A bipartisan group of lawmakers recently proposed the Ending Corporate Bankruptcy Abuse Act (ECBA) on Capitol Hill, aiming to end the “Texas Two-Step,” a bankruptcy tactic used by corporations like Johnson & Johnson and Georgia Pacific to avoid asbestos liabilities. This legislation emerges just before the July 26 deadline for tens of thousands of ovarian cancer claimants to vote on a $6.48 billion settlement proposed by J&J.
The Texas Two-Step allowed J&J to transfer its talc liability to a Texas subsidiary, LLT Management, which then filed for bankruptcy, delaying lawsuits against the parent company. Despite two failed attempts, LLT has submitted a new bankruptcy plan to compensate U.S.-based claimants over 25 years. However, those voting against the settlement could potentially receive more by holding out for a court trial.
How the ECBA Act Works
The ECBA Act, introduced by Senators Sheldon Whitehouse (D-RI) and Josh Hawley (R-MO), along with Representatives Emilia Sykes (D-OH) and Lance Gooden (R-TX), seeks to prevent this maneuver. It is co-sponsored by Senate Majority Whip Dick Durbin (D-IL) and Rep. Jerrold Nadler (D-NY).
“The Texas Two-Step has mired tens of thousands of injured Americans in protracted proceedings, while the mega-corporations that harmed them continue making money and avoiding penalties,” Whitehouse stated in a press release.
The ECBA Act would presume bad faith in bankruptcy filings appearing as a Texas Two-Step and ban stays of litigation against a debtor’s non-bankrupt affiliates if a Texas Two-Step occurred within the previous four years.
Georgia-Pacific’s Role in Establishing the Texas Two-Step
Georgia-Pacific pioneered the Texas Two-Step in 2017, facing lawsuits from asbestos exposure in its drywall products. This strategy delayed the lawsuits, and a recent Supreme Court decision upheld a lower-court ruling in favor of Georgia-Pacific, allowing the tactic to continue.
With the ECBA Act, lawmakers hope to close the loophole that has allowed corporations to evade accountability for asbestos-related harm. This legislation could significantly impact the ongoing legal battles and future claims, aiming to bring justice to those affected by asbestos exposure.
Asbestos exposure remains a significant health risk, particularly for those in high-risk asbestos-exposure occupations such as construction, shipbuilding, and manufacturing, where asbestos is commonly used. Products like insulation, roofing, and automotive parts also pose dangers. With recent bans on asbestos, awareness and precaution are critical. Those exposed may develop serious illnesses, including mesothelioma and lung cancer. Seeking legal help is essential for affected individuals to understand their rights and pursue compensation. For guidance and legal assistance, visit MesoWatch.