In a gripping session before the Senate Judiciary Subcommittee on Tuesday, bankruptcy experts and individuals directly impacted by mass tort Chapter 11 cases laid bare their concerns over corporate strategies enabling large corporations to sidestep liability for asbestos exposure. The focus was on Johnson & Johnson’s recent deployment of the controversial “Texas two-step” tactic, sparking a fervent debate over the implications and potential remedies.
The hearing, chaired by Senator Sheldon Whitehouse of Rhode Island, delved into the intricacies of the Texas two-step strategy. Retired U.S. Bankruptcy Judge Judith K. Fitzgerald, now with Pittsburgh law firm Tucker Arensberg PC, elucidated how this method allows companies to shield assets while burdening subsidiaries with liabilities, ultimately leading to Chapter 11 filings.
The crux of the issue, as highlighted by Fitzgerald, lies in the exploitation of legal loopholes to evade accountability. Johnson & Johnson’s use of the Texas two-step to insulate itself from thousands of claims related to talc products underscores the magnitude of the problem.
Testimonies further underscored the human toll of such maneuvers. Kimberly A. Naranjo, a mesothelioma patient, lamented being deprived of her voice in seeking justice due to corporate machinations. Her poignant plea resonated with the committee, amplifying the urgency for action.
While proposals like banning bankruptcy filings post-Texas two-step transactions have been tabled, skepticism remains. University of Pennsylvania Law School professor David A. Skeel Jr. cautioned against hasty legislative measures, advocating for judicial discretion to discern bad faith filings.
Bankruptcy attorney Kevin C. Maclay minced no words, emphasizing the imperative for immediate intervention to curb corporate abuse of the system. His impassioned appeal for a “universal solution” struck a chord, urging Congress to stem the tide of injustice.
However, not all perspectives are aligned. Paul H. Zumbro of Cravath Swaine & Moore defended the legitimacy of Texas two-step cases, framing them as essential for managing mass tort liabilities efficiently. Amidst the fervor, the balance between fairness and expediency emerged as a central quandary.
As the hearing drew to a close, Senator Whitehouse vowed to navigate the murky waters of corporate accountability. The quest for a fair and equitable solution to combat corporate malfeasance looms large, signaling a pivotal moment in the fight for justice.
In the labyrinth of legal maneuvers, the voices of the afflicted echo with poignant urgency, compelling lawmakers to chart a course toward accountability and redemption.
