PUBLISHED
`
`UNITED STATES COURT OF APPEALS
`FOR THE FOURTH CIRCUIT
`
`
`No. 24-1493
`
`
`BESTWALL LLC, f/k/a Georgia-Pacific LLC, a Texas limited liability company and a
`North Carolina limited liability company,
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` Debtor – Appellee,
`
`v.
`
`THE OFFICIAL COMMITTEE OF ASBESTOS CLAIMANTS OF BESTWALL, LLC,
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` Creditor – Appellant.
`
`------------------------------
`
`AMERICAN ASSOCIATION FOR JUSTICE; CLAIMANTS; THE OFFICIAL
`COMMITTEE OF ASBESTOS PERSONAL INJURY CLAIMANTS IN IN RE
`ALDRICH PUMP LLC AND IN RE MURRAY BOILER LLC,
`
` Amici Supporting Appellant.
`
`ANTHONY J. CASEY; BROOK E. GOTBERG; JOSHUA C. MACEY; JOSEPH W.
`GRIER, III, Future Asbestos Claimants Representative appointed in In re Aldrich Pump
`LLC, et al.; TRANE TECHNOLOGIES COMPANY LLC; TRANE U.S. INC.;
`CHAMBER OF COMMERCE OF THE UNITED STATES OF AMERICA,
`
` Amici Supporting Appellee.
`
`
`Appeal from the United States Bankruptcy Court for the Western District of North
`Carolina, at Charlotte. Laura Turner Beyer, Chief Bankruptcy Judge. (17-31795)
`
`
`Argued: May 8, 2025 Decided: August 1, 2025
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`2
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`Before KING, AGEE, and QUATTLEBAUM, Circuit Judges.
`
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`Affirmed by published opinion. Judge Quattlebaum wrote the opinion, in which Judge
`Agee joined. Judge Agee wrote a concurring opinion. Judge King wrote a dissenting
`opinion.
`
`
`ARGUED: David Charles Frederick, KELLOGG, HANSEN, TODD, FIGEL &
`FREDERICK, P.L.L.C., Washington, D.C., for Appellant. Noel John Francisco, JONES
`DAY , Washington, D.C., for Appellee. ON BRIEF: Natalie D. Ramsey, Davis Lee Wright,
`Wilmington, Delaware, Thomas J. Donlon, ROBINSON & COLE LLP, Stamford,
`Connecticut; Joshua D. Branson, Alejandra Ávila, KELLOGG, HANSEN, TODD, FIGEL
`& FREDERICK, P.L.L.C., Washington, D.C.; Mark Kutny, Robert A. Cox, Jr .,
`HAMILTON STEPHENS STEEL + MARTIN, PLLC, Charlotte, North Carolina, for
`Appellant. Gregory M. Gordon, Dallas, Texas, Jeffrey B. Ellman, Atlanta Georgia, Sarah
`Welch, Cleveland, Ohio, C. Kevin Marshall, Megan Lacy Owen, Caleb P. Redmond,
`JONES DAY , Washington, D.C.; Garland S. Cassada, Richard C. Worf, Jr., ROBINSON,
`BRADSHAW & HINSON, P.A., for Charlotte, North Carolina, for Appellee. Lori Andrus,
`President, Jeffrey R. White, AMERICAN ASSOCIATION FOR JUSTICE, Washington,
`D.C., for Amicus American Association for Justice. Jonathan Ruckdeschel, THE
`RUCKDESCHEL LAW FIRM, LLC, Ellicott City, Maryland; Clayton L. Thompson, John
`L. Steffan, MAUNE RAICHLE HARTLEY FRENCH & MUDD, LLC, New York, New
`York; Thomas W. Waldrep, Jr., Jennifer B. Lyday, Ciara L. Rogers, Chris W. Haaf, Diana
`Santos Johnson, WALDREP WALL BABCOCK & BAILEY PLLC, Winston-Salem, North
`Carolina, for Amici Claimants. Elizabeth A. Kiernan, Dallas, Texas, Jonathan C. Bond,
`David W. Casazza, Lavi M. Ben Dor, Zach Young, GIBSON, DUNN & CRUTCHER LLP,
`Washington, D.C., for Amici Professors Anthony J. Casey, Brook E. Gotberg, and Joshua
`C. Macey. Jonathan P. Guy, Debra L. Felder, Washington, D.C., Michael Rosenberg,
`Chicago, Illinois, Daniel B. Carnie, ORRICK, HERRINGTON & SUTCLIFFE LLP,
`Washington, D.C., for Amici Future Claimants’ Representative of In Re Aldrich Pump,
`LLC, et al. K. Elizabeth Sieg, J. Stephen Tagert, Richmond, Virginia, Bradley R. Kutrow,
`Charlotte, North Carolina, Jonathan Y . Ellis, MCGUIREWOODS LLP, Raleigh, North
`Carolina; Gregory J. Mascitti, Anthony Bartell, MCCARTER & ENGLISH, LLP, New
`York, New York, for Amici Trane Technologies Company LLC and Trane U.S. Inc. Robert
`E. Dunn, Campbell, California, James E. Barrett, EIMER STAHL LLP, Chicago, Illinois,
`for Amicus Chamber of Commerce of the United States of America. Kevin C. Maclay,
`Todd E. Phillips, Jeffrey A. Liesemer, CAPLIN & DRYSDALE, CHARTERED,
`Washington, D.C.; Elizabeth J. Ireland, Charlotte, North Carolina, David Neier, Carrie V .
