Bestwall January 24 2019 Hearing Transcript

Case 17-31795 Doc 767 Filed 01/25/19 Entered 01/25/19 13:31:08 Desc Main
Document Page 1 of 33
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1 UNITED STATES BANKRUPTCY COURT

WESTERN DISTRICT OF NORTH CAROLINA
2 CHARLOTTE DIVISION
3 IN RE: : Case No. 17-31795
4 BESTWALL LLC, : Chapter 11
5 Debtor. : Charlotte, North Carolina

Thursday, January 24, 2019
6 : 9:53 a.m.
7 : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : :
8 BESTWALL LLC, : AP 17-03105
9 Plaintiff, :
10 v. :
11 THOSE PARTIES LISTED ON :

APPENDIX A TO COMPLAINT AND
12 JOHN AND JANE DOES 1-1000, :
13 Defendants. :
14 : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : :
15 TRANSCRIPT OF PROCEEDINGS
BEFORE THE HONORABLE LAURA TURNER BEYER,
16 UNITED STATES BANKRUPTCY JUDGE
17 APPEARANCES:
18 For the Plaintiff/Debtor: Robinson, Bradshaw & Hinson, P.A.

BY: GARLAND S. CASSADA, ESQ.
19 101 N. Tryon Street, Suite 1900
Charlotte, NC 28246
20
Audio Operator: COURT PERSONNEL
21
Transcript prepared by: JANICE RUSSELL TRANSCRIPTS
22 1418 Red Fox Circle
Severance, CO 80550
23 (757) 422-9089
trussell31@tdsmail.com
24
Proceedings recorded by electronic sound recording; transcript
25 produced by transcription service.
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1 APPEARANCES (continued):
2 For the Plaintiff/Debtor: Jones Day

BY: GREGORY M. GORDON, ESQ.
3 2727 North Harwood St., Suite 500
Dallas, TX 75201-1515
4
Jones Day
5 BY: JEFFREY B. ELLMAN, ESQ.
1420 Peachtree St., N.E., #800
6 Atlanta, GA 30309
7 For Georgia-Pacific LLC: Rayburn Cooper & Durham, P.A.

BY: JOHN R. MILLER, JR., ESQ.
8 227 West Trade St., Suite 1200
Charlotte, NC 28202
9
Debevoise & Plimpton
10 BY: M. NATASHA LABOVITZ, ESQ.
MARK P. GOODMAN, ESQ.
11 919 Third Avenue
New York, NY 10022
12
For the Bankruptcy Bankruptcy Administrator's Office
13 Administrator: BY: SHELLEY K. ABEL, ESQ.
402 West Trade Street, Suite 200
14 Charlotte, NC 28202
15 For Official Committee of JD Thompson Law

Asbestos Claimants: BY: LINDA W. SIMPSON, ESQ.
16 Post Office Box 33127
Charlotte, NC 28233
17
Robinson & Cole LLP
18 BY: NATALIE D. RAMSEY, ESQ.
DAVIS LEE WRIGHT, ESQ.
19 1000 N. West Street, Suite 1200
Wilmington, DE 19801
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1 APPEARANCES (continued):
2 For Future Claimants' Hull & Chandler, P.A.

Representative, Sander L. BY: FELTON PARRISH, ESQ.
3 Esserman: 1001 Morehead Square Dr., #450
Charlotte, NC 28203
4
Young Conaway
5 BY: EDWIN J. HARRON, ESQ.
SHARON M. ZIEG, ESQ.
6 1000 North King Street
Wilmington, DE 19801
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8
APPEARANCES (via telephone):
9
SANDER L. ESSERMAN
10 Future Claimants' Representative
2323 Bryan Street, Suite 2200
11 Dallas, TX 75201-2689
12 CRAIG ZIMMERMAN, ESQ.
13 For the Plaintiff/Debtor: Jones Day

BY: DANIELLE D. DONOVAN, ESQ.
14 1420 Peachtree St., N.E., #800
Atlanta, GA 30309
15
BRAD B. ERENS, ESQ.
16 77 West Wacker
Chicago, IL 60601
17
Schachter Harris, LLP
18 BY: RAY HARRIS, ESQ.
ERIN THERRIAN, ESQ.
19 909 Lake Carolyn Pky., Suite 1775
Irving, Texas 75039
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For Asbestos Plaintiffs: Brayton Purcell, LLP
21 BY: BRYN LETSCH, ESQ.
222 Rush Landing Road
22 Novato, CA 94945
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1 APPEARANCES (via telephone continued):
2 For Georgia-Pacific LLC: Debevoise & Plimpton LLP

BY: CRAIG A. BRUENS, ESQ.
3 801 Pennsylvania Avenue N.W.
Washington, D.C. 20004
4
Debevoise & Plimpton LLP
5 BY: ELIE J. WORENKLEIN, ESQ.
919 Third Avenue
6 New York, NY 10022
7 For Wilentz, Goldman & Wilentz, Goldman & Spitzer P.A.

