Latham Set to Join Steward Bankruptcy After Settling Trustee Row

Steward Health Care System LLC and the Justice Department’s bankruptcy arm agreed to terms that would allow Steward to retain Latham & Watkins LLP in its bankruptcy case.

The private health network said in a Tuesday filing in the US Bankruptcy Court for the Southern District of Texas that it resolved an objection to its proposed hiring of the Big Law firm raised by the US Trustee in January.

The objection claimed Steward couldn’t “afford the fees of another large multinational law firm,” having already hired Weil Gotshal & Manges LLP, which has served as its lead bankruptcy counsel since last spring and billed nearly $70 million in legal fees.

Latham will join the case as Steward works toward a plan to wind down its Chapter 11 case. The health network has sold off dozens of hospitals during the proceeding.

Earlier this month, Latham responded by asserting that hiring Ray C. Schrock and Candace M. Arthur, two attorneys who recently joined the firm from Weil, was “essential” for its Chapter 11 bankruptcy and that the US Trustee’s objection had “no valid basis.”

The revised order includes language specifying that from its entry date and for the duration of the bankruptcy case, Latham’s billable services to Steward must be primarily delivered by Schrock and Arthur and the firm’s restructuring and special situations practice group.

Should Steward need services from another practice group within Latham, the firm must notify the US Trustee before providing such services.

The US Trustee will retain “all rights” to object to Latham’s compensation and reimbursement, according to the new order.

Schrock disclosed earlier this month that he and his colleague couldn’t work with Steward on matters involving TRACO International Group, an insurer and non-bankrupt affiliate, because TRACO has refused to grant a requested waiver. Schrock said that Weil would handle those matters.

The case is Steward Health Care System LLC, Bankr. S.D. Tex., No. 24-90213, order 2/18/25