`Hardman, WINSTON & STRAWN LLP, New York, New York, for Amicus Official
`Committee of Asbestos Personal Injury Claimants in In re Aldrich Pump LLC and In re
`Murray Boiler LLC.
`
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`3
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`QUATTLEBAUM, Circuit Judge:
`The question we must answer in this appeal is whether federal courts have subject-
`matter jurisdiction over bankruptcy cases involving solvent debtors? At least as framed
`here, we answer yes. We do so not because a debtor’s financial condition is irrelevant under
`the Bankruptcy Code. It may be relevant in a number of contexts. Instead, we answer yes
`because the Constitution grants Article III judicial power over all cases arising under the
`laws of the United States. The Bankruptcy Code is a law of the United States. So, petitions
`for relief under the Bankruptcy Code —even those filed by solvent debtors—arise under
`the laws of the United States. Thus, we affirm the bankruptcy court’s denial of the motion
`to dismiss for lack of subject-matter jurisdiction.
`I.
`Founded in 1927, Georgia-Pacific LLC is a multibillion-dollar corporation that
`operates primarily in the pulp and paper industry .1 In 1965, Georgia-Pacific bought and
`then merged with Bestwall Gypsum Co., which manufactured wallboard, joint compound
`products and industrial plasters. But with its assets came its liabilities, including the
`asbestos claims against it, which plagued Georgia-Pacific for decades. See In re Bestwall
`LLC, 605 B.R. 43, 47 (Bankr. W.D.N.C. 2019). From 2014 to 2017, for example, Bestwall
`paid $558 million in defense and indemnity costs for asbestos litigation.
`
`1 Unsurprisingly, Georgia-Pacific’s corporate history is complicated , even before
`the events at issue in this case. But that is not relevant here. So, we do not detail that history
`and, for convenience, refer to the entity as Georgia-Pacific regardless of its specific legal
`name at the time.
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`4
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`In 2017, Bestwall faced around 64,000 pending asbestos claims, with tens of
`thousands more anticipated through at least 2050. So, Georgia-Pacific sought to deal with
`these asbestos claims through a divisional merger that has been labeled the Texas two-
`step—named for Texas’ Business Organizations Code § 1.002(55)(A) (the statutory vehicle
`for the divisional merger) and that state’s beloved country dance.2 This maneuver “splits a
`legal entity into two, divides its assets and liabilities between the two new entities, and
`terminates the original entity.” In re LTL Mgmt., LLC, 64 F.4th 84, 96 (3d Cir. 2023). The
`lion’s share of assets —and indeed many liabilities—go into a new company, while the
`asbestos liabilities fall into a separate company, whose primary purpose is to resolve the
`asbestos claims.3
`The company holding the asbestos liabilities then files for bankruptcy. The
`bankruptcy court issues an injunction channeling all asbestos-related claims into a personal
`injury trust, known as an 11 U.S.C. § 524(g) trust. See In re Combustion Eng’g, Inc., 391
`F.3d 190, 234 (3d Cir. 2004), as amended (Feb. 23, 2005). This “allows a debtor to address
`
`2 Originally dubbed the “valse a deux temps” (“waltz two times”), the Texas two-
`step mixed elements of the waltz, the Foxtrot and the polka. The popular dance style got
`its moniker in early 20th century Texas dance halls. See Scott Sosebee, Dancin’ Texas
`Style: The Origin of the Texas Two-Step, THE DAILY SENTINEL (January 18, 2025),
`https://www.dailysentinel.com/life_and_entertainment/features/dancin-texas-style-the-
`origin-of-the-texas-two-step/article_dd470e3a-d9d7-5197-9948-bb377cec79e9.html
`[https://perma.cc/HZ7M-2V4D].
