Texas Two-Step: How Companies Evade Mass Tort Liability

The video explains the Texas Two Step, a legal strategy used by companies to manage mass tort liabilities by creating two entities: one holding liabilities and the other holding assets. Georgia Pacific's case is highlighted, where they used this strategy to handle asbestos claims. The process involves using Texas laws to split a company, placing liabilities into one entity, which then declares bankruptcy, protecting the main company's assets. The tactic faces criticism for limiting plaintiffs' access to compensation, but defenders argue it prevents chaotic litigation. The strategy has drawn congressional attention and is lucrative for law firms like Jones Day.

What was the primary reason Georgia Pacific used the Texas Two-Step strategy?

• To merge with another company

• To manage their asbestos-related liabilities

• To expand their business operations

• To increase their market share

What legal provision in Texas allows companies to split into two entities?

• Bankruptcy protection laws

• Corporate restructuring laws

• Divisional merger laws

• Asset allocation laws

How does the Texas Two-Step strategy affect the main company's assets during bankruptcy?

• Assets are liquidated to pay creditors

• Assets are transferred to the new entity

• Assets are protected from creditors

• Assets are used to settle lawsuits

Why are plaintiffs frustrated with the Texas Two-Step strategy?

• They have to deal with multiple lawsuits

• They feel they are not accessing the full compensation

• They face delays in court proceedings

• They receive full compensation

Which other company, besides Georgia Pacific, has used the Texas Two-Step strategy?

• Procter & Gamble

• Nestle

• Johnson and Johnson

• Unilever