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MassArbitration
Mass Tort & MDL

Texas Two-Step

A divisive merger that places tort liabilities in a new entity which then files for bankruptcy.

Using a state divisive merger statute, a solvent defendant separates its mass tort liabilities into a newly created subsidiary, which files chapter 11 — halting tort litigation through the automatic stay and channelling claims into a bankruptcy claims process. The technique has drawn intense scrutiny over whether such a debtor is in genuine financial distress.

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