Spitzer Plaintiffs: BY: DEIRDRE W. PACHECO, ESQ.
8 Suite 900 Box 10
90 Woodbridge Center Drive
9 Woodbridge, NJ 07095-0958
10 For the Official Committee Montgomery McCracken

of Asbestos Claimants: BY: MARK A. FINK, ESQ.
11 LAURIE A. KREPTO, ESQ.
1105 North Market St., 15th Floor
12 Wilmington, DE 19801
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1 P R O C E E D I N G S
2 (Call to Order of the Court)
3 THE COURT: All right. Good morning.
4 (Counsel greet the Court)
5 THE COURT: I apologize for the tech, technical
6 difficulties that we have experienced this morning. I'm
7 beginning to wonder if maybe we haven't paid our phone bill and
8 that might be part of the, part of the difficulty, but I
9 understand that that's all been squared away and everybody
10 should be on the phone now and should be able to appear
11 telephonically, at least those who we understood were going to
12 be calling in.
13 Let me also say you all tend to bring bad weather with
14 you. It's a little warm today and the chillers are broken
15 because of the construction. So we shouldn't be here too too
16 long, but it's just going to be hot.
17 And sort of one more kind of announcement before we
18 get started. They just handed me this (indicating) and said
19 somebody left it here when we were back here in November. So
20 you can come gather it after the hearing's over, but you can
21 wait until the conclusion of the hearing.
22 So we are here for the Court to rule on the motion of
23 the Committee to dismiss the debtor's chapter 11 case for cause
24 as a bad faith filing pursuant to Section 1112(b), or,
25 alternatively, transfer venue in the interests of justice and

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1 for the convenience of the parties pursuant to Section 1412 and
2 the responses, reply, and surreplies thereto.
3 We are also here today for a ruling on the motion of
4 the debtor for an order preliminarily enjoining certain actions
5 against nondebtors or, in the alternative, declaring that the
6 automatic stay applies to such actions and granting a temporary
7 restraining order pending a full hearing on the motion and the
8 objections, joinders, replies, and surreplies thereto.
9 Having said that, Ms. Abel, why don't I start over
10 here with you and have you all announce your appearances and
11 then I'll get to the folks who are on the phone.
12 MS. ABEL: Shelley Abel, Bankruptcy Administrator.
13 THE COURT: Okay.
14 MR. HARRON: Good morning, Your Honor. Ed Harron and
15 Sharon Zieg from Young Conaway, Felton Parrish from Hull &
16 Chandler, for the Future Claimants' Representative.
17 THE COURT: Okay.
18 MR. HARRON: And Mr. Esserman, the Future Claimants'
19 Representative, is on the phone.
20 THE COURT: Okay.
21 MR. HARRON: Thank you.
22 THE COURT: We hope, anyway, right?
23 MR. HARRON: We do.
24 MS. ZIEG: Good morning, Your Honor. He's on.
25 THE COURT: Good.

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1 MS. RAMSEY: Good morning, Your Honor. Natalie Ramsey
2 and my partner, Davis Wright, newly with the law firm of
3 Robinson & Cole.
4 Your Honor, we filed a motion for substitution of
5 counsel. We will shortly be filing --
6 THE COURT: Okay.
7 MS. RAMSEY: -- a declaration, but we did want to make
8 the Court aware that we were now affiliated with a new law
9 firm.
10 THE COURT: Okay.
11 MS. RAMSEY: And we're here, Your Honor, also, with
12 Linda Simpson from JD Thompson Law.
13 THE COURT: Thank you.
14 MS. RAMSEY: Thank you.
15 THE COURT: All right.
16 MR. GORDON: Ms. Ramsey has indicated to us that she
17 intends to behave in a different way now that she's changed law
18 firms. So we'll keep Your Honor updated on that.
19 THE COURT: Okay.
20 MS. RAMSEY: Your Honor, that, that's not true.
21 THE COURT: Glad we got that out there.
22 MR. GORDON: We'll, we'll discuss that later, Your
23 Honor.
25 MR. GORDON: Greg Gordon, Jeff Ellman, Jones Day, on

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1 behalf of the debtor. Also, Garland Cassada with the Robinson
2 Bradshaw firm on behalf of the debtor.
3 THE COURT: Okay. Thank you.
4 MS. LABOVITZ: Your Honor, Natasha Labovitz, with my
5 partner, Mark Goodman, from Debevoise & Plimpton on behalf of
6 New GP, along with our co-counsel, Jack Miller.
7 THE COURT: Okay. Thank you.
8 All right. And on the phone I understand -- and
9 rather than asking you to announce your appearance, I'm going
10 to list off your names and if you would, just confirm you're on
11 the line:
12 Craig Zimmerman?
13 MR. ZIMMERMAN: Yes, Your Honor. Good morning.
14 THE COURT: Daniel Donovan?
15 MS. DONOVAN: Yes, Your Honor. Good morning.
16 THE COURT: Oh, I'm sorry.
17 Deirdre Pacheco?
18 MS. PACHECO: Good morning, Your Honor. Yes, I'm
19 here. Thank you.
20 THE COURT: Cary Schachter?
21 MR. HARRIS: Mr. Schachter's not on today.
22 THE COURT: Okay.
23 Ray Harris?
24 MR. HARRIS: Yes. This is Ray Harris, Your Honor.
25 THE COURT: Erin Therrian?

