The Texas two-step is a popular dance format that many people who go to country-western bars in the United States like to do.
It’s also a controversial corporate strategy that’s been getting a lot of attention in the last few weeks. Thousands of people have claimed that talc-based products made them sick, so Johnson & Johnson used the Texas two-step to lessen the damage. This hearing is being closely watched.
The Texas two-step is what?
It’s a Texas law that lets businesses that have a lot of debt set up a separate company that acts like a “pack mule,” taking on the debt and leaving the original company with nothing. It breaks away from its parent company, files for bankruptcy, and settles with victims in bankruptcy court, all while avoiding jury trials that could result in big payouts for the victims. This is how the new company works.
There’s also J&J. If you use talc products like baby powder, they may contain asbestos, which can cause cancer. The health company is facing 38,000 claims that this is true. Last year, J&J was ordered to pay $2.1 billion to women who said they got ovarian cancer from using those things, among other things.
While denying that its products cause cancer, the company used the Texas two-step last year and set up a subsidiary called LTL Management that would go bankrupt and take on the debts.
The hearing started yesterday, and it will decide whether LTL can stay in bankruptcy or have to go out of business.
They want to stop the bankruptcy process, saying that J&J is a $436 billion behemoth that wants to “game the bankruptcy system” and limit payouts to people who have been harmed by their products.
They said that bankruptcy would make it easier to get money for people who have been hurt by their products. This would be better than having a jury decide, which could give one person a lot of money and leave another with nothing.
The outcome of the J&J hearing could decide if the Texas two-step, which is now very rare, becomes more common or fades away. It may already be on that path. Lawmakers in Congress have written a law that would stop the practise.