The Texas two-step is a popular dance format enjoyed by many country-western bar patrons across the US.
It’s also a controversial corporate strategy that’s recently found itself in the hot seat. A closely watched hearing began yesterday over Johnson & Johnson’s use of the Texas two-step in order to minimize damage from the tens of thousands of claims that its talc-based products caused cancer.
What is the Texas two-step?
It’s a Texas law that allows corporations saddled with liabilities to create a separate company that acts like a pack mule—taking on those liabilities and leaving the OG corporation with none of the baggage. Once that new company is created, it breaks off from its parent, files for bankruptcy, and settles with victims in bankruptcy court…all while avoiding jury trials that could result in hefty payouts.
And what does J&J have to do with it? The health giant is staring down 38,000 claims that its talc products (including its famous baby powder) sometimes contained asbestos, which has been linked to cancer. Among other legal setbacks, J&J was ordered to pay $2.1 billion last year to women who said they developed ovarian cancer from those products.
While denying that its products cause cancer, the company decided last year to utilize the Texas two-step and create a subsidiary called LTL Management that would enter bankruptcy and absorb the liabilities.
- The hearing that began yesterday will decide whether LTL can remain in bankruptcy.
- Lawyers for the plaintiffs want to stop the bankruptcy process, contending that J&J is a $436 billion behemoth that is trying to “game the bankruptcy system” and cap payouts to victims.
This is just another example of corrupt greedy morally bankrupt lawyers who capitalize on uneducated jurors to win these huge rewards.
There is nothing wrong with baby powder!