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1 MS. THERRIAN: I'm present, Your Honor.
2 THE COURT: Sander Esserman?
3 MR. ESSERMAN: I'm present, Your Honor. Thank you.
4 THE COURT: Uh-huh (indicating an affirmative
5 response).
6 Brad Erens?
7 MR. ERENS: Present, Your Honor. Thank you.
8 THE COURT: Mark Fink?
9 MR. FINK: Present, Your Honor. Good morning.
10 THE COURT: Greg Bruens? Craig Bruens? I'm sorry.
11 MR. BRUENS: Good morning, Your Honor. I'm present.
12 Thank you.
13 THE COURT: Elie Worenklein?
14 MR. WORENKLEIN: Good morning, Your Honor. I'm
15 present as well.
16 THE COURT: Bryn Letsch?
17 MS. LETSCH: Good morning, Your Honor. I'm present.
18 Thank you.
19 THE COURT: Laurie Krepto?
20 MS. KREPTO: I'm here, Your Honor. Thank you.
21 THE COURT: Michael Cloherty?
22 (No response)
24 And is there anybody else appearing on the phone?
25 (No response)
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1 THE COURT: Okay.
2 As you all know, these matters originally came on for
3 hearing on November 9, 2018, at 9:30. The parties argued the
4 motions over the entirety of that day and, in retrospect, that
5 was sort of an yeoman's job that you all did getting all of
6 those matters heard by the conclusion of that day. At the
7 conclusion of the hearing, I announced I would continue the
8 hearing until today so that I could give you my ruling.
9 I'll start much the same way that I ended that day by,
10 again, recognizing how complicated these issues are and by
11 acknowledging that there are no easy answers. I've read and,
12 in some instances, I've reread several times your briefs, the
13 cases you've cited, and I've studied the transcript from the
14 hearing and having done all that, I've concluded that I must
15 deny the motion of the Committee to dismiss the case, or,
16 alternatively, transfer venue and grant the motion of the
17 debtor for an order preliminarily enjoining certain actions
18 against nondebtors.
19 For what it's worth, I don't make this decision
20 lightly, nor do I make it easily. So bear with me as I take a
21 minute to get through all of this.
22 Similar to the way we proceeded at the hearing on
23 November 9th, I'll start with the Committee's motion to
24 dismiss, or, alternatively, to transfer venue. I'll then
25 discuss the motion for a preliminary injunction or a

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1 declaration that the automatic stay applies.
2 I'll also note for the records that the parties, for
3 the record, that the parties stipulated to the facts relevant
4 to these motions and the parties agreed that there was no
5 dispute about the facts presented at the hearing.
6 As you all well know, the Fourth Circuit standard for
7 dismissal of a chapter 11 case as a bad faith filing is one of
8 the most stringent articulated by federal courts. In Carolin
9 Corp. v. Miller, the Fourth Circuit held that to dismiss a case
10 as a bad faith filing the movant must prove, first, that the
11 chapter 11 case is objectively futile and, second, that the
12 debtor filed the chapter 11 case in subjective bad faith. The
13 Fourth Circuit made it clear in Carolin that the movant has a
14 high burden in order to establish this two-prong requirement.
15 As the court noted, this two-prong test:
16 "[I]s the only sufficiently stringent test of
17 justification for threshold denials of Chapter 11
18 relief. Such a test obviously contemplates that it is
19 better to risk proceeding with a wrongly motivated
20 invocation of Chapter 11 protections whose futility is
21 not immediately manifest than to risk cutting off even
22 a remote chance that a reorganization effort so
23 motivated might nevertheless yield a successful
24 rehabilitation."
25 Similarly, the court goes on to say, "It contemplates

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1 that it is better to risk the wastefulness of a probably futile
2 but good faith effort to reorganize than it is to risk error in
3 prejudging its futility at the threshold."
4 Because I conclude that this case is not objectively
5 futile, largely for the reasons argued by the debtor in its
6 objection to the motion to dismiss, I need not reach the issue
7 of whether this case was filed in subjective bad faith and deny
8 the motion to dismiss the case as a bad faith filing.
9 The Committee made compelling arguments about the
10 debtor's lack of good faith, but for the reasons stated I don't
11 need to address that issue today. I will ultimately have to
12 rule on the debtor's good faith, albeit in a different context,
13 when we get to confirmation. Suffice it to say at this point,
14 on the one hand, how the debtor got here and the filing of this
15 case may technically comply with the relevant statutes. On the
16 other hand, I'm not sure it's what Congress had in mind when it
17 drafted Section 524(g) to address mass tort bankruptcies.
18 I recognize that the result may well be different if
19 we were in a different Circuit, but we aren't. I believe this
20 case falls square within the Fourth Circuit's conclusion that
21 it's better to risk proceeding with a chapter 11, the filing of
22 which is, arguably, wrongfully motivated, than to risk cutting
23 off the possibility that the filing might result in a
24 successful reorganization. At this point, I conclude that that
25 possibility exists.
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1 Pursuant to Carolin, the objective futility inquiry
2 requires courts to focus on determining whether there's no
3 going concern to preserve and no hope of rehabilitation except
4 according to the debtor's terminal euphoria. I agree with the
5 debtor that attempting to resolve its asbestos claims through
6 524(g) is a valid reorganizational purpose and that filing,
7 especially in the context of an asbestos or mass tort case,
8 need not necessarily be due to insolvency. The Committee
9 ultimately, I believe, conceded that point and it's especially
10 true in this case, given the number of claims, the volume of
11 asbestos claims Bestwall faced, together with the number of
12 claims projected to be filed at least through 2050. That's
13 sufficient financial distress for the debtor to seek resolution
14 through 524(g).
15 In light of the funding agreement, which allows
16 Bestwall to draw from New GP the amount of money necessary to
17 pay the costs of this chapter 11 and to fund a Section 540(g)
18 trust, 524(g) trust, to the extent the debtor's assets are
19 insufficient to do so, there's no reason for the Court to
20 conclude at this point that Bestwall does not have the ability
21 to reorganize and to establish a trust that meets the statutory
22 requirements of 524(g). Based on the facts presented in the
23 stipulation, even as a holding company Bestwall owns
24 substantial assets and operating businesses that produce
25 substantial cashflow and have an enterprise value of nearly 150

