Attorney General Bonta to U.S. Supreme Court: The Texas Two-Step Allows Corporations to Evade Accountability, Sidestep Financial Liability. This Is Wrong.

California Attorney General Xavier Becerra - Press Releases · October 23, 2026 · g5378538

October 23, 2026 Contact: (916) 210-6000, agpressoffice@doj.ca.gov OAKLAND — California Attorney General Rob Bonta today joined a bipartisan coalition of 21 attorneys general in filing an amicus brief urging the U.S. Supreme Court to review a lower court’s decision permitting a profitable corporation to exploit bankruptcy and Texas state law to evade mass-tort liabilities. This controversial legal maneuver, referred to as the “Texas Two-Step,” allows solvent companies facing massive financial liabilities to create a shell entity under Texas corporate law, saddle the new entity with those liabilities, while leaving all the asset and profits behind, and then place the shell entity in bankruptcy. The brief, filed in Herlihy v. DBMP, LLC , asks the Supreme Court to reverse a lower court’s decision that held that a company’s use of the Texas Two-Step was not a bad-faith use of the bankruptcy process to evade accountability to hundreds of thousands of asbestos claims. Left in place, the Texas Two-Step has the potential to undermine states’ critical role in protecting consumers and the environment, and stalling justice for victims for years. “Bankruptcy should not be used as a loophole to allow healthy, multibillion-dollar corporations to avoid financial accountability for harm they inflict on people,” said Attorney General Bonta. “Corporations are using the Texas Two-Step scheme as a way to shield their profits from legitimate tort claims and avoid reckoning with the law. This is wrong. When a company harms consumers, it should face consequences, not sidestep them." In this case, petitioners brought claims under state law in state court after they developed mesothelioma, caused by asbestos-containing products manufactured by CertainTeed Corporation over six decades. The Texas Two-Step, however, has prevented these claims from proceeding. Facing a growing number of lawsuits and significant financial exposure, CertainTeed split into two entities: New CertainTeed, which received most assets and non-asbestos liabilities, and DBMP, which received all asbestos-related liabilities and certain assets. DBMP then filed for Chapter 11 bankruptcy. The injury claims of petitioners have now been pending for more than seven years without resolution. If allowed to stand, the lower court ruling has the potential to limit corporate liability for violating the law and would likely lead to more frequent use of the Texas Two-Step scheme, including to obtain injunctions potentially barring states’ litigation against financially viable companies. Courts could halt litigation against solvent corporate affiliates for years, all the while shielding billions in assets from creditors and forcing victims to accept pennies on the dollar for their claims. If the Supreme Court reviews the case, reversal could put an end to the Texas Two-Step, allowing individual victims to pursue mass-tort claims through traditional jury trials in state court. In 2024, Attorney General Bonta joined a multistate amicus brief in Bestwall LLC v. Official Committee of Asbestos Claimants , asking the U.S. Supreme Court to scrutinize a bankruptcy court’s decision to enter a preliminary injunction barring all injury litigation against a solvent entity that was created as the “Texas Two-Step.” In 2023, Attorney General Bonta filed a letter with the Supreme Court in a case arising from Purdue Pharma’s attempted bankruptcy reorganization plan, which, at the time, shielded the Sacklers from all private, opioid-related civil lawsuits. In the letter, Attorney General Bonta noted that California and other states had consistently argued that key aspects of Purdue Pharma’s bankruptcy plan were not authorized by the Bankruptcy Code. In filing the brief, Attorney General Bonta joins the attorneys general of North Carolina, Arizona, Colorado, Connecticut, Illinois, Louisiana, Maine, Massachusetts, Michigan, Minnesota, Nevada, New Mexico, New York, Rhode Island, South Dakota, Tennessee, Vermont, Virginia, Washington, and the District of Columbia.

Источник: California Attorney General Xavier Becerra - Press Releases