Johnson And Johnson's Talc Bankruptcy

The Texas two-step lets a solvent company split itself in two, placing valuable assets in one business and mass legal liabilities in another. The liability company then files for Chapter 11 bankruptcy, which can halt lawsuits while the original business keeps operating. Johnson & Johnson used the strategy in 2021 by creating LTL Management to hold claims alleging that its talc products contained asbestos. Courts ultimately rejected all three bankruptcy attempts, with the first dismissal finding that LTL was not genuinely in financial distress.

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