The recent bankruptcy proceedings of Tehum Care Services Inc., a unit of Corizon Health Inc., mark a significant shift in the execution of the Texas Two-Step legal strategy. This strategy, often employed to mitigate liability, was partially abandoned in Tehum’s reorganization plan.
Tehum, a provider of healthcare services within correctional facilities, emerged from bankruptcy with a novel element in its settlement approach. The company offered tort claimants, including incarcerated individuals, the choice to either be part of a $75 million settlement or to pursue their claims for greater compensation through state court litigation. This choice was largely related to claims of inadequate medical care leading to personal injury and wrongful death.
This provision allows claimants to maintain the right to sue Corizon Health Inc. and YesCare Corp., entities linked to Tehum through private equity-backings, for successor liability. The ability to opt-out from the collective settlement and individually pursue claims is a divergence from the typical Texas Two-Step process, which has been criticized as a loophole in bankruptcy law allowing companies to evade extensive legal liabilities.
Legal practitioners note that this departure from the traditional strategy is unlikely to recur in other Texas Two-Step maneuvers, as it reflects unique circumstances of the healthcare company’s bankruptcy case. The implications of this case are broad, especially for how future bankruptcies invoking the Texas Two-Step might be negotiated and litigated. For a deeper insight into the proceedings, access the full article on Bloomberg Law.