Texas
How Texas’s bankruptcy courts are used to shield a prison healthcare provider
When late last year the largest provider of healthcare to inmates in jails and prisons in the US found itself facing an avalanche of medical malpractice lawsuits, its path forward was seemingly obvious.
By filing for Chapter 11 bankruptcy in Texas’s increasingly popular bankruptcy courts, Wellpath Holdings could restructure itself, in the process staying the 1,500 lawsuits it had been facing and limiting its exposure to more than $100m in potential liabilities.
Last month, a bankruptcy judge for the southern district of Texas in Houston extended those stays to give Wellpath additional time to propose how it might exit bankruptcy and continue operating.
But critics say that the move is a cynical attempt to avoid paying out to the families of people devastated by the company’s actions in a state increasingly seen as a safe haven for big corporations looking to avoid paying out to people and families their actions have harmed.
Among the cases stayed for Wellpath was one brought by Teesha Graham of Albuquerque. Her father Frankie died in 2022 after spending almost a week slumped in his San Juan county jail cell, covered in vomit and excrement as medical staff and prison guards refused his requests for help, an inmate in the jail told the Guardian.
Also stayed was a claim brought by Nicole Poppell of Colorado Springs. Her daughter Savannah died aged 24 just three days after she was booked into El Paso county jail in Colorado. Incessant vomiting caused by opiate withdrawal tore her esophagus and she bled to death in her cell.
“Now they’re filing bankruptcy the chances are I could get next to nothing but really I don’t even give a shit about the money,” said Nicole. “I just want to be heard.”
Poppell and Graham are just two grieving family members wanting the bankruptcy court to consider their claims against Wellpath because as “unsecured creditors”, but they’re at the bottom of the hierarchy when it comes to who gets paid from the limited funds that remain.
Last week they enjoyed a small victory as Wellpath dropped its request that the court approve some $5m in bonuses for 12 of its executives. “I’ll never understand it,” said Graham.
Attorneys representing claimants against Wellpath say its bankruptcy was a long time coming, and part of a cynical strategy that would see it minimize costs low with reduced staff and improper insurance coverage. Malpractice lawsuits would inevitably accumulate but using the Texas courts it could largely shed itself of those liabilities and exit from it all relatively unscathed.
“These companies keep their costs as low as possible and then rely on the bankruptcy courts in Houston to bail them out once they hit a critical mass of lawsuits,” said Adam Flores, a New Mexico attorney representing Graham.
Wellpath is a for-profit business headquartered in Nashville, Tennessee, and owned by private equity firm HIG Capital. It operates in jails and prisons across almost 40 states and is responsible for the care of hundreds of thousands of inmates.
Although bankruptcy is governed by federal code, jurisdictions will enforce it with varying lenience, and typically if a company has enough assets in a given state they can make use its courts.
In recent years, the southern district of Texas has become a go-to bankruptcy venue, displacing the southern district of New York as the second most popular in the country behind Delaware.
“The Southern District of Texas really blew up four or five years ago,” said RJ Shannon, a bankruptcy attorney in Houston who is representing almost 100 claimants in the Wellpath case. “It’s a debtor-friendly court, so it’s where all the big cases will be filed.”
Last year, the southern district of Texas saw some 31 filings for bankruptcy by companies with assets greater than $100m, whereas the southern district of New York saw just 11, according to figures from Bankruptcy Data.
Wellpath’s filing in November made it the second prison contractor to have used the court’s Houston division in just two years after prison healthcare firm Corizon filed for Chapter 11 in early 2023. The maneuver it attempted has been referred to as “the Texas Two-Step” and sees a company split itself into two, placing valuable assets in one and its liabilities in the other.
Although Wellpath is pursuing a simpler and more traditional Chapter 11 restructuring, its critics say the move is intended to have precisely the same effect.
“I think the reason Wellpath filed here [in Texas] is that they saw Corizon do it and they saw good things came of it,” said Shannon. He said that not only is the Houston court friendly to debtors, it’s also “user-friendly”, meaning proceedings can take place fast.
Anna Holland Edwards, a civil rights attorney in Denver who has brought a handful of cases against Wellpath over her career, said she saw its bankruptcy coming from a mile away. In early November her office asked a state court to issue sanctions on the company ahead of its expected bankruptcy.
Holland Edwards and other critics of Wellpath paint its use of Chapter 11 as a “business model” – both inevitable and symptomatic of the increasing extent to which America’s corporate assets have come under the ownership of private equity funds.
They argue that Wellpath, under private equity ownership, borrowed money to buy up regional facilities across the country and then underbid rivals and county services in order to win taxpayer-funded government contracts. Underbidding meant cost-cutting.