`3 That said, nothing inherent to the two-step requires the tort liabilities to be
`asbestos-related. See, e.g., In re Aearo Techs. LLC, No. 22-02890-JJG-11, 2023 WL
`3938436 (Bankr. S.D. Ind. June 9, 2023), appeal dismissed, No. 22-2606, 2024 WL
`5277357 (7th Cir. July 11, 2024) (using a bankruptcy maneuver closely related to the Texas
`two-step to address tort claims regarding defective earplugs).
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`5
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`in one forum all potential asbestos claims against it, both current and future, as well as
`current and potential future claims against third parties alleged to be liable on account of
`asbestos claims against the debtor.” In re Bestwall LLC, 606 B.R. 243, 249 (Bankr.
`W.D.N.C. 2019), aff’d, No. 3:20-cv-103-RJC, 2022 WL 67469 (W.D.N.C. Jan. 6, 2022),
`aff’d, 71 F.4th 168 (4th Cir. 2023); see generally Michael A. Francus, Texas Two-Stepping
`Out of Bankruptcy, 120 MICH. L. REV. ONLINE 38 (2022).4
`Implementing this strategy, on July 31, 2017, Georgia-Pacific split into two entities,
`which, for convenience, we will refer to as Georgia-Pacific and Bestwall.5 Georgia-Pacific
`received most of the $28.3 billion company. Bestwall received:
`(a) three bank accounts containing approximately $32 million in cash;
`(b) all contracts of the old Georgia-Pacific related to its asbestos- related
`litigation;
`(c) certain real estate;
`(d) 100% of a separate company that manufactures and sells gypsum plaster
`products. It was projected to generate cash flow of approximately $18 million
`per year, and was valued at approximately $145 million in 2017; and
`
`4 Section 524(g) asbestos trusts trace back to the Johns- Manville bankruptcy, in
`which Judge Lifland pioneered this solution to the tricky timing problem presented by the
`long latency periods of asbestos-related diseases. See In re Johns-Manville Corp., 68 B.R.
`618 (Bankr. S.D.N.Y.1986), aff’d, 78 B.R. 407 (S.D.N.Y. 1987), aff’d sub nom, Kane v.
`Johns-Manville Corp., 843 F.2d 636 (2d Cir. 1988). Congress codified the innovation by
`adding § 524(g) to the Bankruptcy Code via the Bankruptcy Reform Act of 1994, Pub. L.
`No. 103-394, § 111, 108 Stat. 4106, 4113–17.
`
`5 The legal names of the entities are Georgia-Pacific LLC and Bestwall LLC.
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`6
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`(e) an agreement from Georgia- Pacific to pay for Bestwall’s expenses
`incurred in the normal course of business ; administration expenses if
`Bestwall declared bankruptcy; and a § 524(g) asbestos trust in the amount
`required by a confirmed reorganization plan if Bestwall couldn’t fund the
`trust.
`On November 2, 2017, Bestwall petitioned for relief under Chapter 11 of the
`Bankruptcy Code in the Western District of North Carolina. It simultaneously filed an
`adversary proceeding, in which it moved for an injunction prohibiting asbestos claimants
`from filing or prosecuting asbestos claims against Bestwall or Georgia-Pacific. See
`Bestwall, 606 B.R. at 246–47. The Official Committee of Asbestos Claimants—formed
`after Bestwall filed bankruptcy to represent the interests of individuals with personal injury
`claims for exposure to asbestos manufactured by Bestwall—opposed the injunction. The
`bankruptcy court granted Bestwall’s motion.6
`The Committee also moved to dismiss the bankruptcy case, arguing it was filed in
`bad faith because Bestwall wasn’t really bankrupt. The same day the bankruptcy court
`
`6 The Committee argued that the bankruptcy court did not have jurisdiction to issue
`an injunction prohibiting suits against Georgia-Pacific, since it did not file for bankruptcy.
