Legal term
Texas Two-Step
In a sentence
A strategy where a company facing mass claims spins its liabilities into a new subsidiary that immediately files bankruptcy — attempting to cap and channel the claims while the parent keeps operating.
Named for the Texas divisive-merger statute that enables it, the two-step moves tort liabilities into a shell that files Chapter 11. Johnson & Johnson attempted it three times for talc claims; courts dismissed each attempt, most recently Red River Talc in March 2025, and roughly 68,000 talc cases returned to the MDL.
A 2024 Supreme Court decision (Truck Insurance Exchange v. Kaiser Gypsum) separately gave insurers standing to fight mass-tort bankruptcy plans — adding another adversary to these filings. Bankruptcy maneuvers matter to claimants because they freeze litigation and set bar dates.
