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ARTICLE · 06 NOVEMBER 2021

Johnson & Johnson: The Texas Two-step And Talc-Related Liabilities

Thompson Coburn LLP
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A newly created subsidiary of Johnson & Johnson recently filed Chapter 11 to manage 38,000 pending talc-related lawsuits and future talc-related claims.

United StatesInsolvency/Bankruptcy/Re-Structuring
David Warfield
David Warfield
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A newly created subsidiary of Johnson & Johnson recently filed Chapter 11 to manage 38,000 pending talc-related lawsuits and future talc-related claims. There is nothing especially new about using Chapter 11 to deal with mass tort litigation. In the past three decades, thousands of companies, dozens of religious organizations, and even the Boy Scouts of America have filed Chapter 11 because of mass tort claims. 

However, the Johnson & Johnson ("J&J") related filing represents a new twist in the high-stakes game of mass-tort Chapter 11 cases. In brief, J&J used an obscure provision of Texas corporation law to split into two new companies: one that holds the talc-related liabilities and another that holds non-talc assets and liabilities. The new company with the talc-related liabilities then filed for Chapter 11 protection. Some legal commentators have called J&J's strategy the "Texas Two-Step." J&J candidly admits the strategy was intended "to globally resolve

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