`The court rejected this argument, holding it had subject-matter jurisdiction to enjoin the
`claims against Georgia-Pacific because the injunction “related to” Bestwall’s bankruptcy
`under 28 U.S.C. § 1334(b). Bestwall, 606 B.R. at 249. When the Committee appealed, the
`district court affirmed. See In re Bestwall LLC, No. 3:20-cv -103-RJC, 2022 WL 67469
`(W.D.N.C. Jan. 6, 2022). It agreed the bankruptcy court had subject-matter jurisdiction
`given its “related-to” jurisdiction over the claimants’ asbestos claims. Id. at *5. The court
`also held the bankruptcy court did not abuse its discretion i n granting Bestwall’s motion
`for a preliminary injunction. Id. at *7–9. In a split decision, we affirmed. See In re Bestwall
`LLC, 71 F.4th 168 (4th Cir. 2023).
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`7
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`granted the motion for an injunction, it denied the Committee’s motion. See In re Bestwall
`LLC, 605 B.R. 43, 54 (Bankr. W.D.N.C. 2019). The court held that “[a]ttempting to resolve
`asbestos claims through 11 U.S.C. § 524(g) is a valid reorganizational purpose, and filing
`for Chapter 11, especially in the context of an asbestos or mass tort case, need not be due
`to insolvency.”7 Id. at 49.
`Several years later, the Committee moved to dismiss again , this time for lack of
`subject-matter jurisdiction. It is the bankruptcy court’s ruling on this motion that is
`currently before us. The Committee noted that the Constitution gives Congress the power
`to establish “uniform Laws on the subject of Bankruptcies throughout the United States.”
`U.S. CONST. art. I, § 8, cl. 4. The Committee then argued that Bestwall was not “bankrupt”
`according to a founding-era understanding of the word. For that reason, it maintained that
`the bankruptcy court had no legitimate subject-matter jurisdiction over Bestwall. This
`constitutional requirement for jurisdiction, the Committee insisted , precedes any statutory
`requirements for debtors.
`
`7 The bankruptcy court noted that the “Fourth Circuit standard for dismissal of a
`Chapter 11 case as a bad faith filing is one of the most stringent articulated by the federal
`courts.” Id. at 49 (citing In re Dunes Hotel Assocs., 188 B.R. 162, 168 (Bankr. D.S.C.
`1995)). That standard permits a court to dismiss a Chapter 11 filing for bad faith only when
`the bankruptcy reorganization is both (i) objectively futile and (ii) filed in subjective bad
`faith. See Carolin Corp. v. Miller, 886 F.2d 693, 700–01 (4th Cir. 1989). The Committee
`sought leave to appeal, but the bankruptcy court denied it s request. The Committee then
`moved for certification of direct appeal to the Fourth Circuit under 28 U.S.C. § 158(d)(2).
`Holding that certification would materially advance the case on a matter of public
`importance, the bankruptcy court certified the Committee’s appeal. However, we denied
`the petition. See Off. Comm. of Asbestos Claimants of Bestwall, LLC v. Bestwall LLC, No.
`19-408, 2019 WL 13512209 (4th Cir. Nov. 14, 2019).
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`8
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`The Committee claimed that its motion was a “new and distinct argument from any
`previously raised.” J.A. 1773. And since the motion attacked the court’s subject-matter
`jurisdiction, the court’s previous denial of its motion to dismiss for bad faith did not bar it;
`subject-matter jurisdiction, the Committee noted, may be challenged at any time. See Plyler
`v. Moore, 129 F.3d 728, 731 n.6 (4th Cir. 1997).
`The bankruptcy court agreed that subject-matter jurisdiction arguments “may be
`resurrected at any point in the litigation.” In re Bestwall LLC, 658 B.R. 348, 361 (Bankr.
`W.D.N.C. 2024) (quoting Gonzalez v. Thaler, 565 U.S. 134, 141 (2012)). And it considered
`the Committee’s argument that the bankruptcy court lacked subject-matter jurisdiction over
`a solvent debtor on the merits. The bankruptcy court observed that “Congress determines
`subject-matter jurisdiction within any limitations imposed by the Constitution[,]” and in
`turn, that the “Bankruptcy Clause of the Constitution determines the limits of constitutional
`subject-matter jurisdiction for bankruptcy.” Id. at 362. But because the history of
`bankruptcy legislation has been one of liberalizing bankruptcy access, and Congress enjoys
`substantial deference in defining bankruptcy, the bankruptcy court ultimately rejected the
`Committee’s argument that Congress cannot open bankruptcy to debtors who aren’t in
`financial distress.8 Therefore, it denied the Committee’s motion.
