The Fourth Circuit on Thursday declined asbestos claimants' request for an en banc review of a panel ruling in a Georgia-Pacific LLC spinoff's Chapter 11 case, rejecting on an 8-6 vote an argument that the bankruptcy is a sham and blocks victims' access to justice.

The brief order did not explain the court's decision. In a dissenting opinion, U.S. Circuit Judge Robert B. King said denying the rehearing request from the official committee of asbestos claimants was a mistake, arguing that the panel's August ruling violates Article I of the U.S. Constitution.

Judge King called Bestwall LLC's bankruptcy a "concerted boardroom effort" to stall and consolidate civil claims in order to extract favorable settlements from dying victims.

"At the expense of thousands of dying asbestos claimants, fully-solvent and multi-billion-dollar corporations have the audacity — indeed, an incentive under our court's dubious precedent — to delay and evade civil tort liability. And they do so by creating corporate alter-egos, which they plunder into sham Chapter 11 bankruptcies with impunity," he said.

The asbestos claimants asked the full Fourth Circuit in September to reconsider the panel's ruling that Bestwall could stay in Chapter 11 even though parent company George-Pacific is solvent.

The three-judge panel ruled 2-1 that a debtor's financial status has no bearing on whether a bankruptcy court has jurisdiction over the case. In the majority opinion, U.S. Circuit Judge A. Marvin Quattlebaum Jr. wrote that Congress granted bankruptcy courts power over all Chapter 11 cases.

Judge King argued in his dissent that Bestwall doesn't have subject matter jurisdiction to stay in Chapter 11, and that the full court should have weighed in. The panel majority erred in assuming that Congress' grant of bankruptcy case jurisdiction under Title 28 Section 1334 overrides the Constitution's "more limited delegation of power under the bankruptcy clause," he said.

"Section 1334 does not — and cannot, because of the bankruptcy clause — independently determine what constitutes a 'case' that Congress can authorize under Article I of the Constitution," he said.

Judge King said any reading of the bankruptcy clause has to be informed by the Constitution and its historical context. During ratification in the late 18th century, bankruptcy protections were made available only for debtors who were truly bankrupt, he argued, pointing to definitions from founding-era dictionaries and reasoning from the framers.

Moving to the present day, Judge King said that although Georgia-Pacific has shelled out almost $3 billion defending asbestos litigation, it remains a fully solvent, multibillion-dollar leader in the pulp and paper industry, he said.

Georgia-Pacific, Judge King said, had employed the "Texas two-step" by splitting into two companies, one with barely any assets and no formal business operations, Bestwall, and another with all of Georgia-Pacific's legacy, non-asbestos-related assets, the "new" Georgia-Pacific.

Still, the judge asserted, Bestwall is fully able to pay its debts with a funding agreement with the new Georgia-Pacific, backed by the parent company's billions of dollars in assets.

"In effect, a financially-healthy and fully-solvent corporation (that is, New Georgia-Pacific) has placed its asbestos-related tort liabilities involving thousands of American workers behind the firewall of bankruptcy protection," he said.

He noted that Bestwall and the new Georgia-Pacific were Texas business entities for less than five hours before Bestwall was reorganized in North Carolina and its parent in Delaware. "As was the plan all along," Bestwall filed for Chapter 11 in 2017 in the Western District of North Carolina, a favored forum for huge, Texas-two-stepping companies, he said.

The Chapter 11 filing paused civil litigation all over the country. Unlike typical Chapter 11 bankruptcies, the claimants aren't corporate lenders, they're laborers, veterans and tradesmen, widows and children of those who've died, the judge wrote. Many claimants suffer from mesothelioma — a rare, incurable cancer almost exclusively caused by asbestos exposure, Judge King said.

The human cost of the eight-year litigation should also have warranted an en banc rehearing, Judge King argued, saying that nearly 25,000 asbestos claimants have died without resolution to their tort claims since Bestwall filed for Chapter 11. Families are saddled with medical debt and no recourse, he said.

"The sacred right of the New Georgia-Pacific and Bestwall asbestos claimants to pursue justice through the tort system of America's civil courts — deeply rooted in the laws and constitutional fabric of our nation — has been placed on hold by a solvent profitable enterprise called Bestwall, acting through a manufactured sham bankruptcy," he wrote.

The claimants first tried in 2018 to dismiss Bestwall's Chapter 11 case, but a federal bankruptcy judge denied them. The judge denied their second dismissal bid in 2024 but allowed a direct appeal to the Fourth Circuit.

Counsel for neither party immediately responded Friday to a comment request.

The claimants committee is represented by Natalie D. Ramsey, Davis Lee Wright and Thomas J. Donlon of Robinson & Cole LLP, David C. Frederick, Joshua D. Branson and Alejandra Ávila and Hilary M. Weaver of Kellogg Hansen Todd Figel & Frederick PLLC and Mark Kutny and Robert A. Cox Jr. of Hamilton Stephens Steele & Martin PLLC.

Bestwall is represented by Gregory M. Gordon, Jeffrey B. Ellman, Noel J. Francisco, C. Kevin Marshall, Caleb P. Redmond and Lauren Straight of Jones Day LLP and Garland S. Cassada and Richard C. Worf Jr. of Robinson Bradshaw & Hinson PA.

The case is The Official Committee of Asbestos Claimants of Bestwall LLC v. Bestwall LLC, case number 24-1493, in the U.S. Court of Appeals for the Fourth Circuit.