The corporate giant Johnson & Johnson (J&J) is valued at more than $400 billion. But that isn’t stopping the company from utilizing a controversial bankruptcy loophole to try to avoid paying a fraction of its total value to claimants who have won talc powder cases filed against it. After losing seven consecutive mesothelioma trials arising from asbestos in Johnson’s Baby Powder, J&J is now trying to stop all talc lawsuits and avoid responsibility.

What is the Texas Two-Step?

In the world of bankruptcy law, there is a controversial tactic called the Texas Two-Step that, if permitted, would allow corporations to avoid practically all financial fallouts resulting from even the worst corporate negligence. The Texas Two-Step works by creating a subsidiary company in Texas, transferring all financial liability to that company but holding onto all valuable assets in the parent company, and then making that subsidiary file for bankruptcy. A wealth corporation can then direct the company holding all the liabilities to seek a “stay” in the bankruptcy court to halt all lawsuits for at least several months, but, more often than not, the freeze lasts years and years.

This strategy is exactly what J&J is doing to try to dodge full accountability for the aftermath of selling talc powder products that tested positive for asbestos. Mesothelioma is a cancer caused by asbestos. J&J has lost a string of jury verdicts involving users of Johnson’s Baby Powder who developed mesothelioma including a $325 million verdict in the Olson case in New York City (this case is currently awaiting final review on appeal). By establishing a subsidiary in Texas called LTL, placing all settlement-related liabilities on it, and then making that company file for bankruptcy, J&J has done the Texas Two-Step tactic and froze the pending cases, at least for the time being. The case is currently being appealed to a higher court in an effort to dismiss the bankruptcy so the lawsuits can re-start and proceed to jury trials.

Damage Caused by the Texas Two-Step

Halting pending talc powder cases is not just a temporary annoyance. The damage caused by the Texas Two-Step is real and intentional.

Most of the people who have won cases against J&J are fighting for their lives against the cancers the talc powder products caused. They need a financial recovery from the company now to help pay for the losses they have already experienced, secure future medical care, and try to live as comfortably as possible. Many do not have years to wait for a bankruptcy court to figure out what to do with LTL’s bankruptcy filing. Some might not even have months to wait.

If J&J succeeds in using the Texas Two-Step to avoid full accountability for its outrageous misconduct in selling dangerous talcum powder products, then it will set a legal precedent for other conglomerates and companies to do exactly the same thing in the future.

For more information about J&J’s controversial bankruptcy tactic and the harm it has already caused, you can click here to read a full NPR article about the late Hanna Wilt, a woman whose fatal mesothelioma was linked to her use of baby powder products. To speak to a powerful legal team about talc powder cancer lawsuits and how to hold J&J liable for corporate negligence, contact the national trial attorneys of Levy Konigsberg today.


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