`When the Committee again moved for certification for direct appeal to us under 28
`U.S.C. § 158(d)(2), the bankruptcy court once again granted it. This time, we granted the
`petition.
`
`8 The Committee proffers a vague concept of “financial distress” but never defines
`the term. Neither does the Constitution, the Bankruptcy Code or any court.
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`9
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`II.
`At the outset, we clarify what this appeal is and is not about. This appeal is not about
`the validity of the controversial Texas two-step maneuver. The Committee acknowledged
`this at oral argument, agreeing that its view of jurisdiction would affect all debtors, not just
`those who recently performed a divisional merger. See Bestwall LLC v. The Off. Comm. of
`Asbestos Claimants of Bestwall, LLC, No. 24-1493, Oral Arg. at 16:00–16:20 (4th Cir. Mar.
`8, 2025). Nor is it about whether a debtor’s ability to pay its debts is relevant in a
`bankruptcy case. That issue was considered in the Committee’s motion to dismiss for bad
`faith and may come up at future junctures—at plan confirmation, for example. Instead, we
`face a narrow question—do federal courts have subject-matter jurisdiction over bankruptcy
`cases filed by debtors who may be able to pay their obligations?9
`To answer this question, we start with the basics. The Constitution grants Article III
`judicial power over all cases arising under the laws of the United States. See Royal Canin
`U. S. A., Inc. v. Wullschleger, 604 U.S. 22, 26 (2025) (“‘Arising under’ jurisdiction—more
`often known as federal-question jurisdiction—enables federal courts to decide cases
`founded on federal law.”). The Bankruptcy Code is a law of the United States. Bestwall
`petitioned to reorganize under Chapter 11 of the Code. So, that petition is a case arising
`under the laws of the United States. Seems straightforward.
`
`9 We review such questions de novo. See Capitol Broad. Co. v. City of Raleigh,
`N.C., 104 F.4th 536, 539 (4th Cir. 2024). We review the bankruptcy court’s legal
`conclusions de novo and its factual findings for clear error. See In re White, 487 F.3d 199,
`204 (4th Cir. 2007).
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`10
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`The Committee insists it’s not that simple. It claims, correctly, that Congress only
`has the power to enact laws pertaining to bankruptcy that the Constitution grants. And
`though it acknowledges Article I, Section 8 authorizes Congress to “establish . . . uniform
`Laws on the subject of Bankruptcies throughout the United States,” the Committee
`maintains the meaning of “bankruptcy” at the founding did not include those able to pay
`their debts. Any law that permits a company that could pay its debts to seek bankruptcy
`protection, according to the Committee, cannot confer “constitutional subject matter
`jurisdiction.”10 Committee Br. at 16 (quoting In re Bestwall, 658 B.R. at 362).
`But that phrase sounds an awful lot like a standing challenge. Indeed, all the cases
`we have located that use that phrase use it as a synonym for Article III standing. See, e.g.,
`Norfolk S. Ry. Co. v. Guthrie, 233 F.3d 532 , 534 (7th Cir. 2000) (“NS argues that its
`complaint against Lakin and Snyder presents a case or controversy and thus should not
`
`10 Strictly speaking, the question isn’t whether the bankruptcy court had subject-
`matter jurisdiction; it’s whether the district court that referred the case to the bankruptcy
`court had subject-matter jurisdiction. As we have said, “since bankruptcy courts are not
`Article III courts, they do not wield the United States’s judicial Power.” Kiviti v. Bhatt, 80
`F.4th 520, 532 (4th Cir. 2023). Accordingly, bankruptcy courts are not subject to Article III
`limitations. We held in Kiviti that bankruptcy courts can adjudicate cases that would be
`moot if they were heard by an Article III court. See id. By the same token, bankruptcy
`courts could, in theory, adjudicate cases that would lack subject-matter jurisdiction if they
`were heard by an Article III court. “Once a case is validly referred to the bankruptcy court,
`the Constitution does not require it be an Article III case or controversy for the bankruptcy
`court to act.” Id. at 533. Granted, a bankruptcy case must satisfy Article III requirements
`at the bookends of the case’s life. So, before a district court refers a bankruptcy case to a
`bankruptcy court, “a bankruptcy case must— at the start —be within the judicial Power .”
