A U.S. bankruptcy judge ruled Thursday that two Trane Technologies subsidiaries, Aldrich Pump and Murray Boiler, may remain in bankruptcy despite asbestos plaintiffs' arguments that the companies are not in "financial distress," Reuters reported. The ruling is a sign that the Texas Two-Step — a controversial legal maneuver that allows solvent companies to dump legal liabilities into shell companies that then file for bankruptcy — is still alive, despite high-profile setbacks in 2023 cases involving Johnson & Johnson and 3M. Clay Thompson, an attorney who represents mesothelioma victims in several Texas Two-Step bankruptcies, said that he was disappointed that Whitley did not follow the Third U.S. Circuit Court of Appeals ruling in the J&J case, which found that bankruptcy protections are not available to companies that are not in immediate "financial distress." "Bankruptcy is for people and companies in financial distress, not multi-billionaires who want to pay less to their cancer victims," Thompson said in an email. U.S. Bankruptcy Judge Craig Whitley in Charlotte, N.C., declined to dismiss the bankruptcies, saying that his hands were tied by precedent in the Fourth Circuit, which requires a finding of "objective futility" before bankruptcy cases are dismissed for bad faith. The Aldrich Pump and Murray Boiler bankruptcies were not objectively futile, because the companies still might reach a bankruptcy settlement that resolves 90,000 asbestos cases, Judge Whitley ruled. Those lawsuits accuse the companies of exposing customers to asbestos through their historical sales of heating and air conditioning systems.
