Georgia-Pacific unit seeks bankruptcy in wake of asbestos cases

WILMINGTON, Del (Reuters) - An affiliate of Georgia-Pacific LLC, which makes Brawny paper towels, has filed for U.S. Chapter 11 bankruptcy amid soaring costs of defending against claims its products caused asbestos-related diseases, according to a company statement on Thursday.

The affiliate, Bestwall LLC, joins scores of U.S. manufacturers that have filed for bankruptcy due to asbestos litigation, and comes as the U.S. Congress mulls a bill that plaintiffs’ lawyers say would discourage asbestos claims.

Georgia-Pacific is unaffected by the filing and Bestwall will continue operating normally, the statement said.

Bestwall’s legal costs from asbestos have risen to an average of $160 million a year, up from $6 million a year prior to 2000, according to company filings.

Asbestos is a naturally occurring mineral once prized for its resistance to heat but its fibers can cause deadly cancers, including mesothelioma, and leads to thousands of U.S. deaths annually, according to government statistics.

A bill known as the FACT Act has been introduced in the U.S. House that proponents argue would shed light on possible fraudulent asbestos claims, although critics say it will make it harder for people sickened by asbestos to get compensation.

In 1965, Georgia-Pacific acquired a maker of joint compound that contained asbestos. Georgia-Pacific, which is owned by Koch Industries Inc, ceased making the compound with asbestos in 1977.

Since then, the company has spent $2.9 billion in legal costs on asbestos cases and is currently defending about 62,000 such cases.

According to Bestwall, its products account for a tiny overall percentage of asbestos exposure, but it has been named in up to 80 percent of mesothelioma cases filed each year. Asbestos lawsuits often name multiple manufacturers as defendants.

Asbestos litigation has cost more than $50 billion in compensation and legal fees and has forced about 100 U.S. companies into bankruptcy, including chemical company W.R. Grace and building products company Owens Corning Corp.

Bankrupt companies and asbestos plaintiffs generally agree to establish and finance a trust for future claims. The company exits bankruptcy shielded from future asbestos lawsuits.

However, many trusts are running low on cash and have reduced payouts, and business groups allege that has prompted plaintiffs to focus on suing non-bankrupt companies, even if plaintiffs only had a limited exposure to a company’s product.

Allegations of fraudulent asbestos claims were a central part of the bankruptcy of Garlock Sealing Technologies LLC, which filed in 2010 the same court in Charlotte as Bestwall.

Editing by Noeleen Walder and Bernadette Baum