Sidestepping the Texas Two-Step: L’Oréal Explores Selling Its Talc Lawsuits
For years, companies buried in talc lawsuits had one go-to move: the Texas two-step.
Here’s how it works. A company uses a Texas law to split itself in two. One half keeps the profitable business. The other half gets the lawsuits and files for bankruptcy. That can pause the lawsuits and funnel victims into a single settlement fund, while the parent company keeps running as usual.
Johnson & Johnson recently attempted this strategy three times to avoid responsibility for tens of thousands of cancer lawsuits linked to its talcum powder products. J&J’s subsidiaries claimed they were in financial distress. Courts threw out the first two attempts because they weren’t, and rejected the third over problems with how victims’ votes were collected.
Now, L’Oréal may be testing out a different routine in the wake of its own talcum powder lawsuit crisis. Instead of dancing through bankruptcy court, it could sidestep the courtroom entirely and hand its lawsuits to a new partner: an outside investor.
According to The Wall Street Journal, L’Oréal’s U.S. division has hired the law firm Weil Gotshal & Manges and investment bank Ducera Partners to help consider its options for handling the growing number of lawsuits.
The plan would have L’Oréal transfer its talc-related liabilities into a separate company, which would then be sold to an investor without going through bankruptcy.
Talc Lawsuits Against L’Oréal
About 760 lawsuits were pending against L’Oréal’s U.S. companies as of June 30, 2026, according to the company’s half-year financial report.
Many of these lawsuits claim individuals developed a fatal cancer called mesothelioma from certain L’Oréal cosmetic products made with asbestos-contaminated talc. Talc and asbestos often form close together in the ground, which is how contamination can happen.
Despite the known risk of asbestos contamination in talc, there is still no federal regulation requiring companies to test talc used in cosmetics for asbestos. In November 2025, the FDA withdrew a proposed rule that would have required such testing.
None of L’Oréal’s talc cases had gone to trial as of June 30. Some were dismissed, and others settled. L’Oréal says it “strongly contests” the claims.
Hair Relaxer Lawsuits Against L’Oréal
L’Oréal’s bigger legal headache may be hair relaxers. Its U.S. companies faced over 11,000 federal lawsuits and over 1,000 more in state courts as of June 30, 2026, when the company released its half-year financial report.
The lawsuits claim chemical relaxers caused uterine and other cancers. Many point to a 2022 National Institutes of Health study of 33,497 women. Women who used straighteners more than four times a year were more than twice as likely to develop uterine cancer.
The study estimated uterine cancer risk by age 70 at 1.64% for women who never used straighteners and 4.05% for frequent users.
States are joining in, too. In September 2026, Arizona Attorney General Kris Mayes sued L’Oréal USA and SoftSheen-Carson over Dark and Lovely, Optimum and Mizani relaxers. The suit says the companies failed to warn women about cancer risks.
L’Oréal says the studies “made no finding of a causal connection” between its products and the conditions alleged. It is currently unclear whether hair relaxer claims would be part of any sale to investors.
J&J’s Texas Two-Step: 3 tries, 3 missteps
L’Oréal isn’t the first company looking for a way out of talc lawsuits. J&J first tried the Texas two-step in October 2021. It created a subsidiary called LTL Management, gave it all of its talc liabilities and put it into bankruptcy. In January 2023, a federal appeals court threw the case out. The court found LTL was not in real financial distress, so the filing wasn’t made in good faith.
LTL refiled in April 2023, about two hours after the first case was dismissed. This time, it proposed a trust worth about $12 billion paid over 25 years, or about $8.9 billion in present value. A judge dismissed that case in July 2023, again for bad faith.
J&J’s third try came in 2024 through a new subsidiary, Red River Talc. It filed in Texas with a proposed $9 billion settlement covering about 90,000 claims. On March 31, 2025, a Houston bankruptcy judge dismissed the case, citing problems with how claimants’ votes were collected.
After the third loss, J&J went back to fighting cases in court. In July 2026, it agreed to pay an estimated $5.5 billion to resolve about 76,000 ovarian cancer claims.
The New Move: Selling Lawsuits to Investors
A liability sale skips bankruptcy court entirely. Instead of asking a judge to approve the exit, the company finds a buyer willing to take the lawsuits off its hands.
Here’s how it typically works. The company moves the lawsuits into a separate company, sometimes called a “box,” and puts cash and sometimes its old insurance policies inside. An investor buys that company and takes over the lawsuits. The investor makes money by resolving claims for less than the cash it received and by investing that cash in the meantime.
These deals aren’t new. Honeywell, Crane and ITT have all sold asbestos liabilities this way, mostly tied to industrial products sold decades ago. Buyers like those claims because they’re easier to predict. Mesothelioma rates have been falling since they peaked in 2002, so many buyers expect fewer claims over time.
L’Oréal’s situation is different. Its advisers are reportedly using the Honeywell deal as a model, but L’Oréal’s talc claims are growing, not shrinking. Pending cases rose from about 620 to about 760 in the first half of 2026. None have gone to trial, so there’s no verdict history to show what a case is worth. And these claims involve everyday beauty products sold to consumers, not old factory equipment.
If hair relaxer claims end up in the deal, the gap gets even wider. L’Oréal companies face more than 12,000 of those lawsuits. That’s a lot of uncertainty for a buyer to price, which is why a deal like this would be new territory for mass torts.
Changing partners: What a Sale Could Mean for People with Lawsuits
Nothing changes for people with L’Oréal lawsuits today. No sale has been announced, and L’Oréal hasn’t confirmed it’s pursuing one.
If L’Oréal does find a buyer, people suing over its talc products would no longer be facing L’Oréal. They would be facing an investor whose profit depends on paying out less than it received. That cuts both ways.
The Potential Upside
Unlike the Texas two-step, a sale doesn’t freeze lawsuits or force victims into a bankruptcy settlement. Cases keep moving through the courts, and in past deals, the buyer took responsibility for both current and future claims.
There’s also a built-in safeguard. If the new company is underfunded, claimants may be able to challenge the deal as a fraudulent transfer, meaning assets were moved to dodge creditors. That’s why buyers typically require an outside opinion that the company can pay its debts.
The Potential Downside
The buyer’s goal is to resolve claims at the lowest possible cost, which can mean tougher negotiations and slower payouts. These buyers usually aren’t insurance companies, so insurance rules and “bad faith” laws that limit the delay or denial of claims may not apply. New York regulators have said these deals fall outside their jurisdiction.
The money also has to last. Asbestos-related diseases can take 20 to 50 years or more to appear, so people diagnosed years from now would also be dealing with the buyer. It’s still unclear whether hair relaxer claims would be part of the sale.
There’s a bigger-picture concern, too. Firms that advise on these deals say buyers are also looking at claims involving talc, pharmaceuticals, pesticides and PFAS, or “forever chemicals.” If L’Oréal’s deal goes through, it could become a template for other consumer product lawsuits.
If you have a pending talc or hair relaxer case against L’Oréal, ask your attorney how a sale could affect your claim.
Courts made it clear the Texas two-step isn’t a way out of talc lawsuits. Whether this new dance step works will depend on who L’Oréal picks as its partner and how much money it leaves on the table for victims. Until then, the lawsuits stay on the floor.