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1 million and, therefore, has the ability to make future payments
2 as required by 524(g).
3 Likewise, for the same reason, it appears that
4 Bestwall satisfies any applicable ongoing business requirement
5 of 524(g), but 524(g) does not require Bestwall to maintain a
6 particular level of operations or to fund the entirety of the
7 trust with its own assets or securities. It's sufficient at
8 this point to know that the debtor owns an operating business,
9 that this business, combined with the debtor's other assets
10 which are backstopped by the support New GP is obligated to
11 provide pursuant to the funding agreement, are sufficient for
12 purposes of 524(g) and for this Court to conclude that this
13 case is not objectively futile.
14 In support of its argument that the case is
15 objectively futile the Committee asked the Court to ignore the
16 funding and other support agreements, but that ignores reality.
17 The Committee argues that the funding agreement creates the
18 illusion of a viable business arrangement where one would not
19 otherwise exist. That, too, ignores reality for the reasons I
20 previously noted.
21 In the alternative, the Committee argues that the
22 funding agreement does not contain sufficient protections to
23 justify the debtor's reliance on, on it. At the hearing on the
24 motion to dismiss the Committee conceded it's difficult to
25 predict exactly what problems may arise with the funding

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1 agreement because you don't know what you don't know and while
2 the Court may share some of those concerns, they're
3 unsubstantiated concerns and insufficient for the Court to
4 conclude it should grant the motion to dismiss.
5 In addition, the debtor has encouraged the Committee
6 to articulate specific concerns about the funding agreement or
7 to suggest ways in which it can be improved to alleviate the
8 Committee's concerns. To date, the Committee has -- and I
9 think understandably -- declined to take the debtor up on that
10 offer and I would suggest that now would be the time.
11 Finally, issues and concerns about the funding
12 agreement can be addressed in the confirmation process.
13 On a different note, let me also say that another
14 point consistently expressed by the Committee throughout its
15 pleadings and at the hearing on the motion to dismiss was its
16 concern about the delay caused by this case being in bankruptcy
17 court instead of allowing the claimants to proceed in state
18 court. That point was driven home by the Chairman of the
19 Committee -- and pardon me if I get his name wrong --
20 Mr. Kazan.
21 MS. RAMSEY: Kazan.
22 THE COURT: Kazan.
23 I hear you, Mr. Kazan, who is not here. I heard
24 Mr. Kazan, I suppose I should say then, and I sincerely
25 appreciate his and others' concern about the Committee members

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1 and other claimants and while I don't have personal experience
2 with mesothelioma, it was one year ago this week that I lost a
3 close family member to two different forms of cancer and I have
4 one of my oldest, dearest friends struggling mightily with
5 cancer, as I speak. So I get it. However, I'm not convinced
6 that the claimants are necessarily worse off here. I believe
7 their claims can be sufficiently addressed and fairly
8 adjudicated through a trust created in this case. Some would
9 argue it can be done more efficiently and with less cost, but
10 that's on you. That's on all of you. You all, the parties to
11 this case, control where this case goes from here and how
12 expeditiously we get there. I can assure you that the Court
13 will not be the cause of any delay.
14 In the alternative, the Committee moved to transfer
15 venue of this case. Venue of this case is proper under 28
16 U.S.C. § 1408 because the debtor formed as a limited liability
17 company in Texas July 31, 2017, then its domicile was
18 immediately transferred to North Carolina, 94 days prior to the
19 petition date or for a longer portion of 180 days prior to the
20 filing of this chapter 11 than it was domiciled in any other
21 state. The Committee acknowledges that the debtor has,
22 technically, complied with the statutory venue provisions.
23 The Committee has not established by a preponderance
24 of the evidence that a transfer of these cases, of this case,
25 would be in the interest of justice or for the convenience of

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1 the parties pursuant to 28 U.S.C. § 1412. Specifically, the
2 Committee argues for the transfer of the case to Delaware,
3 Georgia or, really, anyplace other than here. Delaware,
4 because it was the state of formation of both Old GP and New GP
5 and the location of, according to them, the debtor's largest
6 asset, the receivables from New GP under the funding agreement,
7 or Georgia, because New GP's principal place of business is in
8 Atlanta.
9 With respect to the Committee's argument regarding the
10 interest of justice, courts consider a variety of factors when
11 deciding if the interests of justice support a transfer of
12 venue, the most important of those factors being whether
13 transfer promotes the economic and efficient administration of
14 the bankruptcy estate. Courts also consider -- and you all
15 know these factors -- of whether the transfer facilitates
16 judicial economy; the parties' ability to receive a fair trial
17 in either venue; whether either forum has an interest in
18 deciding controversies within its jurisdictional borders;
19 whether a transfer would affect the enforceability of any
20 judgment rendered; and whether the debtor's original choice of
21 forum should be disturbed.
22 Of the factors that apply, they all weigh against
23 transferring venue. The debtor is neither organized in
24 Delaware, nor does it have its principal place of business or
25 assets there. The debtor's domiciled here in the Western

