Joshua A. Sussberg, P.C.

Bankrupt hospital operator Steward Health has filed hundreds of millions in new claims in Texas bankruptcy court against its former CEO and other executives, including allegations that they orchestrated a sale-leaseback deal that rendered the business an insolvent "zombie." The revised complaint against ex-CEO Dr. Ralph de la Torre and other executives increased the damages Steward had been seeking to $3.4 billion and added multiple new claims, including that de la Torre rendered the business insolvent by using the proceeds of the 2016 sale-leaseback transaction to pay out a $790 million dividend. "The result was a zombie hospital chain that limped along for the next eight years, mostly through other equally dubious sale-leaseback transactions providing cash infusions that gave the surface impression of a thriving business, while executives privately conceded it was insolvent all along," the complaint said. Steward filed for Chapter 11 protection in May 2024 with $9.2 billion in debt, and has since sold or closed its 31 hospitals. Its liquidation plan established a trust to pursue claims on behalf of the estate, and in July, Steward filed an adversary action against de la Torre and other former executives seeking to claw back more than $1.5 billion in dividend payments and additional transfers they had approved. The trust alleged that, despite the fact Steward was insolvent at the time, de la Torre, a former surgeon, and other executives approved a $111 million dividend — $81.5 million of which went to de la Torre — overpaid for five Florida hospitals, and allowed investors to pocket most of the proceeds of the sale of the company's Medicare Advantage business. The new complaint adds claims regarding other transactions, as well, including the $790 million dividend paid after Steward's 2016 sale of its Massachusetts hospitals to Medical Properties Trust in a leaseback deal. The complaint alleges the dividend payment to Steward's then-owners — private equity firm Cerberus Capital Management — was what definitively drove Steward into insolvency, saying the hospital chain was showing signs of financial distress before the transaction and the deal left the company burdened with significant lease and mortgage costs. De la Torre personally profited $35 million from the transaction, Steward said, and he was paid a total of $250 million in dividends and salary during his time as CEO. "Steward is now bankrupt, and five of its hospitals have closed, while de la Torre lives in a palace indirectly paid for by Steward's investors, providers, patients and other creditors," the company said. The complaint also blasted Cerberus' 2020 sale of Steward to de la Torre, saying the defendants allowed Cerberus to trade "worthless" equity in an insolvent Steward for a $350 million convertible note. "This wasn't only mismanagement; it was also a systematic extraction of value from a vital healthcare system serving a low-income population," William T. Reid IV, one of the attorneys for the trust, said in a statement released Monday. Counsel for the defendants in the action did not immediately respond to requests for comment Tuesday. The trust is represented by William T. Reid IV, Jeremy Wells, Dylan Jones, Taylor Lewis, Julia Gokhberg, Eric D. Madden, J. Benjamin King, Richard Howell, Jeffrey E. Gross and Yonah Jaffe of Reid Collins & Tsai LLP. De la Torre is represented by Susheel Kirpalani, Zachary Russell, Emma McCabe and Anthony Bongiorno of Quinn Emanuel Urquhart & Sullivan LLP. The other defendants are represented by James L. Leader Jr. of Vinson & Elkins LLP, Ian D. Roffman of Nutter McClennen & Fish LLP, Joshua A. Sussberg, Richard U.S. Howell and Kent Hayden of Kirkland & Ellis LLP, and William L. Roberts and Desiree Pelletier of Ropes & Gray LLP. The bankruptcy case is In re: Steward Health Care System LLC et al., case number 4:24-bk-90213, in the U.S. Bankruptcy Court for the Southern District of Texas. The adversary case is Steward Health Care System LLC et al. v. de la Torre et al., case number 4:25-ap-03593, in the U.S. Bankruptcy Court for the Southern District of Texas.

