Prison Health-Care Bankruptcy Tests ‘Texas Two-Step’ Strategy

A troubled prison health-care provider’s bankruptcy trial will test a controversial corporate legal maneuver to settle mass tort liabilities, which has garnered outrage from federal officials and civil rights groups.

Tehum Care Services Inc. is a shell company created to absorb the medical malpractice suits and other legal liabilities of what used to be the nation’s largest prison healthcare provider: Corizon Health Inc. Tehum is pushing for court approval of a settlement that would remove the rights of prisoners and others to sue parties that took over Corizon and engineered its bankruptcy filing.

Conversely, a committee representing personal injury plaintiffs ...