J&J’s ‘Texas Two-Step’ Talc Bankruptcy Strategy Remains in Doubt

A corporate strategy that gained attention in a Johnson & Johnson spinoff’s bankruptcy continues to face uncertainty despite a refusal to dismiss the Chapter 11 case.

The maneuver, known as the Texas Two-Step because of its reliance on Texas corporate law, involves a company spinning off a unit and transferring its tort liability to that unit. The spinoff is then put into bankruptcy to manage that liability without putting the assets of the original company into play.

New Jersey bankruptcy Judge Michael Kaplan refused to dismiss J&J talc liability spinoff LTL Management LLC’s Chapter 11 case, finding it wasn’t filed ...