Short answer: It’s not a dance move. Rather, it’s a (somewhat controversial) bankruptcy procedure gaining popularity among corporations looking to navigate their debt.  










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If you may have been exposed to asbestos, speak with your healthcare provider about tests and screening to help detect the presence of asbestos fibers and asbestos-related diseases.






















Understanding the Texas Two-Step Bankruptcy Maneuver









Legal procedure has allowed companies like asbestos manufacturers to escape liability for injuries their products cause.





While there are federal regulations and laws in place for both individuals and corporations to file for bankruptcy, it is also true that states have their own sets of bankruptcy laws.  States like Texas and Delaware have some bankruptcy laws in place that appeal to corporations for different reasons.  





And over the years, Texas has become a popular state for some major corporations looking to offload debt and liability thanks to something called a divisive merger, or the “Texas two-step.”





What is a corporate merger and how does it impact the Texas Two-Step?





But let’s back up.  First, what is a merger?  The U.S. Small Business Administration defines it as the combining of “two separate businesses into a single new legal entity.”  So, Company A and Company B agree to join forces (merge) and become Company C.  





This differs from an acquisition, which is when one company purchases another that becomes absorbed into the original (parent) company (Company A buys Company B, and Company B becomes part of Company A).  





A divisive (or divisional) merger, which is involved in the Texas two-step, is when one company divides itself into multiple entities.  Essentially, a company can create a smaller company (or companies) that may take on certain aspects, departments, and/or finances of the original.





In fact, this practice was first introduced into Texas law in 1989.  Authors who wrote it, members of the Corporation Law Committee of the Texas State Bar, wanted it to create a more flexible business environment in Texas, and did not intend for it to be used by billion dollar corporations to insulate themselves from claims and avoid paying them out.  





It’s a totally legal move, but its use by big corporations has been making waves in the world of not only bankruptcy law, but asbestos litigation as well. 





You may be familiar with Johnson & Johnson (J&J), a company known for making a wide array of beauty care products and notably, baby products.  Maybe you’ve even heard about the swarm of lawsuits filed against them in recent years on behalf of women, and some men and other family members, who have been diagnosed with various cancers from exposure to asbestos found in Johnson & Johnson’s talcum based baby powder. 





This has resulted in a massive class action suit against the company as well as hundreds, if not thousands, of other asbestos injury claims.  





How can asbestos get into talc? 

Basically, through cross contamination since both are naturally occurring minerals. Talc is a type of clay silicate mineral. Much like the tremolite asbestos that was found among the vermiculite in the mine formerly operated by W.R. Grace in Libby, MT, asbestos can also be found among deposits of talc.  













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J&J’s Two-Step









In 2021, J&J created a Texas based subsidiary company called LTL Management, LLC by way of the Texas Two-Step.  Then, it took the 40,000+ asbestos injury claims it’s facing and offloaded them onto LTL, effectively stalling all of those cases in court.  But that’s not all.





Shortly after LTL Management was created (read: less than a week), it filed for Chapter 11 bankruptcy.  If you’re not familiar with that term or need a refresher, Chapter 11 refers to the “chapter” of the U.S. Bankruptcy Code that “generally provides for reorganization, usually involving a corporation or partnership.”  Usually, this is done so that the corporation (or less often, individual) can “keep its business alive and pay creditors over time.”





Texas Two-Step can let debtors avoid paying creditors (including injured customers)





Part of the complex bankruptcy process involves the debtor, the company or person filing for bankruptcy, submitting financial records and a plan of reorganization to the court.  In 2022, J&J’s filing was allowed to move forward after a judge’s ruling.





But most recently, per Bloomberg Law, judges from the US Court of Appeals Third Circuit ruled that LTL Management could not actually file for bankruptcy because it is being funded with $61.5 billion by J&J, according to court submissions.  Basically, the company was found to be too financially secure to declare bankruptcy.





Johnson & Johnson’s position on the Texas Two-Step





J&J said that the purpose of LTL filing for Chapter 11 was “to resolve all claims related to cosmetic talc in a manner that is equitable to all parties, including any current and future claimants” which sounds like the plan was to establish a bankruptcy trust.  





This ruling has the potential to derail J&J/LTL’s plans, and also to change the game around procedural moves like the Texas two-step.  Because actually, J&J is far from the first company to attempt the move in regards to resolving asbestos litigation.













       
        
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Other asbestos companies have used the Texas two-step to establish bankruptcy trusts instead of facing mounting asbestos litigation claims.





Another company that has taken this route is former producer of asbestos joint compound Georgia-Pacific (parent company Koch Industries), which two-stepped into creating Bestwall in 2017 and assigned all GP’s asbestos liability to it.  If you guessed that Bestwall’s next step was to file for Chapter 11, you guessed right.





A few years later, asbestos cement and coating manufacturer CertainTeed Corporation (parent company Saint-Gobain) spun off its asbestos liabilities to a subsidiary called DBMP, LLC, which then filed for Chapter 11 bankruptcy.  





And still another company, Trane Technologies, two-stepped into creating 2 new entities to take on the burden of its asbestos litigation debt – Aldrich Pump, LLC and Murray Boiler, LLC.  Trane manufactured industrial equipment like pumps and boilers that used asbestos insulation and gasket products in order to function optimally.  Aldrich Pump and Murray Boiler filed for bankruptcy in 2020.  





When companies use this maneuver, they halt the proceedings of the cases filed in court on behalf of thousands of sick plaintiff’s and their families.  With the recent ruling in the J&J case, we will have to wait and see what the future holds for former asbestos companies eyeing the Texas two-step.





















AsbestosClaims.Law









For Justinian C. Lane, getting compensation for asbestos victims is personal.





Justinian’s grandparents and his father all worked with asbestos in their younger years and died from asbestos-related cancers in their later years.  





At the time of each of their deaths, no one in Justinian’s family knew that they were eligible to file an asbestos lawsuit and to seek compensation from the asbestos trusts.





Because no one in Justinian’s family knew their options, they never received any compensation for the death of their loved ones. 





If you believe that you or your family member’s injury was related to asbestos exposure, you could be entitled to significant compensation.





This is money you could use to cover the costs of asbestos removal services, pay for medical treatment, and preemptively protect your physical well-being. 





There are also asbestos trusts that offer compensation much more quickly and easily (without filing a lawsuit.)





If you’d like help with filing a claim, please get in touch by email at [email protected], or call or text us at (833) 4-ASBESTOS (427-2378) or (206) 455-9190. We’ll listen to your story and explain your options. And we never charge for anything unless you receive money in your pocket.





In addition to legal claims, veterans disability, social security and employment protection like workers compensation, FELA and The Jones Act for maritime workers, there are asbestos trusts that have been set up to compensate those harmed by asbestos without having to file a lawsuit.





There is no risk or cost to speak with one of our staff about your asbestos litigation. There are no fees unless you receive money.





If you have any additional questions or concerns related to asbestos, check out our website and YouTube page for videos, infographics and answers to your questions about asbestos, including health and safety, asbestos testing, removing asbestos from your home and building, and legal information about compensation for asbestos injuries.





Introducing the largest database of asbestos information on the planet.





W.A.R.D., which stands for the Worldwide Asbestos Research Database, helps clients to narrow down when and where they may have been exposed, as well as which products may still contain asbestos. W.A.R.D. will also help indicate compensation types and how much a person may be entitled to.