Tehum Care Services Inc. Exits Bankruptcy Amid Legal Controversy

News Summary

Tehum Care Services Inc. is exiting bankruptcy after a significant settlement, allowing tort claimants to pursue larger claims against its parent company, Corizon Health Inc., and YesCare Corp. This decision raises important questions about corporate liability and accountability in the healthcare system serving incarcerated individuals. Experts believe this departure from the Texas Two-Step strategy could set a precedent for future bankruptcy cases, as many claimants now have the chance to seek substantial damages instead of accepting limited settlements.

Tehum Care Services Inc. Exits Bankruptcy Amid Controversy

In a significant turn of events, Tehum Care Services Inc. has received the green light to exit bankruptcy, following a major personal injury settlement that is creating waves in the legal landscape. This groundbreaking agreement allows tort claimants, many of whom are incarcerated individuals, to opt out of a $75 million settlement package, giving them the opportunity to pursue larger claims in state courts.

Game-Changing Legal Option for Claimants

The settlement strikes a unique tone, presenting hundreds of claimants with the opportunity to retain their right to sue Tehum’s parent company, Corizon Health Inc., and its affiliate YesCare Corp., for issues of successor liability. This approach diverges sharply from the typical Texas Two-Step strategy, which often shields parent companies from liability by transferring their responsibilities to a subsidiary. Emory University’s bankruptcy expert Lindsey Simon has noted that this case has acknowledged the likelihood of ongoing legal claims against Tehum, setting a precedent that could influence similar bankruptcy cases in the future.

Historical Approval in Bankruptcy Court

The U.S. Bankruptcy Court for the Southern District of Texas marked a notable milestone by confirming what is being billed as the “first ever confirmed chapter 11 plan in a ‘Texas Two Step’ divisional merger case.” Claimants who voted on the bankruptcy plan were presented with the option to opt out of the settlement, though the majority chose to accept it. The structured plan includes a tiered system to allocate approximately $25 million for over 200 tort claims, including wrongful death claims which are estimated to be valued between $1.2 million and $1.6 million each.

Individual Claimants and Their Experience

Among the claimants, **David Hall**, categorized as a Tier Two claimant, is anticipated to receive around $385,000 for injuries incurred while incarcerated in a Maryland prison operated by Tehum. In an interesting development, Tehum has set up two separate settlement trusts – one designated for personal injury and wrongful death claims, while the other caters to non-tort general unsecured claims. Interestingly, claimants must provide consent to release YesCare, Corizon, and affiliated entities in order to qualify for compensation.

Broader Implications and Concerns

Legal experts have raised eyebrows about whether the resolution reached in Tehum’s case will offer any meaningful guidance for other companies, such as Johnson & Johnson, entrenched in litigation bankruptcies. The plan explicitly indicates that creditors still maintain the rights to pursue uncapped damages under state law, a potentially game-changing adjustment in the landscape of debt restructuring and personal injury claims.

Tehum’s bankruptcy surfaced amidst a flurry of controversies involving Corizon’s corporate framework and the often opaque ownership of YesCare, a company tasked with providing services under this structure. Records from the court have revealed concerns about YesCare’s management, with many suggesting that the complex web involving management companies linked to insiders was purposely crafted to protect profits and obscure accountability. Senators Elizabeth Warren and Dick Durbin have voiced concerns over the governance structure of YesCare, heightening scrutiny on the operational protocols surrounding prison healthcare.

The reorganization of Tehum and its affiliates follows a backdrop of substantial liabilities originating from claims of medical negligence, contributing to ongoing controversies surrounding appropriate care standards within the prison system. Notably, YesCare has assumed Corizon’s contracts with various correctional facilities while Tehum has been handling associated liabilities, including ongoing lawsuits.

Looking Ahead: Ongoing Concerns About Accountability

Critically, YesCare has been described by several observers as little more than a shell company, with numerous documents intimating limited operational independence. The company’s financial activities are reportedly overseen by Geneva Consulting, which controls $10.5 million in operations and is believed to have connections to both YesCare and Tehum.

With YesCare overseeing the health and well-being of over 39,000 prisoners across various states, the operational structure has prompted serious concerns about accountability and the quality of healthcare within the correctional system. Tehum’s distinct approach to bankruptcy, by allowing claimants to pursue substantial damages instead of accepting pre-defined settlements, marks a pivotal shift in how similar situations may be handled in the future.