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1 District of North Carolina and many of its assets are here.
2 Keeping the case in this District will avoid the expense and
3 delay associated with transferring the case to Delaware or
4 Georgia, especially now that the case has been pending in this
5 District for over a year and given this Court's familiarity
6 with the case and the fact that the debtor says it stands ready
7 to file a plan and disclosure statement, I disagree with the
8 Committee's assertions that this case is in its infancy.
9 The fact that the debtor is a holding company weighs
10 against transferring the case in the interest of justice
11 because it's not an operating company with employees, vendors,
12 customers, and other tangible assets in a separate location
13 making this case factually distinguishable from Patriot Coal.
14 Finally, for what it's worth, I'll take a minute to
15 touch on a theme in the Committee's pleadings, which I think is
16 the underlying basis for its motion to transfer venue and,
17 likely, the other motions that were before the Court on
18 November 9th.
19 In its motion to dismiss the Committee argues that the
20 debtor's obvious forum shopping evidences a clear effort to
21 take advantage of Fourth Circuit law and to taint this case
22 with the factual findings made in Garlock, which the Committee
23 acknowledges is "a vastly different and unrelated case." The
24 Committee made similar references throughout its brief and
25 again in Footnote 6 in its surreply to the motion for a

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1 preliminary injunction in which it states that, "Of significant
2 import to the Committee is the apparent effort to develop a
3 playbook or blueprint for attempting to maximize the impact of
4 the Garlock decision and for eviscerating the claimant
5 protections contained in 524(g)."
6 First, I find it difficult to believe that the end
7 result in Garlock eviscerated claimant protections contained in
8 524(g).
9 Second -- and you know this -- this case is not
10 Garlock and I am not Judge Hodges, nor is Judge Whitley, for
11 that matter. Neither of us are bound by the Garlock decision
12 and you fail to give me proper credit by presuming that because
13 that case was heard in this District the outcome of an
14 estimation trial in this case would necessarily be the same or
15 even similar. As the Committee notes, this is a different case
16 and presumably, the facts and the evidence presented at an
17 estimation trial would be different and, therefore, so would
18 the outcome. Either way, it would be a new estimation trial
19 with different parties trying the case and to the best of my
20 ability, I will reach the right result and one that is
21 consistent with the evidence you present.
22 But you can't presume that it would necessarily be the
23 same result reached by Judge Hodges in Garlock and I would ask
24 that all parties bear that in mind as this case moves forward.
25 With respect to the Committee's argument that this

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1 case should be transferred for the convenience of the parties,
2 Bestwall's creditors are spread throughout the country;
3 therefore, the Western District is just as convenient as any
4 jurisdiction. The fact that counsel for the Committee and the
5 FCR are located in Delaware is not determinative of venue.
6 Bestwall's assets are located in this District and New GP's
7 headquarters are located in Atlanta, which is not far down the
8 road, certainly closer to Charlotte than Delaware. And while
9 it's true that the Third Circuit has significant experience
10 with asbestos bankruptcies, this Court also has experience with
11 asbestos cases and is gaining more experience every day and is
12 perfectly well equipped and, arguably, a more convenient forum
13 in which to handle them, given the location of our airport and
14 the ability and willingness, for example, of the Court to set
15 aside monthly hearing dates for each of these asbestos cases.
16 In short, the Committee has not shown by a
17 preponderance of the evidence that the case should be
18 transferred to either Delaware or Georgia for the convenience
19 of the parties.
20 I will now turn to the debtor's motion for an order
21 preliminarily enjoining certain actions against nondebtors, or,
22 in the alternative, declaring that the automatic stay applies
23 to such actions. Specifically, the debtor seeks to enjoin
24 litigation against New GP and other non-debtor affiliates of
25 Bestwall. I'll simply refer to them as the Non-Debtor Third

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1 Parties.
2 Following the entry of a temporary restraining order
3 on November 8, 2017, the Court entered an injunction with the
4 consent of the Committee. Pursuant to an order entered
5 December 7, 2017, the injunction has been extended from time to
6 time with the consent of the Committee without prejudice to its
7 right to object to further continuances of the injunction and
8 on August 15, 2018, that's what the Committee did. And the
9 Committee and the FCR filed objections to the continuation of
10 the injunction and that's the matter that's before the Court
11 today.
12 As Ms. Ramsey noted at the hearing, these issues are
13 complicated and difficult to organize, but I agree that the
14 Court must start by considering whether the Court has subject
15 matter jurisdiction and, specifically, related-to jurisdiction.
16 The Fourth Circuit has adopted the Pacor test for
17 determining whether a proceeding is sufficiently related to a
18 bankruptcy case for this Court to have jurisdiction under
19 Section 1334(b). The Pacor test examines whether the outcome
20 of a proceeding could conceivably have any effect on the estate
21 being administered in bankruptcy. A proceeding need not
22 necessarily be against the debtor or against the debtor's
23 property because an action is related to bankruptcy if the
24 outcome could alter the debtor's rights, liabilities, options,
25 or freedom of action, either positively or negatively, and