`Id. at 532. For the same reason, “[s]o too must Article III be satisfied after the bankruptcy
`court acts and the case is returned to the district court[.]” Id. at 533. None of this changes
`the question before us. This point is only one of technical precision; the basic question
`presented of whether subject-matter jurisdiction exists remains just as pressing.
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`11
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`have been dismissed for lack of constitutional subject-matter jurisdiction.”); United States
`v. Hahn, 359 F.3d 1315, 1322–24 (10th Cir. 2004) (analyzing the existence of an Article III
`case or controversy for purposes of “constitutional subject matter jurisdiction”); Umanzor
`v. Lambert, 782 F.2d 1299, 1301 n.2 (5th Cir. 1986) (“Whether there exists an Article III
`case or controversy, and thus Constitutional subject-matter jurisdiction, is analytically
`distinct from whether a habeas corpus statute] confer[s] statutory subject- matter
`jurisdiction”). Yet the Committee does not argue that Bestwall’s restructuring doesn’t
`satisfy Article III’s standing requirements.
`What the Committee’s argument really does is convert a challenge to the Bankruptcy
`Code’s constitutionality into a jurisdictional question. But that can’t be right. Following
`the Committee’s logic, challenges to Congress’s Commerce Clause power ought to be
`about jurisdiction too. But they aren’t. Consider United States v. Lopez, 514 U.S. 549
`(1995). There, the Supreme Court struck down a criminal conviction for violating 18
`U.S.C. § 922(q)(1)(A), which criminalized possessing a gun in school zones. Id. at 551.
`The Court held that Congress lacked authority under the Commerce Clause to make such
`laws. Id. at 567–68. But not because the district court had no subject-matter jurisdiction
`over the case. Instead, the Court affirmed the Fifth Circuit’s decision that “reversed
`respondent’s conviction.” Id. at 552. If Congress’ lack of c onstitutional authority stripped
`subject-matter jurisdiction, the Court would have said so. See Vt. Agency of Nat. Res. v.
`U.S. ex rel. Stevens, 529 U.S. 765, 778 n.8 (2000) (explaining “the validity of qui tam suits
`under [Article II is not] a jurisdictional issue that we must resolve here”); see also City of
`Boerne v. Flores, 521 U.S. 507, 512 (1997) (saying nothing about jurisdiction and merely
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`12
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`reversing the Fifth Circuit after holding that RFRA “exceeded the scope of [Congress’]
`enforcement power under § 5 of the Fourteenth Amendment”). Plainly, federal courts have
`subject-matter jurisdiction over constitutional challenges to Congressional enactments.
`This is not to say bankruptcy courts are immune to questions of subject-matter
`jurisdiction. But that jurisdiction is determined by statute. 28 U.S.C. § 1334 vests district
`courts with “original and exclusive jurisdiction of all cases under title 11 . . . or arising in
`or related to cases under title 11.” 28 U.S.C. § 1334(a)–(b). “Whether a bankruptcy court
`may exercise subject- matter jurisdiction over a proceeding is determined by reference to
`28 U.S.C. § 1334.” Valley Historic Ltd. P’ ship v. Bank of N.Y., 486 F.3d 831, 839 n.3 (4th
`Cir. 2007); see In re Kirkland, 600 F.3d 310, 315 (4th Cir. 2010) (“[S]ubject matter
`jurisdiction is determined by § 1334.”). “Only Congress may determine a lower federal
`court’s subject-matter jurisdiction.” Kontrick v. Ryan, 540 U.S. 443, 452 (2004).
`11
`Granted, § 1334 must remain within constitutional limits. See Kline v. Burke Constr.
`Co., 260 U.S. 226, 234 (1922) (holding Congress “may give, withhold or restrict such
`
`11 Relatedly, 28 U.S.C. § 157 permits district courts to channel that jurisdiction to
`bankruptcy courts. “Each district court may provide that any or all cases under title 11 and
`any or all proceedings arising under title 11 or arising in or related to a case under title 11
`shall be referred to the bankruptcy judges for the district.” 28 U.S.C. § 157(a). This raises
`an interesting delegation issue —can Article III power be delegated by Article III courts
`(United States District Courts) to non-Article III courts (Bankruptcy Courts)? But that
`thorny issue is not before us, so we need not delve into it. See generally Kevin H. Kim, A
`Constitutional Tango of Judicial Interpretation: The Instability of Bankruptcy Court
`Authority under Article III, 34 EMORY BANKR. DEV. J. 561 (2018); Troy A. McKenzie,
`Judicial Independence, Autonomy, and the Bankruptcy Courts, 62 STAN. L. REV. 747
`(2010); Anthony J. Casey & Aziz Z. Huq, The Article III Problem in Bankruptcy, 82 U.
