The Texas divisive merger, more commonly known as the Texas Two-Step, is a legal tool employed by businesses involved in substantial litigation to settle their tort liabilities through the bankruptcy process. Listeners may recognize this maneuver from recent headlines and the questions posed as to whether it is leading to abuse of the bankruptcy system. Rejoining us today to unpack all of this and more is returning guest Matt Cantor, senior managing director at Pretium, a specialized investment firm that currently has more than $50 billion in assets under management. Matt also has extensive experience in corporate restructuring at large law firms, has worked at various respected investment firms, and is known for his handling of the Lehman Brothers’ bankruptcy and liquidation case. In today’s conversation, we delve into the concept of divisive mergers, their relationship to bankruptcy, and how mass torts present an opportunity for investors who are willing to take on litigation risk. Matt gets into the variability that can occur in mass tort liabilities and what can be done to reduce uncertainty. We also discuss how the move from an industrial to a digital economy presents new opportunities for investors and some of the risks inherent to technology-based business models. To learn more about liability management, the Texas Two-Step, and much more, be sure to tune in today!

Key Points From This Episode:

•An overview of the Texas Two-Step; its origins, what it entails, and why it’s not as new as people think it is.

•Engaging in a liability management program and how it relates to bankruptcy.

•The high range of variability of outcomes within the American tort system.

•Different types of mass tort liabilities and how they demonstrate wide variability.

•What companies do to reduce variability: predicting outcomes, giving their case to a bankruptcy judge who will assign some certainty to it.

•The complexity of the risk-sharing arrangements between debtors and their representation.

•An overview of the opportunities in this space for investors with an appetite to take on litigation risk.

•Why this area of work is well-suited to anyone earning a JD–MBA.

•Some of the opportunities inherent in the move from an industrial economy to a digital economy.

•The embedded liability within some technology-based business models.

•Why settling a lawsuit provides benefits to both sides by reducing variability and uncertainty.

•Matt’s thoughts on whether lawyers are abusing the bankruptcy system.

Links Mentioned in Today’s Episode:

Matt Cantor on LinkedIn

Pretium

Richard Squire

Richard Squire on Google Scholar

Richard Squire on LinkedIn

Bite-Sized Business Law Podcast: Matt Cantor on Litigation Finance

Fordham University School of Law Corporate Law Center