3rd Circuit Rejects LTL’s Use of ‘Texas Two-Step’ Legal Strategy, Dismisses LTL’s Chapter 11 Petition

PHILADELPHIA –– The 3rd Circuit U.S. Court of Appeals has weighed in on the “Texas Two-Step,” concluding Johnson & Johnson’s use of the bankruptcy legal strategy for its talcum powder claims was not in good faith given that LTL was “not in financial distress.”

In the Jan. 30 precedential opinion, the 3rd Circuit further opined that “only a putative debtor in financial distress can” access the Bankruptcy Code’s safe harbor.

“We start, and stay, with good faith,” the court opined in the 56-page opinion. “Good intentions –– such as to protect the J&J brand or comprehensively resolve litigation –– do …