The U.S. Supreme Court on Monday declined to hear a case concerning the “Texas two-step,” a bankruptcy maneuver that allows firms to halt lawsuits against them by setting up a dummy company to hold legal liabilities.
The disagreement arose after cancer victims opposed a bankruptcy filing by Georgia-Pacific LLC’s unit, Bestwall, which has been in Chapter 11 since 2017, following a corporate separation that made Bestwall liable for all of the conglomerate’s asbestos-related obligations.
When Georgia-Pacific filed for bankruptcy, the business was facing 64,000 claims that its drywall, wallboard, plaster, and other construction products contained asbestos and caused cancer.
The Supreme Court had earlier declined a petition to reconsider the issue in 2024.
In their latest appeal to the high court, cancer sufferers alleged that Bestwall was misusing U.S. bankruptcy law to prevent them from trying their cases in foreign courts while offering no viable avenue to resolving the cases in bankruptcy.
They were appealing a 2025 ruling by the 4th U.S. Circuit Court of Appeals that rejected their bid to dismiss the bankruptcy case.
“Bankruptcy is the fastest path to a full and fair resolution of all asbestos plaintiffs,” Bestwall wrote in its reply filed with the Supreme Court.
Bestwall blamed the delay on the plaintiffs, claiming they would rather spend time and resources contesting the bankruptcy than discussing a settlement.
The petition was backed by seven amicus filings from 11 law professors, three U.S. senators, and others who urged that the Supreme Court should limit wealthy firms’ capacity to exploit U.S. bankruptcy laws.
Bestwall led a series of contentious bankruptcies that used a technique known as the Texas two-step.
The cancer victims’ suit argued that bankruptcy should not shield a wealthy corporation like Georgia-Pacific.
The major industrial giant is known for paper products, including Brawny paper towels, Angel Soft toilet paper, and Dixie cups.
According to the petition, Georgia-Pacific is worth tens of billions of dollars and has paid billions in dividends to shareholders since Bestwall entered bankruptcy.
The cancer victims’ attorneys said the case has remained in bankruptcy because of a fault in the 4th Circuit’s interpretation of “bad faith” in bankruptcy cases.
This is the second big Supreme Court ruling in recent days.
The Supreme Court ruled last Thursday in favor of Terry Pitchford, a death row inmate in Mississippi.
The nation’s highest court held in a narrow 5-4 decision that he was denied a fair opportunity to challenge the prosecution’s removal of black jurors during his trial.
The ruling in Pitchford v. Cain vacates Pitchford’s capital murder conviction and death sentence, sending the case back to Mississippi and allowing prosecutors to pursue a new trial if they choose.
At the heart of the case is a dispute over jury selection procedures and the Supreme Court’s longstanding precedent in Batson v. Kentucky, the 1986 ruling that prohibits prosecutors from using peremptory strikes to remove potential jurors solely because of their race.
The controversy stems from a Mississippi murder case dating back more than two decades. In 2004, Pitchford, then 18 years old, and Eric Bullins, then 16, carried out a robbery at a grocery store in Grenada, Miss.
During the crime, prosecutors said Bullins fired the shots that killed the store’s white owner, Reuben Britt.
Because Bullins was a juvenile at the time of the offense, he was not eligible for the death penalty under constitutional standards governing juvenile offenders.
He ultimately received a 20-year prison sentence. Pitchford, however, faced capital murder charges and was sentenced to death following his conviction.
The Supreme Court’s latest ruling does not address his guilt or innocence, but instead focuses on whether the trial court properly handled allegations that black jurors were excluded from the jury in violation of Batson.
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