`CHI. L. REV. 1155 (2015).
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`13
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`jurisdiction at its discretion, provided it be not extended beyond the boundaries fixed by
`the Constitution”); Kiviti, 80 F.4th at 533 (“Bankruptcy courts, as statutory creatures, have
`whatever power Congress lawfully gives them.” (emphasis added)) . So, a party like the
`Committee can certainly argue that Congress exceeded its powers in giving the bankruptcy
`court jurisdiction over a company that can pay its debts. But that question really is about
`Congress’s power under Article I of the Constitution to make parties eligible for bankruptcy
`protection.12 It’s not a question of subject-matter jurisdiction.
`Indeed, no court has ever adopted the Committee’s view. As the bankruptcy court
`pointed out, “[t]here are simply no cases at any level (of which this court is aware) that
`explicitly endorse the proposition that bankruptcy courts do not have subject-matter
`jurisdiction unless a debtor has a sufficient degree of financial distress.” Bestwall, 658 B.R.
`at 371. Even the In re LTL M anagement court didn’t decide the case on subject-matter
`jurisdiction grounds. See 64 F.4th 84 (3d Cir. 2023). There, the Third Circuit determined
`that LTL—the company formed to own and resolve Johnson & Johnson’s talc liabilities—
`was not in financial distress. See id. at 106–10. So, it dismissed LTL’s bankruptcy petition
`as a bad faith filing. See id. at 110. Importantly, the court determined that it had jurisdiction
`of the appeal under 28 U.S.C. § 158(d)(2)(A) and that the bankruptcy court had jurisdiction
`
`12 The parties here advance policy reasons for and against the idea that only
`insolvent debtors should file for bankruptcy protection. But those arguments are best left
`for Congress. We traffic in law, not policy.
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`14
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`under § 157(a) and § 1334(a). See id. at 99. It said nothing about the Constitution or its
`bearing on subject-matter jurisdiction over bankruptcies.13
`Perhaps the Committee’s best authority is Reid v. Covert, 354 U.S. 1 (1957). There,
`the Supreme Court held that wives of military members could not be court-martialed but
`were instead entitled to regular civilian criminal jury trials. Id. at 18–19. It analyzed Article
`2(11) of the Uniform Code of Military Justice, which lists whom the Code covers. Id. at
`16. The Court determined that the Fifth and Sixth Amendments require criminal
`prosecutions to proceed in regular civilian jury trials, except for the “very limited and
`extraordinary jurisdiction” of military tribunals. Id. at 21. Thus, the Court held that the
`court-martial had no jurisdiction over civilians. Id. at 39–40.
`But Reid never used the phrase “subject-matter jurisdiction.” Indeed, the opinion
`seems to instead be concerned with personal jurisdiction. Perhaps Reid is a vestige of an
`
`13 Relatedly, at least five other circuits have rejected the argument that a debtor’s
`ineligibility for bankruptcy is jurisdictional, and no court has ever accepted it. In In re
`Zarnel, 619 F.3d 156, 158 (2d Cir. 2010), the Second Circuit addressed whether a debtor
`who doesn’t satisfy credit counseling requirements per 11 U.S.C. § 109(h) can commence
`a bankruptcy proceeding. The court held that “the restrictions of § 301 and § 109(h) are not
`jurisdictional, but rather elements that must be established to sustain a voluntary
`bankruptcy proceeding.” Id. at 169. According to the court, “[r]estricting whether an
`individual may be a debtor either under the Bankruptcy Code in general or under a given
`chapter does not speak in jurisdictional terms or invoke the jurisdiction of the district court,
`delineated in 28 U.S.C. § 1344.” Id.; see also In re Trusted Net Media Holdings, LLC, 550
`F.3d 1035, 1046 (11th Cir. 2008) (en banc) (holding that the Bankruptcy Code’s sections
`on involuntary cases do not implicate subject-matter jurisdiction); In re McCloy, 296 F.3d
`370, 375 (5th Cir. 2002) (debtor eligibility under §§ 109(g) and 303(a) & (h) is not
`jurisdictional); In re Marlar, 432 F.3d 813, 815 (8th Cir. 2005) (failing to satisfy § 303(a)
`does not strip the court of subject-matter jurisdiction); In re Hamilton Creek Metro. Dist.,
`143 F.3d 1381, 1385 n.2 (10th Cir. 1998) (“[N]one of the § 109(c) criteria is jurisdictional
`in nature.”).
