Malpractice plaintiffs seek to end prison health co. bankruptcy

3M Co

17/01/2024 21:45

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      Plaintiffs say Corizon bankruptcy strategy cannot succeed
    

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      Bankruptcy plan would pay $8.5 mln for wrongful death
suits 
    

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      The case received scrutiny after mediator's resignation
    

  
    By Dietrich Knauth
       Jan 17 (Reuters) - Lawyers for prisoners suing Corizon
Health over allegedly substandard medical care in U.S. prisons
have asked a bankruptcy judge to toss the Chapter 11 case of a
Corizon subsidiary, saying the prison healthcare provider's
bankruptcy was a fraud from the start.
    The Corizon subsidiary, Tehum Care, was created solely to
get rid of medical malpractice and wrongful death lawsuits for
"pennies on the dollar" through the Chapter 11 process, while
allowing Corizon to rebrand itself as YesCare, according to a
Tuesday filing in Houston bankruptcy court by the official tort
committee that represents about 200 prisoners, former prisoners,
and family members suing Corizon.
    Tehum does not intend to reorganize its business, and is
instead using its bankruptcy to stop lawsuits against Corizon,
its owners and key employees, according to the committee.
    "There is no possible rehabilitation here," the committee
said in the filing. "This case was a fraud from its inception."
    Tehum Care, which filed for bankruptcy in February, has been
pursuing a mediated bankruptcy settlement which would allocate
roughly $8.5 million to settle prisoners' and former prisoners'
claims. 
    That number is far too "cheap" to settle the roughly 200
lawsuits that collectively seek $775 million for substandard
medical care, according to the committee. 
    The committee said Tehum's bankruptcy should be dismissed,
like other so-called "Texas Two-step" cases that place a
disposable shell company into bankruptcy in an effort to stop
lawsuits against a wealthy corporate owner. 
    The controversial legal maneuver suffered high-profile
setbacks in 2023 cases involving Johnson & Johnson and 3M.
    Corizon and Tehum did not immediately respond to a request
for comment. 
    Tehum said in a separate court filing on Tuesday that its
proposed bankruptcy settlement had maximized the amount that
could be collected from the company owners and insiders, who are
providing $54 million in value, which will be used to pay the
company's other creditors in addition to the prisoner healthcare
plaintiffs, according to Tehum.    
    Tehum was forced to replace its mediator in November after
the sudden resignation of former U.S. bankruptcy judge David
Jones, who resigned from the bench over his previously
undisclosed romantic relationship with an attorney representing
YesCare. 
        Jones served as mediator, not the presiding judge, in
Tehum's case, but attorneys for prisoners and the U.S.
Department of Justice's bankruptcy watchdog had argued that the
settlement process was tainted by Jones' conflict of interest.
Tehum and its stakeholders engaged in a second round of
mediation in December, resulting in a revised settlement
proposal.     
    The case is In re: Tehum Care Services, U.S. Bankruptcy
Court for the Southern District of Texas, No. 23-90086
    For the tort claimants committee: Eric Goodman, David
Molton, Gerard Cicero, and Susan Sieger-Grimm of Brown Rudnick
    For Tehum: Jason Brookner of Gray Reed & McGraw
    For the U.S. Trustee: Ha Nguyen of the DOJ's Office of the
U.S. Trustee
    For the creditors' committee: Nicholas Zluticky of Stinson

    Read more:
    Special Report: U.S. jails are outsourcing medical care —
and the death toll is rising
  
    Prison healthcare company restarts mediation after
bankruptcy judge Jones quits    
    Top US bankruptcy judge resigns amid ethics inquiry
  

 (Reporting by Dietrich Knauth in New York)