NORTH CAROLINA – Asbestos claimants (claimants committee) in this Chapter 11 case filed a motion to dismiss the bankruptcy case filed by Georgia Pacific (GP) for its acquisition of Bestwall arguing that the petition was filed in bad faith and established a reorganization that was “objectively futile.”
By way of background, GP filed for corporate restructuring in 2017 as a result of “decades long” asbestos litigation liabilities. As many as 64,000 asbestos claims were pending against Bestwall as of the date of the petition alone. The new plan set an asbestos trust with Bestwall as a party to the funding agreement. The claimants committee argued that the plan was objectively futile and filed in bad faith. Particularly, the claimants committee took the position that the reorganization of GP would allow it to “evade” its obligations should it be motivated.
The court first addressed the claim that the reorganization was “objectively futile.” The analysis for whether a bankruptcy filing is objectively futile concentrates on “assessing whether there is no going concern to preserve … and … no hope of rehabilitation …” Here, Bestwall had significant assets in on hand cash, real estate and revenue from its equity interest in a non-party. Those assets were significant and illustrated Bestwall’s ability to participate in the funding agreement with the new version of GP. Moreover, the claimants committee pointed to nothing to show that the new version of GP had not performed according to its obligations.
The claimants committee also lodged improper venue and sought transfer to Delaware. The court quickly concluded that in the interests of justice transfer was inappropriate. Bestwall was not organized in Delaware or had its principal place of business there. The court noted that most of its assets were located in the Western District of North Carolina. The court further rejected the authority relied upon by the claimants committee as Bestwall was not a shell corporation as the two entities in the Patriot Coal matter. As for the final prong of the transfer analysis, the convenience of the parties also did not warrant transfer. Also, Delaware may have experience with asbestos related bankruptcies but this jurisdiction also has experience with bankruptcies. Finally, the location of counsel had no bearing in on venue.
Accordingly, the motion to dismiss was denied.
Read the case decision here.