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`era in which jurisdictional arguments and phrases were used more liberally than they are
`today. Since then, the Supreme Court has warned against the overuse of jurisdictional
`labels. “Because the consequences that attach to the jurisdictional label may be so drastic,
`we have tried in recent cases to bring some discipline to the use of this term.” Henderson
`ex rel. Henderson v. Shinseki, 562 U.S. 428, 435 (2011); see Sebelius v. Auburn Reg’l Med.
`Ctr., 568 U.S. 145, 153 (2013) (“Tardy jurisdictional objections can [] result in a waste of
`adjudicatory resources and can disturbingly disarm litigants.”); see also Lexmark Int’l, Inc.
`v. Static Control Components, Inc., 572 U.S. 118, 125–27 (2014) (repudiating the
`“prudential standing” doctrine as a misnomer that has nothing to do with Article III
`standing). What Reid really seems to concern itself with is violations of the Fifth and Sixth
`Amendments.14 See 354 U.S. at 19. It therefore shines little light on this appeal.
`Our colleague in dissent writes passionately about his disagreement with the Texas
`two-step bankruptcy maneuver, citing his views on both policy and law. In fact, he insists
`we approve that maneuver in this opinion. But while his arguments address the merits of
`
`14 To be sure, the Committee raises Seventh Amendment challenges to the use of a
`§ 524(g) trust. Bestwall responds that, under the Bankruptcy Code, a plan with a § 524(g)
`trust must be approved by 75% of the asbestos claimants. 11 U.S.C.
`§ 524(g)(2)(B)(ii)((IV)(bb). It also points out that, under the Code, any personal injury
`claimant can opt out and pursue his claim outside of bankruptcy. 28 U.S.C. § 157(b)(5)
`(“The district court shall order that personal injury tort and wrongful death claims shall be
`tried in the district court in which the bankruptcy case is pending.”); 28 U.S.C. § 1411(a)
`(“[T]his chapter and title 11 do not affect any right to trial by jury that an individual has
`under applicable nonbankruptcy law with regard to a personal injury or wrongful death tort
`claim.”). This opinion should not be construed to resolve this question. Rather, this opinion
`merely explains that question is not one of subject-matter jurisdiction.
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`whether solvent debtors may seek bankruptcy protection, ours do not. And while ours
`address subject-matter jurisdiction, his do not.
`The Committee has already had an opportunity to argue that solvent debtors are not
`entitled to bankruptcy protection. It lost that argument before the bankruptcy court. The
`Committee may have another chance to renew that argument— at plan confirmation. If it
`doesn’t like the result, it will then have a final order to appeal. But as we have explained,
`challenges about a debtor’s eligibility for bankruptcy protection are not jurisdictional, even
`when those challenges are constitutional. For that reason, now is not the time for these
`arguments. We repeat that this appeal presents only one narrow question—do federal courts
`have subject-matter jurisdiction over bankruptcy cases filed by debtors who may be able
`to pay their obligations? We have answered yes.
`III.
`For all these reasons, the opinion of the bankruptcy court is,
`AFFIRMED.
`
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`AGEE, Circuit Judge, concurring:
` I am pleased to concur fully in Judge Quattlebaum’s opinion. I write separately to
`outline some of the errors in the dissent’s discussion of bankruptcy precedent and the
`ramifications of its conclusion.
` At the outset, I completely agree with Judge Quattlebaum’s conclusion that this case
`is not “about whether a debtor’s ability to pay its debts is relevant in a bankruptcy case,”
`but rather whether “federal courts have subject-matter jurisdiction over bankruptcy cases
`filed by debtors who may be able to pay their obligations?” Maj. Op. at 9. Our friend in
`dissent views it differently, asserting that the majority’s decision to rely on Section 1334 is
`an attempt to “sidestep th[e] constit