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1 which in any way impacts upon the handling and administration
2 of the bankrupt estate. I conclude that terminating the
3 injunction could, conceivably, have an effect on the debtor's
4 estate and, therefore, that this Court has subject matter
5 jurisdiction to enjoin claims against the Non-Debtor Third
6 Parties.
7 First, the debtor has indemnity obligations that would
8 make judgments against New GP tantamount to judgments against
9 the debtor. The FCR refers to the indemnity obligations as
10 fully circular and contrived and, therefore, would have no
11 effect on the estate, but that argument ignores the fact that
12 the funding agreement is a backstop and that the debtor's
13 assets must be used first to fund a trust to pay asbestos
14 claims under a confirmed plan. Paying the indemnity claims
15 would deplete the assets the debtor has available to fund the
16 trust and, therefore, have an effect on the debtor's estate.
17 In addition, the FCR and the Committee contend that
18 this Court lacks jurisdiction to enjoin lawsuits against New GP
19 because they argue New GP is directly liable for the asbestos
20 claims as a successor to Old GP. The debtor, on the other
21 hand, argues that New GP could only have derivative liability
22 because the asbestos liabilities were assigned to Bestwall as
23 part of the corporate restructuring.
24 In determining jurisdiction it's not necessary for the
25 Court to conclude whether claims against New GP would be direct

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1 or derivative for the reasons stated by the debtor. Any
2 alleged liability of New GP would be for the same claims that
3 are being asserted against the debtor. The claims would
4 necessarily have to involve the same set of facts, the same
5 products, the same exposures, the same conduct, and the same
6 diseases because they all derive from Old GP. To permit the
7 claimants to return to the tort system to proceed against New
8 GP on the same claims that the debtor proposes to pay through a
9 524(g) trust under the debtor's plan of reorganization would
10 have an effect on the debtor's estate and defeat the
11 fundamental purpose of 524(g) and this filing. For example,
12 lifting the injunction would distract the debtor's personnel
13 from working on this chapter 11 reorganization and would
14 require them to spend significant time assisting with,
15 participating in, or monitoring lawsuits against New GP.
16 So for all these reasons, and others, the Court
17 concludes it has jurisdiction to enjoin the pursuit of claims
18 against the Non-Debtor Third Parties.
19 I'll next turn to the Committee's due process and
20 preemption arguments. Like the debtor, I conclude that the
21 Committee's due process and preemption arguments fail.
22 Due process, I'll start there. The Committee argues
23 that the corporate restructuring of Old GP ignored the due
24 process rights of the claimants. I'm not aware of and the
25 Committee has not cited any law, any case law, that it would
24
1 have required Old GP to consult with the claimants or the
2 plaintiffs in the tort system or to take their vote before it
3 engaged in the corporate restructuring. The claimants will be
4 afforded due process in the confirmation process, given the
5 confirmation requirements of the Code and Section 524(g). More
6 specifically, the case cannot be confirmed without the active
7 participation and support of the Committee, the consent of 75
8 percent of the claimants themselves, and the approval of both
9 this Court and the District Court. In addition, the claimants
10 can pursue fraudulent conveyance claims in this case, if they
11 so choose.
12 Because of these procedures which are available to the
13 claimants and are designed to protect their due process rights,
14 I can't conclude that their due process have been violated.
15 With respect to preemption, the Committee argues that
16 New GP is independently liable for the Bestwall asbestos claims
17 because the Texas divisional merger statute pursuant to which
18 Old GP undertook the corporate restruction, restructuring is
19 preempted by Section 524(g). I agree with the debtor that the
20 doctrine of preemption, either conflict or field preemption,
21 does not apply in this case because, as the debtor argued, "The
22 Texas statute and 524(g) concern completely different subjects
23 and work readily in tandem, including in the context of this
24 chapter 11 case."
25 At the hearing the claimants argued that 524(g) is the

25
1 only way to cleanse a company of asbestos liability or
2 permanently, globally, and fairly resolve the Bestwall asbestos
3 claims, yet they say the debtor suggests that the Texas
4 divisive merger statute has already accomplished that. I
5 disagree and conclude that that isn't at all what they're
6 saying. What they're saying is that having engaged in this
7 corporate restructuring we are now before the bankruptcy court
8 so it can permanently and globally resolve the asbestos claims.
9 That's the entire purpose behind this bankruptcy proceeding and
10 if Bestwall can't meet its burden of confirming a plan and
11 obtaining a channeling injunction, it won't have cleansed
12 anything. It's for that reason and the other reasons argued by
13 the debtors that the preemption argument fails.
14 So with respect to conflict preemption, I can't
15 conclude that compliance with the Texas statute and 524 are
16 impossible. That conclusion is also consistent with finding
17 that this case is not objectively futile.
18 Likewise, there's no field preemption. Corporate
19 restructuring is strict, strictly a matter of state law and
20 524(g) takes corporations in their form, in their current form,
21 and it provides a tool for addressing mass asbestos liability
22 and obtaining an injunction, assuming that that corporation can
23 meet all the requirements of 524(g) and the other confirmation
24 requirements of the Bankruptcy Code.
25 Having addressed subject matter jurisdiction and the

26
1 Committee's due process and preemption arguments, I'll analyze
2 the Fourth Circuit's four-prong test for the issuance of an
3 injunction.
4 I'll start with likelihood of success on the merits.
5 The debtor satisfies this prong of the four-part test by
6 showing that it has a realistic possibility of a successful
7 reorganization. For all of the same reasons, I concluded that
8 the debtor's filing is not objectively futile.
9 I can also conclude that the debtor has a realistic
10 possibility of a successful reorganization. As implicitly
11 recognized by both the Committee on Page 42 of its objection to
12 the debtor's motion and the FCR on Page 6 of its surreply to
13 the debtor's motion, I don't have to determine at this point
14 whether the asbestos claims against New GP will ultimately be
15 subject to a channeling injunction. That issue is not before
16 the Court and it's distinct from the issue of whether the
17 debtor is entitled to an injunction under 105. So I'll save
18 that issue for another day.
19 I conclude that failure to maintain the existing
20 injunction would cause irreparable injury to the debtor. For
21 all the reasons argued by the debtor in its motion, I agree.
22 It would defeat the purpose of this chapter 11 to allow the
23 asbestos claims to continue to be prosecuted in the tort
24 system.
25 The balance of harm supports maintaining the

