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What do Steward Health Care and Alex Jones have in common? A bankruptcy judge

(SimpleImages via Getty Images)
(SimpleImages via Getty Images)

The judge overseeing the bankruptcy of national hospital operator Steward Health Care is expected to weigh in Monday on a plan to sell off the company’s 31 facilities, including seven in Massachusetts.

The proposed sales, through auctions, could begin later this month. They’re part of the private, for-profit company’s effort to liquidate much of its business and reemerge from billions of dollars in debt and future rent obligations.

Massachusetts officials are closely watching the Chapter 11 proceedings amid concerns about the future of patient care. It remains unclear what buyers may emerge for the company’s hospitals and whether any will ultimately close. Hospital leaders and state officials have warned that closures could destabilize the state’s health care system.

The person in charge of the bankruptcy process, Southern District of Texas Bankruptcy Judge Christopher Lopez, will play a critical role in determining the timeline for the sale of the facilities and how to distribute any assets to Steward’s creditors. They include many vendors and staffing agencies that did business with Steward’s hospitals across the country.

Lopez is a nationally-known bankruptcy expert with a reputation for fairness, according to legal experts. He once worked for same law firm now representing Steward.

Before Lopez became a federal judge in 2019, he worked for Weil, Gotshal & Manges LLP. The group specializes in corporate litigation and restructuring — and is currently leading Steward’s reorganization effort. Lopez’s LinkedIn profile indicates he spent 20 years at the firm.

Several legal experts said Lopez’s past employment does not immediately pose a conflict of interest in the Steward bankruptcy proceedings. Nancy Rapoport, law professor at the Boyd Law School at the University of Nevada, Las Vegas, said Lopez has been on the bench for five years, so judicial rules indicate he does not have to recuse himself from the Steward case.

“The reality is everyone knows he used to work at Weil, so it’s not a shock,” Rapoport said. “It’s something that somebody could raise, it’s something that the judge could raise on his own motion, but it is not conclusively disqualifying.”

Bankruptcy Judge Christopher Lopez speaks about his career to young lawyers. (Screenshot from a 2021 Houston Young Lawyers Association video posted to YouTube)
Bankruptcy Judge Christopher Lopez speaks about his career to young lawyers. (Screenshot from a 2021 Houston Young Lawyers Association video posted to YouTube)

Rapoport said many bankruptcy judges come from big bankruptcy firms, so the connection is not all that unusual. In fact, a second judge in the same Houston court also previously worked for Weil, Gotshal & Manges.

The bankruptcy world tends to be small, confirmed Jay Westbrook, a professor of business law at the University of Texas School of Law at Austin, where Lopez earned his law degree. Westbrook taught Lopez and described him as a meticulous jurist.

“I think he has a good reputation for fairness, treating the lawyers fairly, being concerned about what’s before him and producing a good result. All of those good things you want a judge to be,” Westbrook said.

According to his court profile, Lopez earned a Master’s degree from Yale Divinity School and a bachelor’s degree from the University of Houston. He is also an adjunct professor at Thurgood Marshall School of Law at Texas Southern University, and lectures on bankruptcy law around the country.

During Steward’s first bankruptcy hearing last month, Lopez said his priority was preserving health care for patients and workers.

“There are real people who are receiving real care in real time and real people who are showing up to work every day at these places, and they are at the forefront of my mind today,” Lopez told attorneys at the hearing.

The court appointed an ombudsperson, Suzanne Koenig, to monitor patient care at Steward hospitals during the bankruptcy process. Koenig, who runs a health care consulting business, will monitor facilities in several states, including those in Massachusetts.

Steward’s bankruptcy isn’t Lopez’s first foray into high profile litigation. He’s currently overseeing the personal bankruptcy of Alex Jones, the broadcaster who was ordered to pay $1.5 billion to families of victims in the Sandy Hook school shooting in Newtown, Connecticut. The families sued Jones for claiming the shooting was a hoax. In a recent ruling, Lopez said Jones could sell his 27-acre Texas ranch for $2.7 million to pay legal expenses and some of what he still owes the families.

Legal experts said Steward may have chosen to file its bankruptcy in the Southern District of Texas because of its reputation for handling complicated restructuring cases. Although Steward is based in Dallas, which falls under a different jurisdiction, it operates a hospital in Houston.

“Houston has become the center of a number of very large bankruptcy cases in recent years,” Westbrook said.

According to Rapoport, the Southern District of Texas has worked to attract complex bankruptcy litigants like Steward. Rapoport said the court offers “24-7 service, people always on call. It did everything it could to make itself an attractive location.”

Currently, the district is embroiled in a controversy involving judicial ethics. Last fall, the chief judge, David Jones, resigned after publicly acknowledging he was living with a lawyer whose firm’s clients often appeared in his courtroom. The lawyer also resigned. The revelations prompted a review of the court’s rules on how judges are assigned. Federal officials reportedly may consider reopening some of the jurist’s cases because of the relationship.

The scandal does not involve the parties litigating the Steward case, but Westbrook said it has affected the entire system.

“All of the judges in Houston are in an awkward position right now,” Westbrook said.

During Monday’s scheduled hearing, Lopez is expected to consider claims by Steward’s creditors and lenders, and the timeline for selling Steward hospitals. Ross Martin, a professor of law at Boston College said he expects the hospital auctions will be complicated, and the process could face delays.

“The hospitals are so geographically diverse. They even have different people trying to sell the South Shore hospitals from the North Shore hospitals in Massachusetts,” Martin said. “So there will be a lot of moving parts, and I think that can be very challenging.”

Steward also has filed court documents indicating it is seeking additional funding to keep the facilities operating through the bankruptcy.

Steward has proposed an ambitious timeline to sell its hospitals. The company’s attorneys are hoping to hold the first auction, which includes seven facilities in Massachusetts, by the end of June. Steward also has been working to sell its doctors group, Stewardship Health. Prior to declaring bankruptcy, it had announced a deal with Optum, but the agreement has not been finalized.

This article was originally published on WBUR.org.
Copyright 2024 WBUR

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Deborah Becker