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

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

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