Supreme Court Denies Cert in Bestwall, Leaving the “Texas Two-Step” Intact

What Happened

On June 1, 2026, the U.S. Supreme Court denied certiorari in Official Committee of Asbestos Claimants of Bestwall LLC v. Bestwall LLC (No. 25-1013), declining to review the U.S. Court of Appeals for the Fourth Circuit’s ruling that permitted the “Texas Two-Step” bankruptcy of Bestwall LLC — a spinoff of Georgia-Pacific (a Koch Industries subsidiary) — to proceed.

The “Texas Two-Step” is a maneuver in which a solvent corporation uses a Texas divisional merger to split itself, loading mass tort liabilities (here, asbestos / mesothelioma claims) into a newly created entity that then files for bankruptcy, while the productive assets and the operating business remain with a healthy, non-bankrupt successor. The petitioning asbestos claimants argued that Bestwall filed despite having billions of dollars available — and that solvency should be a jurisdictional bar to such a filing. The question presented to the Court was explicit: “Whether a debtor with a conceded ability to pay all liabilities now and in the foreseeable future properly can invoke bankruptcy protection.” The Fourth Circuit held that federal courts had subject-matter jurisdiction and that solvency was not a bar. The Court let the appellate ruling stand.

The petition was backed by seven amicus filings: Bankruptcy Law Professors; Sen. Richard Durbin (D-IL), Sen. Sheldon Whitehouse (D-RI), and Sen. Josh Hawley (R-MO) jointly (filed March 25, 2026); Public Justice; Bankruptcy and Legal History Professors; Professor D. Theodore Rave; the Asbestos Creditors’ Committees from the parallel DBMP and Aldrich Texas-Two-Step bankruptcies; and the American Association for Justice. Per the senators’ release, since its 2017 bankruptcy filing Bestwall has paid zero dollars to its approximately 56,000 current asbestos claimants. The release names one claimant specifically: Lori Knapp, whose father died of mesothelioma linked to Georgia-Pacific drywall products.

This is one entry in a wider circuit split the cert denial leaves unresolved: the Third Circuit’s January 30, 2023 rejection of Johnson & Johnson’s near-identical LTL Management “Texas Two-Step” (holding LTL was never genuinely insolvent because of its funding backstop from J&J) sits in direct tension with the Fourth Circuit’s more permissive Bestwall standard. J&J refiled twice more after that rejection (April 2023, April 2025); both refilings were also dismissed. By declining cert here, the Court leaves filers free to venue-shop toward the more permissive circuit. See texas-two-step-bankruptcy-mass-tort-liability-shield for the full mechanism history, case lineage (Georgia-Pacific/Bestwall 2017, Saint-Gobain/DBMP 2019, Trane/Aldrich-Murray 2020, J&J/LTL 2021-2025, and Corizon Health per the senators’ brief), and amicus-coalition detail.

(Attribution note: a cert denial is not a merits ruling and sets no nationwide precedent of its own; its effect is to leave the Fourth Circuit’s decision in force in that circuit and to decline to resolve the underlying split. The Lever’s framing — “lets corporations sidestep their victims” — is the analytical reading; the operative legal fact is the denial of review.)

Why It Matters

This is the judicial layer of the accountability-elimination pattern, operating through inaction rather than decision. The Texas Two-Step lets a profitable corporation route its mass-tort victims into a bankruptcy estate — capping, delaying, and channelizing their recovery — while never itself becoming insolvent. By declining to hear the challenge, the Court left the door open for solvent firms to keep using the device.

Structurally it belongs with the forgiveness-over-accountability ratchet: the mechanism does not deny that harm occurred; it relocates the harmed parties into a forum (bankruptcy claims-trust) that converts open-ended liability into a managed, discounted, often slow-paying pool. The victim is not refuted — the victim is administratively absorbed. That this required no affirmative Supreme Court opinion, only a refusal to look, is itself the point: capture of the accountability system increasingly runs through the gaps a captured or quiescent judiciary chooses not to close.

It is a bipartisan-resistance data point worth flagging that the amicus pressure against the maneuver came from both Durbin (D) and Hawley/Whitehouse — the Texas Two-Step has drawn cross-ideological objection, which the cert denial overrode by omission.

Deploy-With-Dignity Note

The victims here are hundreds of thousands of asbestos / mesothelioma claimants — a class, not primarily a single named individual. The Senate Judiciary release names one: Lori Knapp, whose father died of mesothelioma linked to Georgia-Pacific drywall products. Beyond that one name, the honest accounting is the scale — “approximately 56,000 current asbestos claimants” who have received zero dollars from Bestwall since its 2017 filing, per the senators’ release — rather than a face. Additional named claimants were not located in this pass; see the mechanism entry’s research gaps.

Related

• 2026-06-11–scotus-abouammo-9-0-reverses-saudi-spy-conviction-rebukes-doj-venue-shopping — same Court, same June window, opposite valence (a 9-0 rebuke of DOJ overreach); together they map where the Court does and does not impose a check
• texas-two-step-bankruptcy-mass-tort-liability-shield — standalone mechanism entry: full case lineage, circuit split, and cross-ideological amicus detail