“If they don’t have enough money, maybe instead of having 10 nurses working in jail they’d only get five,” said Shannon.
According to Graham, it was a lack of staff in San Juan county jail that led to her father’s death: “They feel like they can send two people in there to care for over 500 humans?”
Another cost-cutting measure that may have brought Wellpath to its knees was its purchase of liability insurance policies that appeared to meet state and local government requirements but failed to establish any “true risk transfer”. As revealed in the ongoing bankruptcy proceedings, these policies only pay out if Wellpath covers a share of the damages, otherwise, no insurance kicks in.
And so tight were Wellpath’s purse strings that at the time of its bankruptcy it had left around 15 EMS providers in Michigan with more than $6m worth of unpaid bills, according to the Michigan Association of Ambulance Services.
Where the chips will now land remains uncertain, according to Shannon. As it stands, the ball is in Wellpath’s court, as prepares to issue a revised plan for how it will restructure and emerge out of Chapter 11 operational.
A recent ruling by bankruptcy Judge Alfredo R Perez of the southern district of Texas extended the stay on the pending lawsuits until at least 30 April.
In the meantime, unsecured creditors will fight to have as much money as possible set aside for their settlements. In many cases, especially those involving personal injury, once the stays are lifted plaintiffs’ right to seek damages will be restored, but the pool of funds from which to collect will be limited.
For Wellpath, the plan after Chapter 11 is to continue business as usual, and with Trump in office, there has never been a better climate in which for it to emerge from bankruptcy, according to Andy McNulty, another civil rights attorney based in Colorado.
“We saw when Donald Trump was elected that private prison company stocks soared to all-time highs so there’s no reason to believe that if Wellpath is allowed to continue operating it will not continue to profit off the suffering of inmates across the country,” he said.
A spokesperson for Wellpath said in a statement to the Guardian that it had filed for Chapter 11 in order to “strengthen our financial foundation without compromising our ability to deliver high-quality patient care”.
“We remain committed to providing vital healthcare services to underserved populations and are confident this process will allow us to continue to do so for years to come,” they added.
The company declined to say why it chose to file in the southern district of Texas or to answer questions about its liability insurance.
Savannah’s mother Nicole said she wants to see Wellpath dissolved for good. “For three days she was in there and she was begging for help, she was crying for help, and she was alone,” she said. “I want these people shut down.”
For more than a year, high-profile Texas Republicans have argued that Muslims are secretly plotting to take over Texas, centering their outrage on the East Plano Islamic Center, a mosque and Muslim community in North Texas known as EPIC. That hysteria resulted in a range of government enforcement actions last year, including a probe by the Texas Funeral Service Commission that barred EPIC from performing funeral rites. Last July EPIC sued the state, alleging Texas had violated its religious freedom. Late Wednesday, a federal judge in the Western District of Texas ruled that the mosque’s lawsuit can proceed despite the state’s attempt to dismiss it. In his ruling, the judge also issued a strong rebuke to claims made by Governor Greg Abbott and other state officials, writing that “no evidence has been presented” that EPIC intends to impose “Sharia law,” Islamic teachings based on the Quran and words of the Prophet Muhammad, on Texans.
The case stems from last March, when the funeral commission issued a cease and desist order that barred the mosque from performing traditional cleansing, shrouding, and prayer over bodies, on the grounds that EPIC may have been unlawfully conducting such rites without a license. (EPIC denies this allegation.) As Texas Monthly has reported, the agency was pushed to issue the order by some of Abbott’s closest advisers, who had made unsupported claims that EPIC and a proposed housing development it was affiliated with, EPIC City, was building a “no go zone” exclusive to Muslims (it was not).
EPIC sued the funeral commission in July 2025, arguing that the cease and desist order was an unconstitutional prohibition on religious practices. In Islam, preparing bodies for funerals stands as one of the most sacred rites; by the time of EPIC’s lawsuit, according to the petition, at least eleven congregants had been forced to receive rites elsewhere—away from their home mosque.
EPIC later amended its lawsuit to include former funeral commission chair Kristin Tips after text messages were released showing she had shared anti-Muslim messages and videos as the agency’s investigation unfolded. Among the examples was a graphic Tips had sent to the commission’s then–executive director, Scott Bingaman, that accused Islam of allowing child marriage and pedophilia. After sending it, Tips texted Bingaman a YouTube video with the title: “EPIC CITY TEXAS! Are Muslims planning a TAKEOVER?”
