Outrage Over Asbestos Companies’ Bankruptcy Response to Mesothelioma Claims Leads Senators to Act
Over the last few years, asbestos companies facing legal action from victims of malignant mesothelioma, ovarian cancer, and other asbestos-related diseases have adopted a new legal tactic. Rather than agreeing to settle with those whose lives they’ve affected or allow a jury to decide on the question of liability, they’ve turned to a strategy in which they file for bankruptcy, despite earning millions in profits. The controversial move has led many senators to act.
Texas Two-Step in Response to Mesothelioma Claims Spurs Outcry
Many of the biggest and most profitable companies in the world have found themselves in the unhappy position of having to pay billions of dollars in compensation to mesothelioma victims and others after juries have found them liable for negligence. In an attempt to stop the financial bleeding, some have adopted a novel legal strategy called the Texas two-step in which they spin off a subsidiary that specifically holds all of their asbestos liabilities, and then file for bankruptcy on behalf of that subsidiary.
The companies that have adopted this move include Johnson & Johnson and Georgia-Pacific, and with both companies being worth billions of dollars, the practice has quickly been called into question. The courts have been asked to weigh in on whether this approach evades justice, and now three U.S. senators and 24 states’ attorneys general have added their voices to those of the victims. They’ve filed ‘friend of the court’ briefs asking the Supreme Court to stop companies from using the country’s bankruptcy rules inappropriately.
Many Mesothelioma Victims’ Claims Have Been Delayed by the Texas Two-Step
One of the damaging effects that have been seen from companies using the Texas two-step strategy has been the significant delays in cases being heard. Mesothelioma victims have little time left due to the aggressive nature of the fatal asbestos-related disease. Johnson & Johnson’s bankruptcy filing for its subsidiary LTL Management stopped tens of thousands of mesothelioma lawsuits being heard while the court weighed the bankruptcy filing’s merits. Many victims have died in the interim, never having had the chance to see justice.
After the 4th U.S. Circuit Court of Appeals ruled that the Texas two-step could be used by asbestos companies to protect them from their liabilities to victims of mesothelioma, U.S. senators Sheldon Whitehouse of Rhode Island, Josh Hawley of Missouri, and Dick Durbin of Illinois were among those asking the Supreme Court to step in, noting that the companies are worth tens of billions of dollars and that their actions were not in keeping with the intention of bankruptcy law.
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