U.S. lawmakers are planning legislation to outlaw the controversial bankruptcy maneuver called the “Texas two-step” to prevent large companies from abusing the chapter 11 process, the chair of the Senate judiciary committee has said, the Financial Times reported. Dick Durbin, who is also Democratic whip in the Senate, said negotiations were under way within the committee on a draft bill that would remove what he described as a “get out of jail free card” being deployed by some of the wealthiest companies. His comments follow the failure on Friday by lawyers representing almost 40,000 cancer sufferers to prevent Johnson & Johnson from deploying the bankruptcy scheme to help it settle billions of dollars of claims that its baby talc was tainted with asbestos and caused their illnesses. “When you have massively profitable companies using this bankruptcy maneuver to avoid accountability to dying cancer victims, it’s clear that corrective action is needed,” Durbin told the Financial Times. “It is our goal to pursue bipartisan legislation in committee that curbs corporate bankruptcy abuses like the Texas two-step.” A U.S. bankruptcy judge on threw out a motion by talc claimants to dismiss the bankruptcy of J&J subsidiary LTL management in a ruling that critics warn could open the floodgates for other companies to use the bankruptcy courts to manage personal injury and other tort claims.
