By: Donald L Swanson
The phrase “Texas Two-Step,” as used in bankruptcy, is a legal expletive. Regardless of what the details of a Texas Two-Step might be, the phrase has become synonymous with:
- abusive behavior;
- bad faith conduct;
- a means for swindling creditors;
- the antithesis of “doing what’s right”;
- a tool for avoiding liability;
- etc., etc.
Describing a legal tactic as a “Texas Two-Step” is like calling that tactic a “#$&*#%R&” or “#*$&.” It’s a legal expletive that means “really, really bad.”
An Actual Case
So . . . how is it that an actual Texas Two-Step tactic in a mass tort asbestos bankruptcy has survived a motion to dismiss:
- in a U.S. bankruptcy court;
- on appeal to a U.S. U.S. District Court;
- on appeal to a U.S. Circuit Court of Appeals; and
- on a Petition for writ of certiorari to the U.S. Supreme Court that is denied?[Fn. 1]
How can that be?
A Good Thing?
Is it possible that a Texas Two-Step tactic might actually be, in certain circumstances, a good thing?
Consider this.
- What if the Texas Two-Step tactic would actually help create more value (not less) for the mass tort claimants?
- And what if that more value is a lot more?
- What if the Texas Two-Step tactic would break through a course of litigation that had been languishing for a decade or more and create an efficient way to resolve and pay the mass tort claims?
- What if the only practical reason for opposing the Texas Two-Step tactic is that plaintiffs’ attorneys want a chance at getting extra-ordinary fees from exceptionally-high jury verdicts?
Such questions represent reasons for rejecting a bankruptcy dismissal in the case identified by the U.S. Supreme Court as Esserman v. Bestwall LLC, Case No. 23-702 (petition denied on May 13, 2024).
Upshot
So, here’s the upshot of the Supreme Court’s denial of certiorari in Esserman v. Bestwall. It appears that:
- the bankruptcy case will go forward;
- the Texas Two-Step tactic will be allowed to stand; and
- we will be able to see how the Texas Two-Step tactic works itself out in a real bankruptcy case.
Conclusion
It will be interesting to see how the In re Bestwall bankruptcy plays out.
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Footnote 1. The bankruptcy case is In re Bestwall LLC, Case No. 17-31795 & Adv. P. No. 17-03105 in the Bankruptcy Court for the Western District of North Carolina; the first appeal is In re Bestwall LLC, Case No. 3:20-cv-105 in the U.S. District Court for the Western District of North Carolina; the next appeal is In re Bestwall LLC, Case No. 22-1127 in the U.S. Fourth Circuit Court of Appeals; and the Petition for writ of certiorari is Esserman v. Bestwall LLC, Case No. 23-702 in the U.S. Supreme Court.
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