Corporate bankruptcies happen more often than anyone would want them to happen. Most of the time, they deal with companies that have insufficient assets to pay bills. Bankruptcy courts usually oversee fair resolutions in the interest of both creditors and borrowers. Bankruptcies can also deal with companies that have plenty of assets to pay bills. The “Texas Two-Step” style of bankruptcy filings splits assets and liabilities into separate units and then bankrupts only the unit with the liabilities. If successful, the company would keep its assets and get rid of its liabilities.
What if such a strategic bankruptcy would affect incarceration? Bloomberg Law said Corizon Health, Inc., filed a Texas Two-Step bankruptcy to deal with medical malpractice claims at its prison health care facilities. Corizon spun off all of its medical malpractice claims into Tehum Care Services, a new company it formed solely for putting it into bankruptcy to settle such claims. A judge rejected a $54 million settlement, said the story.
“If they approve a settlement, they are forcing people to take whatever they give them, and that is not right,” formerly incarcerated claimant David Hall told Bloomberg Law. In 2016, Hall injured his wrist for life because of poor care at a Maryland jail in which he served less than one year on a misdemeanor conviction, said the story.
The Corizon doctor had told Hall that his wrist injury “would self-heal,” Hall told Bloomberg Law. In reality, Hall had suffered a “severe fracture.”
Hall won a $770,000 malpractice claim from Corizon, later confirmed on appeal, but the court affirmed the judgment one day after Corizon had filed for bankruptcy, said the article. Hall’s claim, now reduced to a claim against a bankrupt entity, has since joined the cue of hundreds of other claims against Tehum, the newly formed successor company. In a bankruptcy court settlement, Hall may end up with less than his judgment.
The article characterized incarcerated persons as uniquely disadvantaged in dealings with claims in bankruptcy filings. Corene Kendrick of the National Prison Project at the ACLU told Bloomberg Law that incarcerated persons must deal with the imperfect U.S. mail system and must rely on mailrooms staffed by prison officers. “Prisoners may receive filings late — if they get them at all,” the article said.
The article quoted Jackie Aranda Osorno of Public Justice, a legal advocacy nonprofit, as saying that Bankruptcy courts operated at a speed and a level of complexity with which incarcerated persons would have problems keeping up. Another Tehum claimant said he had received notices of two hearings “just one to two days before they happened, making attendance impossible.”
The article said Hall wanted Tehum’s bankruptcy dismissed, which would give him and other claimants the ability to pursue claims individually. Tehum counterclaimed that the bankruptcy settlement would actually help incarcerated persons, for “navigating the state court system” has as many complications “as dealing with the bankruptcy process.”
Another danger in the Corizon bankruptcy scheme has to do with other troubled prison medical providers copying the strategy to avoid paying claims, said the article. Prison health care providers Armor Health Management LLC and YesCare Corp. have taken measures similar to Corizon. Tehum’s case could provide “a blueprint for other contractors to do the same,” said Public Justice’s Aranda Osorno.
