Brooklyn Journal of Corporate, Financial & Commercial Law


Amy West

First Page



Since Congress enacted the current Bankruptcy Code in 1978, large corporations have strategically used bankruptcy law to evade liability in mass tort claims. This Note examines three case studies illustrating such attempts. The first case involves Johnson & Johnson, which tried to use the so-called “Texas Two-Step” maneuver to circumvent liability for 38,000 pending talc-related lawsuits linked to injuries caused by its well-known Baby Powder. The second case is the Purdue Pharma bankruptcy. Purdue Pharma, the pharmaceutical manufacturer responsible for creating OxyContin, faces thousands of claims for strict liability, negligence, and failure to warn. The issue here is whether the Sackler family, in exchange for high contributions to the company’s Chapter 11 plan funding agreement, can receive third-party protections from liability. The third case involves 3M, which attempted to put its subsidiary, Aearo, into bankruptcy to resolve hundreds of thousands of pending lawsuits for hearing loss caused by defective combat earplugs. Bankruptcy courts must analyze the immediacy of these companies’ financial distress, which may be granted protection under their respective Chapter 11 plans, and whether each company’s filings were made in good faith. Additionally, bankruptcy judges must determine whether they have the authority to grant such protections. This Note argues that these bankruptcy strategies must be dismissed as bad faith filings and further asserts that a solution protecting tort claimants and providing amended legislation is required.