For nearly a year, the case has been locked in a procedural back-and-forth as Tips and the agency—represented by Attorney General Ken Paxton’s office—have pushed for the court to dismiss the case. Late Wednesday evening, Judge David Alan Ezra, a Ronald Reagan appointee, issued an order denying Tips’s attempt to dismiss the lawsuit. He also rejected Tips’s claim of qualified immunity, which can shield government officials from personal liability in civil cases. That rejection is rare in courts, such as this one, that appeal to the Fifth Circuit, which is one of the most conservative federal appellate courts in the country and is typically welcoming to government defendants.
In his ruling, Ezra cited the funeral commission’s deviation from historical norm in the EPIC case, as the agency has repeatedly asserted—first in 1987 and again in 2014—that Islamic religious organizations could conduct funeral and burial services without government oversight. The judge also affirmed that the alleged conduct—including the cease and desist order and Tips’s anti-Muslim messages—was seemingly “the result of religious discrimination” that violated EPIC’s clearly established religious rights under the Constitution’s Equal Protection Clause and other laws protecting religious liberty. In a rather remarkable footnote, the judge added that, based on the evidence offered, the court firmly rejected claims “suggesting that EPIC has applied, or intends to apply, ‘Sharia law’ in its practices.”
Though the case will now continue to wind through the courts, the judge’s ruling is a firm rebuke of the anti-Muslim political hysteria fueled by Abbott and his team of advisers. As Texas Monthly reported this month, the governor’s inner circle took an unusually active role in the funeral commission’s regulatory case against EPIC. After being looped into the agency’s pending investigation, which stemmed from an April 2024 complaint levied by a private individual, the governor’s attorneys, including Abbott’s general counsel, Trevor Ezell, edited the boilerplate cease and desist order the commission was ready to issue to make it more severe and punitive.
The original document, drafted by a funeral commission staffer, included a line warning that noncompliance would result in the agency taking “legal action.” Abbott’s team struck that line and suggested replacing it with a “criminal referral” to the Collin County district attorney—in what amounted to a hijacking of the agency’s usual independent regulatory process. At one point, a close adviser of Abbott even reported to a commission staffer that Abbott had texted him that after the cease and desist order was sent out, the funeral commission was his new favorite agency.
Over the following months, the governor’s advisers, including Ezell and a budget and policy adviser, Alex Aragon, weighed in often on the EPIC probe, requesting regular updates, coordinating public statements, and, at times, directing regulatory action. When the agency investigated other cases—such as a high-profile incident in which a Dallas funeral home allegedly accidentally shipped a stillborn baby to a Louisiana laundry facility—the governor’s team exhibited no similar interest. More than a year after the funeral commission’s cease and desist order, its investigation remains ongoing. No violations have been found.
Tips, the agency’s former chair, led the funeral commission until March 12, when, according to an email obtained by Texas Monthly, she “prayerfully” resigned, effective immediately, late in the night. While the circumstances around her departure remain unknown, she had spent months under fire for allegations that she had illegally lobbied for tort reform in her position as chair, which she denies. But in her absence, the governor’s pursuit of EPIC has continued. In March, the funeral commission issued a broad new subpoena to EPIC, seeking every record of funeral services that the mosque has on file.
After EPIC’s attorneys pushed back, arguing the order was too large in scope, Paxton’s office got involved—issuing a letter that demanded EPIC comply. Meanwhile, Abbott has continued his crusade against the mosque, going on Fox News earlier this week to deride EPIC and what he alleged were “multiple violations” of the law. The governor has touted that a dozen state agencies have investigated EPIC. To date, no criminal charges have been filed against the mosque, and a federal probe into EPIC by the the Department of Justice was dropped with no findings of malfeasance.
The NHL took the first step toward expansion in Texas earlier this week, agreeing to terms with billionaire Dan Friedkin and his family to explore the feasibility of putting a franchise in Houston or Austin.
Far enough from the Dallas Stars, who relocated from Minnesota in 1993, a new team would not interfere with their territorial rights. And the league has shown no fear of adding one team at a time, so No. 33 does not have to come with No. 34.
“Symmetry I don’t think should necessarily govern expansion,” Commissioner Gary Bettman said Tuesday. “You expand if you think it makes sense and enhances what the league has.”
What is behind the NHL’s interest in Texas
Money is the obvious answer. Bettman said the total investment of the project would be some $3.5 billion, which would include expansion fees paid to established owners along with the cost of building a new arena.
The Houston Rockets’ arena downtown is publicly owned but controlled by team owner Tilman Fertitta’s Clutch City Sports and Entertainment group. The home of the American Hockey League’s Texas Stars, in the Austin suburb of Cedar Park, has a capacity of 8,000 that is a little over half the size of the NHL’s smallest current rink (Winnipeg).
