A Texas U.S. bankruptcy judge has approved a $75 million bankruptcy settlement for YesCare, a prison healthcare company, after a compromise that enables prisoners and their families to opt out of the deal and pursue lawsuits over alleged poor medical care. The approval was granted on Monday by U.S. Bankruptcy Judge Christopher Lopez, who praised the settlement’s flexibility in allowing claimants to walk away from the plan and litigate their cases independently.
The settlement, half of which is designated to address personal injury and wrongful death claims by prisoners, marks a significant shift after two years of contentious legal proceedings. Judge Lopez highlighted that it is unusual for a bankruptcy settlement to allow “true” opt-outs, emphasizing that claimants who choose to exit the settlement would not face further legal hurdles within the bankruptcy system.
Eric Goodman, an attorney representing those who sued YesCare, stated that only 12 personal injury claimants opted out, while the majority chose the settlement to resolve their claims. Those who accepted the settlement still retain the right to pursue legal action against other entities, such as government agencies managing prisons, Goodman added.
YesCare, which succeeded Corizon Health, inherited Corizon’s contracts and business assets after the company faced approximately 200 lawsuits alleging substandard medical care in 50 detention facilities across 27 states. Corizon had used the “Texas two-step” legal strategy to split into two companies, with YesCare continuing its operations and Tehum Care Services filing for bankruptcy, burdened with the responsibility for the lawsuits.
Initially, Tehum sought to use its bankruptcy proceedings to pressure creditors, including personal injury claimants, into a deal that would prevent lawsuits against YesCare and its private equity owners. This move was met with fierce opposition from claimants and lawmakers, who condemned it as an abuse of the bankruptcy system.
After Judge Lopez rejected an earlier settlement proposal, tort claimants’ attorneys took the lead in negotiations, ultimately resulting in an improved offer from YesCare. The revised deal provides at least $25 million for prisoner healthcare claims, up from $8 million in the initial settlement. The total settlement, including a $50 million cash payment and additional tax credits, is valued at approximately $75 million.
Tehum’s other creditors, including lenders and hospital systems that had filed claims over unpaid medical bills, also supported the settlement. The case faced a delay in November 2023 after mediator David Jones resigned following the revelation of a romantic relationship with an attorney involved in the negotiations.
The case is In re Tehum Care Services, U.S. Bankruptcy Court for the Southern District of Texas, No. 23-90086.
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