Gray Reed is pleased to announce that, on March 3, 2025, U.S. Bankruptcy Judge Christopher López approved a historic bankruptcy plan for Tehum Care Services, Inc., a provider of prison healthcare services. This represents the first-ever confirmed chapter 11 plan in a “Texas Two Step” divisional merger case. Gray Reed Partners Jason Brookner, Aaron Kaufman, Lydia Webb and Amber Carson represented Tehum throughout the proceedings in the Southern District of Texas, which began over two years ago on February 13, 2023.
The confirmed plan approves a global settlement among Tehum, its two official creditor committees, and non-debtor settlement parties led by YesCare Corp. Under the settlement, YesCare and the other settlement parties have agreed to contribute $50 million into a settlement fund, which will be distributed to creditors by two separate plan trustees. The settlement parties have also agreed to waive approximately $25 million in senior secured and priority claims.
"This case presented extraordinary challenges from the outset," said Jason Brookner, Partner at Gray Reed. "We worked diligently to craft a solution that ensured fair and equitable treatment for all constituents. Court approval of the plan validates our approach and provides a path forward for all stakeholders."
The case involved complex negotiations and multiple mediation sessions leading up to, and then following, the court's rejection of an earlier settlement proposal. The approved plan generally provides claimants with the ability to opt out of the settlement and pursue non-estate, non-released claims without facing additional procedural hurdles if they prefer to pursue their claims through litigation.
"What makes this settlement noteworthy is the choice it offered to claimants," said Gray Reed Partner Aaron Kaufman. "Judge Lopez himself noted that he had never seen an opt-out of this kind. The Office of the U.S. Trustee echoed Judge Lopez’s thoughts."
The plan garnered broad support from all stakeholder groups, including the Official Committee of Unsecured Creditors, represented by Stinson LLP, and the Official Tort Claimants’ Committee, represented by Berry Riddell, LLP and Brown Rudnick LLP. The plan was unanimously accepted by all voting classes.
"This outcome demonstrates Gray Reed's ability to handle high-stakes, multi-faceted bankruptcy matters that involve sensitive public interest considerations," added Brookner. "We are proud and honored to have played a central role in developing a unique solution that addresses the legitimate concerns of all creditors, including personal injury claimants. We also express our appreciation to the Unsecured Creditors’ Committee and the Tort Claimants’ Committee for their tireless work and commitment in reaching this historical result."
The case is In re Tehum Care Services, Inc., in the U.S. Bankruptcy Court for the Southern District of Texas, Houston Division, Case No. 23-90086.
About Gray Reed’s Corporate Restructuring & Bankruptcy Practice
Gray Reed's Corporate Restructuring and Bankruptcy Practice Group provides efficient, innovative and sophisticated solutions to complex distressed financial situations. Our attorneys represent troubled companies, trustees, creditors, committees, equity holders, owners, managers and other stakeholders in financial distress, workouts, turnarounds, restructurings and bankruptcy matters — both in and out of court. With experience spanning healthcare, energy, real estate, manufacturing and retail sectors across Texas and nationwide, our Corporate Restructuring & Bankruptcy Practice Group is recognized by both Chambers USA and Best Lawyers "Best Law Firms" rankings.
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