Nov 25

3 min

Bankrupt hospital operator Steward Health has filed hundreds of millions in new claims in Texas bankruptcy court against its former CEO and other executives, including allegations that they orchestrated a sale-leaseback deal that rendered the business an insolvent "zombie." The revised complaint against ex-CEO Dr. Ralph de la Torre and other executives increased the damages Steward had been seeking to $3.4 billion and added multiple new claims, including that de la Torre rendered the business insolvent by using the proceeds of the 2016 sale-leaseback transaction to pay out a $790 million dividend. "The result was a zombie hospital chain that limped along for the next eight years, mostly through other equally dubious sale-leaseback transactions providing cash infusions that gave the surface impression of a thriving business, while executives privately conceded it was insolvent all along," the complaint said. Steward filed for Chapter 11 protection in May 2024 with $9.2 billion in debt, and has since sold or closed its 31 hospitals. Its liquidation plan established a trust to pursue claims on behalf of the estate, and in July, Steward filed an adversary action against de la Torre and other former executives seeking to claw back more than $1.5 billion in dividend payments and additional transfers they had approved. The trust alleged that, despite the fact Steward was insolvent at the time, de la Torre, a former surgeon, and other executives approved a $111 million dividend — $81.5 million of which went to de la Torre — overpaid for five Florida hospitals, and allowed investors to pocket most of the proceeds of the sale of the company's Medicare Advantage business. The new complaint adds claims regarding other transactions, as well, including the $790 million dividend paid after Steward's 2016 sale of its Massachusetts hospitals to Medical Properties Trust in a leaseback deal. The complaint alleges the dividend payment to Steward's then-owners — private equity firm Cerberus Capital Management — was what definitively drove Steward into insolvency, saying the hospital chain was showing signs of financial distress before the transaction and the deal left the company burdened with significant lease and mortgage costs. De la Torre personally profited $35 million from the transaction, Steward said, and he was paid a total of $250 million in dividends and salary during his time as CEO. "Steward is now bankrupt, and five of its hospitals have closed, while de la Torre lives in a palace indirectly paid for by Steward's investors, providers, patients and other creditors," the company said. The complaint also blasted Cerberus' 2020 sale of Steward to de la Torre, saying the defendants allowed Cerberus to trade "worthless" equity in an insolvent Steward for a $350 million convertible note. "This wasn't only mismanagement; it was also a systematic extraction of value from a vital healthcare system serving a low-income population," William T. Reid IV, one of the attorneys for the trust, said in a statement released Monday. Counsel for the defendants in the action did not immediately respond to requests for comment Tuesday. The trust is represented by William T. Reid IV, Jeremy Wells, Dylan Jones, Taylor Lewis, Julia Gokhberg, Eric D. Madden, J. Benjamin King, Richard Howell, Jeffrey E. Gross and Yonah Jaffe of Reid Collins & Tsai LLP. De la Torre is represented by Susheel Kirpalani, Zachary Russell, Emma McCabe and Anthony Bongiorno of Quinn Emanuel Urquhart & Sullivan LLP. The other defendants are represented by James L. Leader Jr. of Vinson & Elkins LLP, Ian D. Roffman of Nutter McClennen & Fish LLP, Joshua A. Sussberg, Richard U.S. Howell and Kent Hayden of Kirkland & Ellis LLP, and William L. Roberts and Desiree Pelletier of Ropes & Gray LLP. The bankruptcy case is In re: Steward Health Care System LLC et al., case number 4:24-bk-90213, in the U.S. Bankruptcy Court for the Southern District of Texas. The adversary case is Steward Health Care System LLC et al. v. de la Torre et al., case number 4:25-ap-03593, in the U.S. Bankruptcy Court for the Southern District of Texas.

