A bankruptcy judge has denied a request by the main investor of Genesis HealthCare to shield himself from liability in lawsuits related to injuries and deaths at the company’s nursing homes. The decision offers hope for families seeking compensation.
Genesis HealthCare, which was once the largest nursing home chain in the United States, filed for Chapter 11 bankruptcy protection in July. The company had proposed protecting its controlling investor, Joel Landau, from legal responsibility as part of its reorganization plan. Genesis estimated that resolving nearly a thousand settled and pending cases would cost $259 million.
Reports show that before filing for bankruptcy, Genesis delayed payments on settlements with families of patients who were injured or died while under its care. When it entered bankruptcy proceedings, Genesis still owed $41 million out of $58 million promised in these settlements.
During hearings in U.S. Bankruptcy Court in Dallas, Judge Stacey G.C. Jernigan stated she would not approve any sale of Genesis’ assets that included legal releases for Landau or his private equity associate David Gefner. Landau was seeking to buy back the assets through another company he controlled but did not attend court or respond to a subpoena.
"I'm very encouraged that someone is watching and paying attention to this," said Erin Pearson, whose father died after less than a month at a Genesis facility. "And the guy who owns the most shares, not only did he not show up but doesn't just get to move things around and rebuy" the nursing homes.
Pearson's lawsuit claims her father developed serious medical conditions at the facility but was not sent to a hospital promptly. She has yet to receive her $500,000 settlement from Genesis. "I don't know if I'll ever see that settlement, but I would like to be hopeful," Pearson said.
Genesis and its representatives did not comment on recent developments. However, David Harrington, executive chairman of Genesis' board of directors, publicly credited Landau’s investment with helping avoid bankruptcy in 2021 and allowing the company to focus on patient care.
Ian Norris, an attorney representing multiple clients with outstanding settlements against Genesis, called the judge’s ruling "a huge win for all those who were confronting the possibility that they would not be able to recover the settlements that were promised to them by Genesis prior to the bankruptcy."
According to filings reviewed by KFF Health News and presented in court records, unpaid claims against Genesis total more than $1.6 billion—including those from former residents’ families as well as pension funds and state governments such as Pennsylvania, New Mexico, and West Virginia.
Daniel Simon, lawyer for Genesis’ owners, told the court that $155 million from asset sale proceeds would be available for creditors under a bid led by Landau and Gefner’s new company.
Last month’s auction process drew objections from federal officials and creditors over concerns about fairness and exclusion of some bidders; Judge Jernigan found too many irregularities in how it was conducted and ordered it redone under oversight by federal authorities.
"I am aware that there is huge concern about Mr. Landau, and he is not here," Jernigan said last week. "There is no way I can approve these releases without him on the witness stand and me being convinced of his good faith."
Senator Elizabeth Warren commented: "A private equity company tried to abuse the bankruptcy system to slither out of paying what they owe to neglected seniors in its nursing homes. This is a textbook case of why we need to get private equity out of health care altogether, and this decision is a good step forward in the fight to deliver relief for the victims of Genesis."
Representatives for Landau’s group indicated they will participate again when bidding resumes next month without liability protections attached. Simon noted at hearing that Judge Jernigan's ruling "has humbled us."
Attorneys representing former residents expressed hope they could pursue further legal action against those responsible for leading Genesis into bankruptcy. John Anthony—who represents hundreds of claimants—said: "The victims believe that Mr. Landau richly deserves his day in court so he can explain...how he has apparently gotten so rich running all these supposedly insolvent facilities into the ground."
