Official Committee of Asbestos Claimants v. Bestwall LLC, et al.

In 2017, solvent conglomerate Georgia-Pacific attempted to sequester its asbestos liabilities in a new entity (“Bestwall”) it designed for bankruptcy, while shielding most of its valuable assets in a new entity (“New GP”) it kept outside of bankruptcy. The bankruptcy court enjoined thousands of asbestos lawsuits against Bestwall and against various other nondebtors, including New GP, under 11 U.S.C. § 105(a). In affirming, the Fourth Circuit parted with the majority of circuits by declining to apply a presumption of collusion to Georgia-Pacific’s jurisdiction-conferring transactions, disregarding both common law and 28 U.S.C. § 1359, which strip jurisdiction over civil actions in which a party “has been improperly or collusively made or joined.” Also in conflict with other circuits, it found “related to” jurisdiction under 28 U.S.C. § 1334(b) to enjoin claims against non-debtors based on circular funding agreements with no economic effect on the estate. The questions presented are:

1. Whether jurisdiction-conferring transactions between related business entities are subject to a presumption of collusion in violation of 28 U.S.C. § 1359.

2. Whether a bankruptcy court has “related to” jurisdiction under 28 U.S.C. § 1334(b) to enjoin claims against a non-debtor with no actual economic effect on estate assets or their distribution to creditors.

3. Whether 11 U.S.C. § 105(a) permits bankruptcy courts to issue equitable relief not expressly authorized in the Bankruptcy Code or, at a minimum, whether the Court should hold this petition for Harrington v. Purdue Pharma L.P., No. 23-124, and then grant, vacate, and remand if the Court reaches this question there.