Sen. Elizabeth Warren (D-Mass.) told the Justice Department’s bankruptcy watchdog it should consider moving to dismiss a prison health-care company’s attempt to use bankruptcy to settle liability.
Warren on Wednesday asked the US Trustee, an arm of the Justice Department, to consider joining a motion to dismiss made by tort claimants in Tehum Care Services Inc.’s Chapter 11 case. Tort claimants earlier this month moved to dismiss Tehum’s bankruptcy so they can sue its affiliates, providing them a path to recover more money than they say they would receive through bankruptcy.
“The U.S. Trustee should carefully consider the merits of the TCC’s motion for structured dismissal and support it if it agrees with the conclusions presented,” Warren said in the letter, referring to the tort claimants committee. The letter was addressed to Tara Twomey, the director of the US Trustee program, and Kevin M. Epstein, the trustee for the Southern District of Texas, where Tehum filed its case.
Tehum, a shell company created by Corizon Health Inc. using a controversial bankruptcy maneuver known as the Texas Two-Step to resolve hundreds of personal injury suits, filed for Chapter 11 in February 2023. Tort claimants say Corizon provided substandard health care to incarcerated victims in prison.
The US Trustee has previously expressed skepticism over Corizon’s attempt to settle liability through Tehum’s bankruptcy. The watchdog in October objected to a motion by Tehum to move forward with its bankruptcy plan, which the US Trustee called “patently unconfirmable.” The plan has impermissible liability releases that would shield nonbankrupt people and entities from liability, the US Trustee said. It has argued against similar releases at the US Supreme Court.
The US Trustee should challenge any plan that provides liability releases obtained without creditor consent, Warren said.
Corizon Health is using the Texas Two-Step “explicitly to evade its liabilities,” Warren said. It’s seeking approval of a plan that “will deny Corizon’s creditors, including incarcerated individuals, adequate restitution for the company’s serious harms,” she said.
The case is Tehum Care Services, Inc., Bankr. S.D. Tex., No. 23-90086, 1/31/24.
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