Just a few days before Christmas a bankruptcy court judge in Delaware gave final approval to a plan by Rancho Bernardo-based Millennium Health to restructure its books and settle a long-running government investigation into claims it had been fraudulently billing the government for years.

The plan, hammered out over months of negotiations with lenders who the company owed $1.1 billion, gave the once high-flying Millennium a new lease on life.

It also contained an unusual provision that shielded the former owners of the company – including founder James Slattery and some of his family members, former directors and executives and the private equity firm TA Associates – from any future lawsuits stemming from a $1.8 billion loan the company got in 2014.

About $1.2 billion of the loan was used to pay a “special dividend” to TA Associates and Slattery, court papers say. Slattery, through a holding company and various family trusts, got 55 percent of the money, more than $600 million.

Neither Slattery nor the others covered by lawsuit shield, were parties to the bankruptcy filing, but are known as “nondebtor parties.” While companies that enter bankruptcy are protected from lawsuits, it’s unusual to see such protections extended to individuals.

“The idea you can run your company through bankruptcy, and avoid personal liability, strikes me as wrong,” said Scott Ehrlich, a professor at California Western School of Law and bankruptcy expert.

Before the plan was approved, the U.S. Trustee’s office, which oversees bankruptcy cases for the Department of Justice, filed an objection because of that lawsuit-shield provision, arguing the judge didn’t have the authority to OK such broad protections.

One lender, Voya Funds, filed a lawsuit Dec. 9 alleging that Slattery and Millennium misled lenders in the $1.8 billion by not disclosing it had been under investigation by the federal government for years over its billing and business practices.

Voya lent $100 million to the company as part of the loan package. The lawsuit alleges fraud, civil racketeering and other grounds against Slattery, the investment firm TA Associates and others.

The lawsuit that is pending outlined how Voya believes it was duped by Millennium in 2014. A memo describing the company that was circulated to lenders made numerous representations that Voya said were misleading.

Among them was representations that the company was not the subject of any governmental investigation, and was in compliance with federal rules and regulations.

Millennium didn’t tell lenders about the federal probe until a year after it got the loan. Then the company revealed it had met numerous times with investigators since 2012 and turned over 11 million pages of documents to government investigators, according to Voya’s lawsuit.

Those and other misrepresentation, Voya said, deceived investors into loaning the company the money, most of which Voya said was distributed to Slattery and the other equity owners.

Slattery, who started the company in 2007 and now lives in Florida, could not be reached for comment, and one of his lawyers did not respond to a request for comment on the Voya lawsuit on Friday.

A spokeswoman for TA Associates said the firm declined to comment.

The lawsuit has been put on hold while Voya – which objected to the bankruptcy plan but was overruled by the judge – appeals the decision to approve the bankruptcy plan.

That appeal raises an important legal question – the authority of the bankruptcy court has to bar litigation by creditors against individual owners and executives of failed companies.

“There’s nothing in the bankruptcy code that protects nondebtor persons or entities from liability,” Ehrlich said. “That’s not the purpose of Chapter 11.”

The litigation shield provision, court papers say, was part of a deal struck between the company’s former owners and its lenders. Millennium in October had agreed to pay a $256 million penalty to the government to settle the fraud and false claims allegations.

But the company did not have the money to pay the settlement at the time. Slattery and the former owners agreed to pay the fine – Slattery put in $178 million and TA Associates the rest – but would do so only in exchange for the protection from being sued, court records show.

The judge ruled that the owners putting in money, and therefore keeping the company going, outweighed Voya’s objections to the plan, and approved it.

The bankruptcy plan cut $1.1 billion of debt owed to lenders like Oppenheimer Funds, Voya and other institutional investors, almost in half. In exchange the lenders were give ownership of the company.

It’s unclear if the appeals court will hear Voya’s arguments against the judge’s approval of the plan. A decision won’t come for several weeks. If the court sides with the judge, then Voya’s fraud lawsuit will be dismissed. If the court agrees with Voya, then that suit could proceed.

A spokesman for Voya declined to comment on the suit but said the company was committed to trying to claw back money from the loans.

The government’s investigation focused on overbilling of Medicare and Medicaid by Millennium going back to the start of the company. When the $256 million settlement was unveiled in October, the government said the company billed the government for unnecessary drug tests.

The company had a practice of screening urine samples for a wide spectrum of drugs — screenings the government said weren’t necessary, but allowed the company to inflate bills it sent in for reimbursement. For example the government said the company screened samples for drugs such as Ecstasy, PCP and other drugs from elderly Medicare patients who were unlikely to be using such drugs.

The company agreed to the settlement but did not admit wrongdoing. Since then it has a new board of directors and management. The settlement allowed the company to continue to participate in the Medicare reimbursement program, which accounted for a majority of its revenues.