Bankrupt nursing home company Genesis pauses lawsuits against owners, employees

Genesis Healthcare

08/10/2025 23:19

By Dietrich Knauth

NEW YORK, Oct 8 (Reuters) - A U.S. bankruptcy judge on Wednesday agreed to stop wrongful death lawsuits from proceeding against Genesis Healthcare employees, shareholders and staffing agencies, saying the litigation could derail efforts to sell Genesis nursing homes.

U.S. Bankruptcy Judge Stacey Jernigan granted Genesis' motion at a court hearing in Dallas, Texas, overruling 14 objections from people who have filed personal injury or wrongful death lawsuits against the company.

Jernigan put the cases on hold until the end of Genesis' bankruptcy, finding that the expense of continued litigation could force the company into a full shutdown and put 15,000 patients and residents at risk.

"We're not going to burn the house down," Jernigan said.

Lawyers for the tort plaintiffs argued that they should be allowed to sue doctors who had committed malpractice and bring claims against investors and shareholders who contributed to Genesis' collapse.

Dan Simon, representing Genesis, said that an "onslaught of litigation" would imperil the company's ability to provide care, potentially cause an exodus of critical employees, and reduce the limited amount of money available to pay tort victims and other creditors.

Genesis, which operates 175 skilled nursing facilities and assisted living facilities in 18 U.S. states, filed for bankruptcy on July 9 with over $2.3 billion in debt.

The company faces over 200 lawsuits alleging malpractice, wrongful death or other injury, and it was spending $8 million a month to litigate and settle those cases before it filed for bankruptcy, according to court filings.

The case has drawn the attention of U.S. senators including Massachusetts Democrat Elizabeth Warren, who raised concerns about private equity ownership of healthcare businesses.

Genesis was bought by private equity firms JER Partners and Formation Capital in 2007, and those owners added to the company's debt through a series of acquisitions while selling off the company's real estate. Private equity firm ReGen Healthcare bought most of the company's equity in 2021.

Warren sent a letter to the company's leaders on Tuesday night, asking them for clarity about the company's current ownership and expressing concern that insiders accused of driving the company into bankruptcy could re-acquire it without paying the company's creditors, including the wrongful death plaintiffs.

Other private equity-backed health companies that have filed for bankruptcy in recent months include hospital chains Steward Health and Prospect Medical Group. Both of those companies, like Genesis, took on large amounts of debt during private equity buyouts, sold their real estate, and eventually collapsed into bankruptcy.

The case is Genesis Healthcare Inc, U.S. District Court for the Northern District of Texas, No. 25-80185

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Hospital operator Prospect Medical files for bankruptcy

Steward Health gets green light to repay creditors with litigation proceeds

(Reporting by Dietrich Knauth)