by FireBeyond | 2026-03-02 21:35:47+00:00
> I'm aware the Texas Two Step is used by companies to get out of paying what they legally owe. It's unclear to me if this particular case is a good example of that today ...

They are using the same law firm (Jones Day) as the others. It's a perfectly good example.

> ... because J&J has committed to paying at least $61.5b and that's much more than the judgements against them.

Actually, the $2B and $8.9B proposals in LTL's two bankruptcy proceedings made the funding from J&J contingent on claimants and future claimants accepting the bankruptcy, i.e. its J&J effectively trying to shoehorn this into an informal class action - plaintiffs can choose to form a class action, defendants are not able to force them into one, but this effectively would. So it seems unlikely that J&J would ever be on the hook for $61.5B. Indeed, HoldCo, the parent of LTL, in turn owned by J&J would only ever be funded to a maximum of $30B.

> Here's a law firm's summary of all the judgments to date against J&J

to date. There's many many more (thirty-eight thousand) cases that have not been adjudicated, in fact.

> because J&J has committed to paying at least $61.5b

Where do you think that number came from? J&J playing good corporate samaritan, or knowing that they still have many, many more cases winding through the courts, or in discovery, than have had final judgments rendered so far?

Good for J&J. They've actually only paid $2B - of the $10B of judgments that you yourself acknowledge. Good for J&J. And they've committed to funding $61.5B? How's that worked out for other companies doing this?

Georgia Pacific, in the same spot, committed to an initial funding of their T2S entity, and to review this further as needed. In the end, they funded it to the tune of $175M. And then told the court that the entity was entirely independent from GP and they had no obligation to do any such thing.

St Gobain, in the same spot, committed to funding to the tune of $50B, and ended up putting in less than $100M and refusing anything further.

So audacious was St Gobain that they were laid into by the court:

> Gross testified that Saint-Gobain repeatedly misrepresented its intent in creating the subsidiary that eventually filed for bankruptcy, calling executives’ testimony and other statements “misleading” and “not truthful.” U.S. Bankruptcy Judge Craig Whitley followed Gross’s testimony last August with factual findings that included his own blistering critique of the executives’ statements as “contrary to the evidence,” saying the company’s story “strains credibility.”

Four major companies have tried the Texas Two Step lately. All of them have used the same one law firm, again, Jones Day. Three of them (J&J being the fourth) have managed to drastically under-deliver on their commitments and liabilities and have emerged unscathed as a result.

Trane Technologies, same thing.

Weird that LTL was formed in North Carolina, where this scheme seems to work, yet J&J has no corporate presence there (headquartered in NJ)

But somehow, J&J, and Matt Levine would love us to believe that this time, somehow, it'll be different.

> What did they change in their application?

They changed the number from $2B to $8B and filed bankruptcy again. It was again dismissed. The first time, the courts as you said described it as an untenable position. Now, they were more annoyed, saying that the application was made in actively bad faith.

"Johnson & Johnson would later make a third attempt at resolving talc litigation through bankruptcy in 2024, which also failed. The company continued to face thousands of lawsuits alleging its talc products were contaminated with asbestos and caused cancer.

The repeated bankruptcy dismissals established important precedent limiting the ability of financially healthy corporations to use the Texas Two-Step strategy to avoid mass tort litigation."

This is from another mesothelioma law firm (important to note that J&J has actually resolved many of the mesothelioma claims against it, ~95%. But the vast majority of claims are around asbestos, and have a much clearer causality, typically resulting in larger verdicts).

April 2025, J&J, sorry, LTL, have since tried, and failed, to file a fourth bankruptcy. They're getting increasingly nervous that they won't be able to sidestep liability.

There's also this hugely perverse incentive with all of these "commitment to fund"s:

"You injured me and have been ordered to compensate me. But in order to do so I have to hope you continue to prosper, potentially injuring others along the way, so I get my compensation. I can choose between getting you shut down, but potentially not being compensated, or being compensated but knowing that you go on to be able to do this to others."