“I would be surprised if the NHL would be OK with an expansion team that does not have a new arena,” said Brian Mills, an associate professor at the University of Texas who teaches courses on sports economics and strategy. “The revenue potential with the luxury boxes and the way that they set those up and the money that they like to extract from the local cities is way too large to pass up.”
They are also huge markets. Houston at nearly 2.4 million is the fourth-most-populated U.S. city; Austin at just over 1 million is in the top 12.
“Obviously it makes sense if you’re a sports league to have a franchise in the nation’s fifth-largest metro area and one that is growing rapidly,” said Holy Cross professor Victor Matheson, an expert in sports economics. “Houston obviously makes sense in general as a destination for any league.”
Austin is smaller but has doubled its population since the mid-1990s and has seen an infusion of people over the past five years. Only eight of the NHL’s existing markets are bigger.
“It’s becoming more and more of a tech city, so I wouldn’t be surprised if there’s more hockey fans here than there used to be,” Mills said. “I would imagine there’s some market for the NHL here in Austin, particularly more than when it was a sleepy, small town capital of Texas 30 years ago.”
History of hockey in Houston and Austin
When hockey was picking up in popularity in the 1960s and ‘70s and the NHL went from six teams to 18, the rival World Hockey Association was founded and Houston got a franchise when the one in Dayton, Ohio, failed to get off the ground.
The Aeros’ inaugural season was in 1972-78, and they were best known for “Mr. Hockey” Gordie Howe playing for them along with sons Mark and Marty. They won four Avco World Trophies as WHA champions before folding.
An AHL team using the same name existed in Houston from 1994-2013. The Texas Stars have played in Austin since ’09.
“There’s some interest of hockey,” University of Houston economics professor Steven G. Craig said. “Houston is full of immigrants from around the country and around the world. And Austin is sort of similar in the sense of a pretty heterogeneous population.”
Pros and cons of a Houston or Austin NHL franchise
Growing the sport in another so-called non-traditional spot is a big benefit. Smashing successes in places like Las Vegas and Tampa, Florida, show what hockey can do across the Sun Belt when strong ownership is involved.
“Southern cities have been doing pretty well now these days in the NHL: the Lightning and the Panthers,” Mills said of the two teams in Florida. “You’ve got some pretty good hockey teams after some pretty miserable failures with some earlier expansion to the South.”
Abandoning the second try in Atlanta (the Thrashers from 2000-11) was more a failure of ownership than the market. The same could be said in Arizona, where a revolving door of owners led to arena miscues and eventually the Coyotes being sold and moved to Salt Lake City in 2024 to become the Utah Mammoth.
A 33rd team also means 20-23 more NHL players and hopefuls in the minors. The changing landscape of hockey development at the junior and college levels has the potential to churn more talent through the pipeline in North America than ever before, along with players coming from Europe.
“You do have a pretty big pool of players,” Matheson said. “I’m not particularly worried about diluting the talent there because I think there’s a lot of skill.”
What’s next and where the 34th team may be
After this six-month exploratory phase is complete, recent history suggests a season-ticket drive would be one of the subsequent steps. Ticket drives validated interest that led to the Vegas Golden Knights and Seattle Kraken.
The Board of Governors would need to approve moving forward in the process. No vote has yet been held, though the executive committee supported exploring Houston and Austin.
And while the NHL is comfortable with unbalanced Eastern and Western conferences, getting to 34 teams seems inevitable if it goes to 33. Bettman said the board on Tuesday was updated on situations in Atlanta and Arizona, and it would be no surprise if one of those places got another crack at it.
ere’s everything you need to know about one of the most recognizable trophies in North American sports — The Stanley Cup.
-
News6 minutes ago
The Maine Town That Actually Wants a Data Center
-
Lifestyle38 minutes ago‘The Bear’ is back in the kitchen
-
Technology51 minutes agoAndroid 17’s new foldable gaming mode could make flippy phones more fun
-
World54 minutes agoShark attack survivor wakes from 10-day coma and shares first words with family at her hospital bedside
-
Politics59 minutes agoTrump administration pledges $150M in aid, deploys Navy warships after deadly Venezuela earthquakes
-
Sports1 hour agoSecond Lady Usha Vance joins celebrity-filled crowd for Team USA’s group-stage finale in LA
-
Technology1 hour agoDebt collection letter for debt you don’t owe? What to do now
-
Business1 hour agoNewsom blesses Uber ballot measure truce — but fight over car crash lawsuits continues