Nov 25

3 min

Law360 (February 10, 2026, 4:39 PM EST) -- A Delaware bankruptcy judge approved a Chapter 11 schedule Tuesday for the retail operator for outdoor clothing brand Eddie Bauer that will see the company on the block by early March and any unsold stores closed for good by the end of April. At first-day hearings for the company's Chapter 11 case, U.S. Bankruptcy Judge Stacey L. Meisel approved both a timeline for a potential going-concern sale for the retailer and procedures for going-out-of-business sales at its 175 locations. Eddie Bauer filed for Chapter 11 protection Monday with just over $1.74 million in funded debt. Its parent company, the SPARC Group, has another $215 million in unsecured claims. The claim is the funding SPARC has provided to keep Eddie Bauer afloat in recent years, debtor counsel Matthew Fagen said at Tuesday's hearing. In addition to the long-term troubles of brick-and-mortar retail, Fagen said the company has seen a 20% drop in revenue as consumer spending on outdoor goods came down from a COVID-19 pandemic peak, undercutting by overseas competitors taking advantage of the recently abolished de minimus tariff exemption and more recently rising import prices due to increasing tariffs. As a result, the company has lost $172 million in the last three years — $80 million of that in the last fiscal year — and SPARC has said it will no longer cover its losses, he said. Fagen said the company began informally marketing its assets in December, and has gotten non-binding statements of interest from two parties. In the meantime, talks with lenders produced a restructuring support agreement and plan agreed to by the holders of all the company's secured debt, he said. The proposed plan sets a minimum $250,000 recovery for unsecured creditors, with possible increases depending on the sale results. The terms of the RSA call for Eddie Bauer to simultaneously market its assets, both partially and as a going concern, while running closing sales at its stores. Under the procedures approved by Judge Meisel, the auction, if required, will take place March 6 and a court hearing to approve the sale to the winning bidder March 12. The closing sales began a week and a half ago and are expected to conclude for any unsold stores by the end of April, debtor counsel Oliver Paré said. He said it will continue to accept existing gift cards for the next 30 days. The RSA calls for the debtor to get approval for its Chapter 11 plan within 70 days of the filing date. The debtor is represented by Joshua A. Sussberg, Matthew C. Fagen and Oliver Paré of Kirkland & Ellis LLP and Michael D. Sirota, Warren A. Usatine and Felice R. Yudkin of Cole Schotz PC. The case is In re: Eddie Bauer LLC, case number 2:26-bk-11422, in the U.S. Bankruptcy Court for the District of New Jersey. Additional reporting by Emlyn Cameron. For a reprint of this article, please contact reprints@law360.com.

Feb 10

2 min

Law360 (February 10, 2026, 4:39 PM EST) -- A Delaware bankruptcy judge approved a Chapter 11 schedule Tuesday for the retail operator for outdoor clothing brand Eddie Bauer that will see the company on the block by early March and any unsold stores closed for good by the end of April. At first-day hearings for the company's Chapter 11 case, U.S. Bankruptcy Judge Stacey L. Meisel approved both a timeline for a potential going-concern sale for the retailer and procedures for going-out-of-business sales at its 175 locations. Eddie Bauer filed for Chapter 11 protection Monday with just over $1.74 million in funded debt. Its parent company, the SPARC Group, has another $215 million in unsecured claims. The claim is the funding SPARC has provided to keep Eddie Bauer afloat in recent years, debtor counsel Matthew Fagen said at Tuesday's hearing. In addition to the long-term troubles of brick-and-mortar retail, Fagen said the company has seen a 20% drop in revenue as consumer spending on outdoor goods came down from a COVID-19 pandemic peak, undercutting by overseas competitors taking advantage of the recently abolished de minimus tariff exemption and more recently rising import prices due to increasing tariffs. As a result, the company has lost $172 million in the last three years — $80 million of that in the last fiscal year — and SPARC has said it will no longer cover its losses, he said. Fagen said the company began informally marketing its assets in December, and has gotten non-binding statements of interest from two parties. In the meantime, talks with lenders produced a restructuring support agreement and plan agreed to by the holders of all the company's secured debt, he said. The proposed plan sets a minimum $250,000 recovery for unsecured creditors, with possible increases depending on the sale results. The terms of the RSA call for Eddie Bauer to simultaneously market its assets, both partially and as a going concern, while running closing sales at its stores. Under the procedures approved by Judge Meisel, the auction, if required, will take place March 6 and a court hearing to approve the sale to the winning bidder March 12. The closing sales began a week and a half ago and are expected to conclude for any unsold stores by the end of April, debtor counsel Oliver Paré said. He said it will continue to accept existing gift cards for the next 30 days. The RSA calls for the debtor to get approval for its Chapter 11 plan within 70 days of the filing date. The debtor is represented by Joshua A. Sussberg, Matthew C. Fagen and Oliver Paré of Kirkland & Ellis LLP and Michael D. Sirota, Warren A. Usatine and Felice R. Yudkin of Cole Schotz PC. The case is In re: Eddie Bauer LLC, case number 2:26-bk-11422, in the U.S. Bankruptcy Court for the District of New Jersey. Additional reporting by Emlyn Cameron. For a reprint of this article, please contact reprints@law360.com.

