Elements Behavioral Health U.S. Trustee objection questions releases

By Caroline Salls

Pittsburgh, Nov. 20 – The U.S. Trustee overseeing Elements Behavioral Health, Inc.’s Chapter 11 case objected to the company’s motion for interim approval of its disclosure statement and plan of liquidation solicitation procedures, according to a Monday filing with the U.S. Bankruptcy Court for the District of Delaware.

Acting Region 3 U.S. trustee Andrew R. Vara said a local bankruptcy rule allows debtors to file a combined plan and disclosure statement, as Elements did, if the “total pot of assets after sale or other liquidation” is less than $25 million and if the plan does not contain a discharge or any non-consensual third-party releases,

The U.S. Trustee said Elements’ combined plan and disclosure statement does not meet these criteria because it “contains both a discharge and broad, extensive third-party releases.”

“The releasing parties release the released parties for all claims, even those caused by illegal conduct, gross negligence, bad faith or fraud,” the objection said,

In addition, Vara said the releasing parties and released parties have no opportunity to vote on the plan, meaning they are bound by the releases, regardless of their wishes.

Vara also said the combined plan and disclosure statement does not give enough information to demonstrate that creditors will be better served by the proposed plan than by a liquidation.

Elements is a Long Beach, Calif.-based behavioral health company. The company filed bankruptcy on May 23 under Chapter 11 case number 18-11212.

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