Johnson & Johnson’s VP of Litigation recently testified before the U.S. Senate Judiciary Committee, emphasizing on the so-called ‘Texas Two-Step’ as the optimal resolution approach to claims for talc-related payouts. The controversial strategy involves a complicated combination of legal and corporate maneuvers, which have been criticized for potential misuse of bankruptcy protections.
The ‘Texas Two-Step’, a term coined by the legal community, involves the establishment of a new subsidiary company to assume potential liabilities, which is then deliberately led into bankruptcy to handle the liabilities separately, thereby protecting the main corporation from direct financial impacts. This approach is currently under review by the U.S. Senate Judiciary Committee, focusing extensively on its application in the settlement of mass tort liabilities.
As Johnson & Johnson faces growing numbers of lawsuits connected to its talc-based products, the company’s leadership asserts that this method is the most feasible path to fulfill settlement obligations without destabilizing the corporation’s overall financial health.
For more detailed discussion of the hearing and analysis of the ‘Texas Two-Step’ strategy, visit the original article published by the National Law Journal.