Feb 10

2 min

Law360 (February 10, 2026, 4:39 PM EST) -- A New Jersey bankruptcy judge approved a Chapter 11 schedule Tuesday for the retail operator for outdoor clothing brand Eddie Bauer that will see the company on the block by early March and any unsold stores closed for good by the end of April. At first-day hearings for the company's Chapter 11 case, U.S. Bankruptcy Judge Stacey L. Meisel approved both a timeline for a potential going-concern sale for the retailer and procedures for going-out-of-business sales at its 175 locations. Eddie Bauer filed for Chapter 11 protection Monday with just over $1.74 billion in funded debt. Its parent company, Catalyst Brands - formerly the SPARC Group - has another $215 million in unsecured claims. The claim is the funding its parent has provided to keep Eddie Bauer afloat in recent years, debtor counsel Matthew Fagen said at Tuesday's hearing. In addition to the long-term troubles of brick-and-mortar retail, Fagen said the company has seen a 20% drop in revenue as consumer spending on outdoor goods came down from a COVID-19 pandemic peak, undercutting by overseas competitors taking advantage of the recently abolished de minimus tariff exemption and more recently rising import prices due to increasing tariffs. The debtors parent sold the Eddie Bauer brand name to Authentic Brands Group in 2021 and the debtor currently licenses back the brand. It terminated its contract for the "unprofitable" wholesale rights and "barely profitable" e-commerce rights in October as a cost-saving measure, according to its filings. As a result, the company has lost $172 million in the last three years — $80 million of that in the last fiscal year — and that its parent has said it will no longer cover its losses, he said. Fagen said the company began informally marketing its assets in December, and has gotten non-binding statements of interest from two parties. In the meantime, talks with lenders produced a restructuring support agreement and plan agreed to by the holders of all the company's secured debt, he said. The proposed plan sets a minimum $250,000 recovery for unsecured creditors, with possible increases depending on the sale results. The terms of the RSA call for Eddie Bauer to simultaneously market its assets, both partially and as a going concern, while running closing sales at its stores. Under the procedures approved by Judge Meisel, the auction, if required, will take place March 6 and a court hearing to approve the sale to the winning bidder March 12. The closing sales began a week and a half ago and are expected to conclude for any unsold stores by the end of April, debtor counsel Oliver Paré said. He said it will continue to accept existing gift cards for the next 30 days. The RSA calls for the debtor to get approval for its Chapter 11 plan within 70 days of the filing date. The debtor is represented by Joshua A. Sussberg, Matthew C. Fagen and Oliver Paré of Kirkland & Ellis LLP and Michael D. Sirota, Warren A. Usatine and Felice R. Yudkin of Cole Schotz PC. The case is In re: Eddie Bauer LLC, case number 2:26-bk-11422, in the U.S. Bankruptcy Court for the District of New Jersey. Additional reporting by Emlyn Cameron. Correction: A previous version of this article gave an incorrect figure for Eddie Bauer's funded debt and the venue for the case in one reference. The errors have been corrected. Update: This story has been updated to clarify ownership of the debtor and its brand. For a reprint of this article, please contact reprints@law360.com.

Feb 10

3 min