Summary:
In the United States Bankruptcy Court for the Western District of North Carolina, through Judge Ashley Austin Edwards, partially granted and partially denied motions for reconsideration filed by DBMP LLC and related CertainTeed/Saint-Gobain entities regarding a prior privilege and discovery ruling in the sprawling asbestos bankruptcy litigation.
The Court’s ruling focused primarily on procedural and evidentiary issues surrounding whether prior findings from the preliminary injunction proceedings had “preclusive effect” in later adversary proceedings. The Defendants argued that the Court’s earlier privilege order improperly treated findings from the preliminary injunction stage as binding merits determinations. Judge Edwards agreed only in a limited sense—clarifying that the prior Injunction Order did not have formal preclusive effect—but otherwise left the substance of the earlier rulings largely intact.
The opinion provides an extended discussion of the standards under Rules 59(e), 52(b), and 60(a), emphasizing that reconsideration is an “extraordinary remedy” reserved for manifest injustice, clear legal error, or clerical clarification.
Most importantly, the Court refused to retreat from its broader conclusions concerning the planning and execution of the DBMP “Texas Two-Step” restructuring. The Defendants challenged the Court’s finding that the bankruptcy filing decision had effectively been made well before the formal filing date and was part of the restructuring itself. Judge Edwards rejected that challenge outright, explaining that the Court independently reached those conclusions “based on unavoidable realities for any significant and substantial corporation transaction such as the Defendants’ Texas Two Step.”
The Court also clarified that background discussion regarding asbestos litigation history and CertainTeed’s asbestos exposure did not prejudge issues for the future estimation trial.
Finally, the Court did grant limited substantive relief regarding certain privilege determinations, redesignating twenty-two documents after concluding that some communications were in fact privileged or partially privileged.
Commentary:
This opinion feels less like a retreat and more like judicial housekeeping.
The Defendants sought to transform what was essentially a clarification motion into a broader attempt to walk back some of the most damaging language from the earlier DBMP rulings. Judge Edwards declined that invitation.
The Court carefully acknowledged an important procedural point: preliminary injunction findings are generally not entitled to formal preclusive effect. That is black-letter law. But the Defendants appear to have hoped that once the Court conceded that point, the entire factual architecture surrounding the Texas Two-Step restructuring might begin to unravel.
That did not happen.
Instead, Judge Edwards essentially said: No, the prior injunction findings are not technically binding in the res judicata or collateral estoppel sense—but the Court still agrees with them.
That distinction matters enormously.
The Court repeatedly emphasized that it independently reached many of the same conclusions based on the evidentiary record, the in camera review, and what it called “common sense.” In other words, the problem for the Defendants is not merely what Judge Whitley previously found during the preliminary injunction proceedings. The problem is that the current Court, after years of litigation and extensive discovery battles, appears to remain deeply skeptical of the restructuring narrative.
That skepticism continues to haunt virtually every major “Texas Two-Step” bankruptcy.
This blog has previously discussed DBMP and the broader asbestos divisional merger strategy multiple times, particularly in the context of:
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the use of divisional mergers to isolate mass tort liabilities,
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the effort to obtain bankruptcy-wide injunction protections for non-debtor affiliates,
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the role of funding agreements as purported substitutes for direct tort liability,
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and the increasingly strained arguments that these restructurings somehow arise organically rather than through years of prepetition strategic planning.
This latest ruling reinforces another recurring theme from those prior posts: courts are becoming increasingly unwilling to pretend that massive corporate restructurings just “happen” spontaneously shortly before bankruptcy filings.
Judge Edwards’ discussion of the “DBMP Filing Decision Finding” is particularly notable because the Court essentially rejected the idea that sophisticated multinational corporations engage in billion-dollar restructuring exercises without simultaneously planning for bankruptcy from the outset.
That observation has implications well beyond asbestos cases.
Consumer bankruptcy attorneys see analogous behavior all the time in different contexts:
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mortgage servicers engineering postpetition fee structures,
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creditors creating shell ownership transfers shortly before foreclosure,
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debt buyers restructuring portfolios to manipulate standing arguments,
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and lenders attempting to use contractual complexity as insulation from accountability.
What DBMP demonstrates is that courts are increasingly willing to look through form to substance when the transactional choreography becomes too elaborate to ignore.
The opinion is also significant for its extended discussion of § 105(a). Judge Edwards strongly reaffirmed that bankruptcy courts cannot use § 105(a) as a “roving commission to do equity” or to override explicit procedural rules. That discussion echoes the Fourth Circuit’s continuing emphasis in cases like David v. King that bankruptcy courts remain constrained by statutory structure even in highly equitable proceedings.
Ironically, that same limitation on § 105(a) often cuts against consumer debtors in ordinary cases—particularly when debtors seek equitable relief from harsh procedural defaults. Yet in mass tort bankruptcies involving sophisticated corporate actors, courts appear increasingly cautious about allowing § 105(a) to become a mechanism for expanding protections beyond what the Bankruptcy Code expressly authorizes.
That tension continues to define modern mass-tort Chapter 11 practice.
At bottom, this opinion is probably best understood as a warning shot rather than a reversal. The Court clarified language, corrected some privilege rulings, and narrowed procedural ambiguity. But the fundamental judicial skepticism surrounding the DBMP restructuring strategy remains firmly in place.
To read a copy of the transcript, please see:
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