Group of State AGs Join Efforts to Undermine Legitimate Use of Bankruptcy Process

Last week, a group of attorneys general inserted themselves into litigation involving Bestwall LLC in the U.S. Court of Appeals for the Fourth Circuit. The AGs filed an amicus brief supporting plaintiffs’ motion for en banc review of a Fourth Circuit panel’s decision to allow the company’s bankruptcy process to proceed, removing thousands of liability claims from civil court.  

Bestwall LLC is a subsidiary of Georgia-Pacific that includes liability for thousands of asbestos claims and was placed into bankruptcy. Plaintiffs’ lawyers are challenging the legitimate use of bankruptcy and now this group of AGs is joining their efforts. The only problem is – they don’t have a valid objection. 

In their brief filed on July 12, the attorneys general argue that by allowing Bestwall’s bankruptcy to proceed, the Court is undermining the state’s role of protecting consumers. This is an extraneous argument with no foundation in the current litigation. No state has appeared in the bankruptcy.  

The alleged consumer protection claims are just freeriding on private product liability claims. They are a duplicative way to extract more money for lawyers – not a way to help people. State AGs typically hire outside counsel on a contingency fee basis to handle the state’s consumer protection litigation.

Plaintiffs’ lawyers don’t like it when defendants choose bankruptcy. Their fees — generally around a third of any settlement or judgment — can often get slashed in the bankruptcy process since claims are simply paid, without the need for litigation. Moreover, the funds approved in bankruptcy to pay legal claims create a level playing field for all claimants, whereas litigation often results in a “race to the courthouse” in which some may receive windfalls while others may fare poorly. 

Resolution of these claims must unequivocally prioritize claimants’ best interests – lawyers’ financial interests must never take priority over the integrity and fundamental fairness of the bankruptcy proceedings.