The “Texas Two-Step” is a legal tactic devised by Jones Day to help corporations like Johnson & Johnson and Georgia-Pacific evade mass tort liability via bankruptcy.
First, a company splits into two entities under Texas law. Then, one of the entities takes on the company’s mass tort liabilities and declares bankruptcy. This maneuver allows companies to potentially resolve large numbers of lawsuits through bankruptcy court, while protecting their main assets and operations from legal claims.
This video explores the Texas Two-Step, how it works, the reasons why plaintiffs’ attorneys’ object to it, the justifications provided by companies and their lawyers for its use, and how courts have ruled on this controversial tactic so far.
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