27
1 injunction, again for the reason that the purpose of this
2 chapter 11 filing would be defeated if the litigation of the
3 Bestwall asbestos claims were allowed to proceed against the
4 Non-Debtor Third Parties.
5 The defendants argue that an injunction will delay
6 their effort to obtain compensation, but, as previously noted,
7 that's not necessarily the case and is, to a large extent,
8 within the control of the parties to this case. If the case
9 proceeds as it should, it should provide both existing and
10 future claimants with an efficient and expedited means by which
11 to address their claims.
12 In addition, delay, in and of itself, is insufficient
13 to overcome irreparable harm.
14 Finally, nothing about maintaining the injunction in
15 this case prohibits the defendants from continuing to proceed
16 against any remaining defendants in state court.
17 Lastly, I'll address public interest and I find that
18 it supports maintaining the injunction because the public
19 interest lies in completing the reorganization process and
20 resolving thousands of claims in a uniform and equitable
21 manner, as noted in the W. R. Grace & Company case. Again,
22 allowing the asbestos claims to be litigated in state court
23 against the Non-Debtor Third Parties would defeat the purpose
24 of this case. Extending the injunction at this point does not
25 allow either the debtor or New GP, as was argued, to escape

28
1 their asbestos liabilities. Their liabilities will be
2 discharged only if the debtor confirms its plan and the
3 channeling injunction is extended to the asbestos claims
4 against New GP.
5 Having concluded that the debtor satisfies the four-
6 prong test for the issuance of an injunction, I need not reach
7 its alternative request for relief, which was a determination
8 regarding the issue of whether the actions by plaintiffs to
9 attempt to hold New GP liable for claims against the debtor are
10 stayed pursuant to Section 362 of the Bankruptcy Code.
11 So the bottom line is, folks, that surviving these
12 motions is only part of the story of this bankruptcy case. I
13 think that result is consistent with the Fourth Circuit's
14 dismissal standard, as was outlined or as is outlined in the
15 Carolin case.
16 So while the debtors have won the war, or won the
17 battle, so to speak, they still have to win the war. And
18 pardon the analogy. As I've said, I don't believe this case
19 should be or needs to be a war, but I think you know what I
20 mean.
21 Going forward, the debtors will have to work with the
22 Committee and the FCR to confirm a plan and get a channeling
23 injunction and we'll see where we go from here.
24 I believe that that addresses in some shape, form, or
25 fashion all of the issues that were before the Court on

29
1 November 9th.
2 Mr. Gordon, you're not going to like this, but I would
3 ask you to draw an order consistent with my remarks and to
4 incorporate in that order the pertinent sections of your brief.
5 There's no need to address subjective bad faith or the
6 automatic stay in any detail since the Court did not reach
7 those issues. Please, if you would, circulate that order by
8 counsel for New GP, the Committee, FCR and once you've
9 circulated that order, I would ask that you e-mail it to
10 Mr. Badger and upload it so we can, for the Court's
11 consideration.
12 And I think that takes us to the conclusion of the
13 hearing unless anybody has anything further.
14 MS. LABOVITZ: Your Honor, thank you very much for
15 your detailed ruling, which I think does provide helpful
16 guidance to all the parties.
17 There is one, I would call it a housekeeping matter --
19 response).
20 MS. LABOVITZ: -- that remains from the hearing on
21 November 9th, Your Honor, which was that we had made an oral
22 motion to intervene in the adversary proceeding to resolve any
23 questions regarding New GP's standing to participate in that
24 proceeding. I believe you ruled at that time, Your Honor, that
25 you had already read the briefs that were filed pursuant to a
30
1 stipulated scheduling order and that you would allow us to
2 appear at the hearing, but I don't believe that there has been
3 a ruling on the motion to intervene.
4 If I may suggest, while we would be happy to brief
5 that or argue that today, if Your Honor is comfortable with
6 that motion, we could include it in the order that Mr. Gordon
7 is preparing.
8 THE COURT: Ms. Ramsey?
9 MS. RAMSEY: Your Honor, we, we have an objection to
10 that and we would ask that that be separately considered by the
11 Court on motion with the benefit of briefing and argument.
12 THE COURT: And I -- that would be my preference as
13 well.
14 And I -- I -- you did make that oral motion. I
15 apologize. That's one thing I did not cover in today's ruling.
16 So if you will file that motion and give the parties
17 the, you know, requisite amount of time and notice and
18 opportunity to respond. As I said, set it on for hearing.
19 We've got our monthly hearing dates and we will hear you next
20 time on that issue and, and we'll go forward from here.
21 MS. LABOVITZ: We will do so. Thank you, Your Honor.
23 response).
24 Yes, sir, Mr. Gordon.
25 MR. GORDON: One other point, if I can make it.

