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The Bankruptcy StrategistFeaturesBankruptcyLitigationMass Torts

Fourth Circuit Ruling Underscores Judicial Divide On Use of 'Texas Two-Step'

By Avalon Zoppo
September 01, 2023

A sharply divided U.S. Court of Appeals for the Fourth Circuit ruling shielding a nondebtor in bankruptcy proceedings from asbestos lawsuits underscores the wider and growing divide among judges across the country on the bounds of Chapter 11 protection and corporations' use of the "Texas two-step" to address mass tort litigation.

Breaking from his colleagues in the majority, Judge Robert King said a bankruptcy judge lacked jurisdiction to pause asbestos lawsuits against an affiliate of Chapter 11 debtor Bestwall, calling the company's use of its restructuring to seek broader protection "little more than a shell game."

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