oct. 26, Bestwall attorney Garland Cassada of Robinson Bradshaw & Hinson in Charlotte, N.C., filed a sur-reply in support of its objection to the ACC’s motion to dismiss.

Cassada argues that the corporate restructuring complied with corporate law and did not violate any fraudulent transfer law nor prejudice any asbestos claimants. 

“Bestwall filed its bankruptcy petition in good faith, for an appropriate purpose and in a proper venue,” the brief states. 

Cassada wrote that the ACC “seizes” on a phrase seeking to extend a channeling inunction to claims asserted against non-debtor New GP “without subjecting the entire Old GP enterprise to chapter 11.”

“But the ACC does not identify, nor could it, any restriction or prohibition that prevents a debtor from engaging in a valid state law corporate restructuring in advance of a bankruptcy filing, particularly where, as here, the interests of creditors were taken into account and fully protected,” the brief states.

Cassada points out that the ACC supported a similar restructuring by Coltec prior to OldCo’s 2017 bankruptcy, which was also filed in the U.S. Bankruptcy Court for the Western District of North Carolina. 

“Similar to the Funding Agreement here, NewCo and OldCo entered into a ‘Keepwell’ agreement through which NewCo committed to make future cash contributions to OldCo as necessary to maintain its solvency and financial stability,” the brief states. “The ACC’s papers nowhere mention Coltec.”

Cassada also argues that the ACC failed to provide a credible argument that Bestwall must include New Georgia Pacific to obtain relief. 

“The 2017 Corporate Restructuring, through the Funding Agreement in particular, ensured that Bestwall had the same paying power to resolve asbestos-related claims as Old GP, whether those claims were resolved in the tort system or in bankruptcy.

“Bestwall has that power today, and no asbestos claimant has been harmed by the pre-bankruptcy restructuring,” the brief states.

Cassada argues that a “far more complex and expensive” bankruptcy proceeding has been avoided by the restructuring. He wrote that involving unrelated businesses, which are now owned and operated by New GP, would have caused disruptions and would not have benefited the asbestos claimants. 

Cassada also argues that Bestwall’s bankruptcy filing is not a “litigation tactic.”

“Disagreements about liability estimation and the facts relevant to an estimation pervade every asbestos bankruptcy. They have nothing whatsoever to do with Bestwall’s entitlement to file or its good faith in doing so,” the brief states.

He adds that 75 percent of current asbestos claimants must support a bankruptcy resolution with review and input by the ACC and the FCR and approval of two federal courts. 

As for the ACC’s alternative request for a change of venue, Cassada wrote that the Committee fails to provide arguments supporting transfer. Instead, he argues that the ACC confirms that no other venue would be more convenient. 

Georgia Pacific LLC, or New GP, also filed a sur-reply on Oct. 26 through attorneys John R. Miller Jr. of Rayburn Cooper & Durham in Charlotte, N.C., and M. Natasha Labovitz of Debevoise & Plimpton LLP in New York. 

New GP argues that the ACC’s claim that the bankruptcy proceeding would allow New GP to obtain relief without filing for its own bankruptcy is meritless and should be denied. 

“Not only is there no legal or factual support for the ACC’s purported remedy, but the Bestwall asbestos claimants would be no better off if New GP were also a debtor, and requiring New GP to file its own case in order for the asbestos claims to be resolved … would serve no public policy interest,” the brief states.

Bestwall filed a voluntary petition for bankruptcy on Nov. 2, 2017, in the U.S. Bankruptcy Court for the Western District of North Carolina. 

Bestwall and its predecessor Georgia Pacific manufactured a joint compound product containing “minimal amounts” of chrysotile asbestos prior to1978, according to a brief filed by Cassada. 

Despite “minimal” exposure, Bestwall argues that it has been “burdened” with asbestos litigation for 40 years and will likely continue until at least 2050, according to the bankruptcy petition. 

Local attorneys Beth A. Gori of Gori Julian & Associates PC in Edwardsville and Andrew O’Brien of O’Brien Law Firm PC in St. Louis are included on the committee of lawyers for claimants. 

Local asbestos firm Maune Raichle Hartley French & Mudd is also among four plaintiff’s firms acting as special litigation counsel on medical science maters in the bankruptcy proceeding. 

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Debevoise & Plimpton Robinson Bradshaw and Hinson U.S. Bankruptcy Court for the Western District of North Carolina

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