31
1 The injunction currently expires on January 31, as
2 Your Honor may remember.
3 THE COURT: Right.
4 MR. GORDON: It may take longer than a week to
5 formulate the order and to have it signed off by the, the
6 Committee. So I would ask if we could, perhaps, extend that
7 through the end of February just to make sure we have plenty of
8 time to finalize it.
9 MS. RAMSEY: No objection, Your Honor.
10 MR. HARRON: No objection.
11 THE COURT: Okay. And I will look for that order.
12 MR. GORDON: Thank you, Your Honor.
13 THE COURT: And, and we'll extend it through the month
14 of February and if it needs to go a little longer than that,
15 you know, you all can talk about that and upload a consent
16 order, if necessary.
17 MR. GORDON: Appreciate it, Your Honor. Thank you.
18 THE COURT: Okay.
19 MS. RAMSEY: Your Honor, I, I also would like to thank
20 you for, for the ruling and, and for the thoughtfulness that
21 the Court put into it. I hope I'm not out of order, but I did
22 want to just respond to one thing, which was the Court's
23 interpretation of the footnote regarding the Garlock case and
24 the evisceration of the protections of 524(g).
25 The evisceration of the protections of 524(g) was

32
1 intended to refer to the playbook of going through the Texas
2 divisive merger and coming back. It was not intended to refer
3 to the Garlock decision.
4 THE COURT: Thank you
5 MS. RAMSEY: So I just did want to clarify that for
6 the Court.
7 And I also wanted to say directly that we have every
8 confidence in Your Honor, so.
9 Thank you.
11 Anything further?
12 MR. HARRON: Thank you, Your Honor. We appreciate the
13 thoughtful ruling.
14 THE COURT: Thank you.
15 All right. With that, we will recess until tomorrow
16 morning at 9:30.
17 Thank you.
18 (Counsel thank the Court)
19 (Proceedings concluded at 10:30 a.m.)
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1 CERTIFICATE
2 I, court approved transcriber, certify that the
3 foregoing is a correct transcript from the official electronic
4 sound recording of the proceedings in the above-entitled
5 matter.
6 /s/ Janice Russell January 25, 2019
7 Janice Russell, Transcriber Date
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Bestwall January 24 2019 Hearing Transcript

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Bestwall January 24 2019 Hearing Transcript

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Case 17-31795 Doc 767 Filed 01/25/19 Entered 01/25/19 13:31:08 Desc Main

1 UNITED STATES BANKRUPTCY COURT

3 IN RE: : Case No. 17-31795

4 BESTWALL LLC, : Chapter 11

5 Debtor. : Charlotte, North Carolina

8 BESTWALL LLC, : AP 17-03105

11 THOSE PARTIES LISTED ON :

18 For the Plaintiff/Debtor: Robinson, Bradshaw & Hinson, P.A.

2 For the Plaintiff/Debtor: Jones Day

7 For Georgia-Pacific LLC: Rayburn Cooper & Durham, P.A.

15 For Official Committee of JD Thompson Law

2 For Future Claimants' Hull & Chandler, P.A.

12 CRAIG ZIMMERMAN, ESQ.

13 For the Plaintiff/Debtor: Jones Day

1 APPEARANCES (via telephone continued):

2 For Georgia-Pacific LLC: Debevoise & Plimpton LLP

7 For Wilentz, Goldman & Wilentz, Goldman & Spitzer P.A.

10 For the Official Committee Montgomery McCracken

2 (Call to Order of the Court)

3 THE COURT: All right. Good morning.

4 (Counsel greet the Court)

5 THE COURT: I apologize for the tech, technical

6 difficulties that we have experienced this morning. I'm

7 beginning to wonder if maybe we haven't paid our phone bill and

8 that might be part of the, part of the difficulty, but I

9 understand that that's all been squared away and everybody

10 should be on the phone now and should be able to appear

11 telephonically, at least those who we understood were going to

15 because of the construction. So we shouldn't be here too too

16 long, but it's just going to be hot.

17 And sort of one more kind of announcement before we

18 get started. They just handed me this (indicating) and said

19 somebody left it here when we were back here in November. So

21 wait until the conclusion of the hearing.

22 So we are here for the Court to rule on the motion of

23 the Committee to dismiss the debtor's chapter 11 case for cause

24 as a bad faith filing pursuant to Section 1112(b), or,

25 alternatively, transfer venue in the interests of justice and

1 for the convenience of the parties pursuant to Section 1412 and

2 the responses, reply, and surreplies thereto.

3 We are also here today for a ruling on the motion of

4 the debtor for an order preliminarily enjoining certain actions

5 against nondebtors or, in the alternative, declaring that the

6 automatic stay applies to such actions and granting a temporary

7 restraining order pending a full hearing on the motion and the

8 objections, joinders, replies, and surreplies thereto.

9 Having said that, Ms. Abel, why don't I start over

11 then I'll get to the folks who are on the phone.

12 MS. ABEL: Shelley Abel, Bankruptcy Administrator.

13 THE COURT: Okay.

14 MR. HARRON: Good morning, Your Honor. Ed Harron and

16 Chandler, for the Future Claimants' Representative.

17 THE COURT: Okay.

18 MR. HARRON: And Mr. Esserman, the Future Claimants'

19 Representative, is on the phone.

20 THE COURT: Okay.

21 MR. HARRON: Thank you.

22 THE COURT: We hope, anyway, right?

23 MR. HARRON: We do.

24 MS. ZIEG: Good morning, Your Honor. He's on.

25 THE COURT: Good.

1 MS. RAMSEY: Good morning, Your Honor. Natalie Ramsey

2 and my partner, Davis Wright, newly with the law firm of

3 Robinson & Cole.