Bankruptcy

Final arguments begin in Boy Scouts bankruptcy case

DOVER, Del. (AP) — After a three-week trial, a Delaware judge began hearing final arguments Wednesday in the Boy Scouts of America bankruptcy case.

Judge Laura Selber Silverstein must decide whether to approve a reorganization plan that the BSA has negotiated over the past two years. This would compensate for tens of thousands of men who say they were sexually abused as children in Scouting, while allowing Scouting to continue as a permanent business.

The Boy Scouts, based in Irving, Texas, filed for bankruptcy protection in February 2020 in an effort to end hundreds of individual lawsuits and create a settlement trust for victims of abuse.

Although the organization faced 275 lawsuits at the time, more than 82,000 sexual abuse complaints were filed in the bankruptcy filing.

The reorganization plan calls for the Boy Scouts, its 250 local councils and certain insurance companies and troop sponsoring organizations to contribute some $2.6 billion in cash and property to a compensation fund for victims of abuse.

In return for these contributions and the assignment of insurance rights to the compensation fund, these contributing parties would be released from further liability.

The plan faces opposition from several unsettled insurance companies, as well as the US bankruptcy trustee, who acts as a watchdog in Chapter 11 cases to ensure compliance with bankruptcy laws. Insurance companies argue that the procedures for distributing funds to abuse claimants would violate their rights under the policies they issued and allow claims to be paid that would not win damages in civil lawsuits.

The trustee, meanwhile, argued that proposed liability releases for non-debtor third parties – including local BSA councils, insurers and troop-sponsoring organizations – violate plaintiffs’ due process rights. of abuse and are not permitted under the bankruptcy code.

Wednesday’s arguments did not address those issues but rather involved supporters defending the plan as having been developed in “good faith” and the procedures for distributing trust, if any. Opponents of the plan will present counter-arguments on Thursday.

Boy Scouts attorneys began Wednesday by acknowledging why the BSA had filed for bankruptcy protection and explaining steps it had taken to improve youth protections.

“It’s a tragic part of Scouting’s past…. Our organization is deeply sorry,” BSA attorney Michael Andolina said of decades of child sexual abuse.

The Boy Scouts and its supporters argue that the judge must make several specific findings for the plan to stand. Among them, the plan was proposed in good faith and the procedures for compensating the victims provide for a fair and equitable settlement of their claims. They also ask the judge to find that the proposed starting values ​​for various types of abuse – ranging from penetration to abuse without physical contact – are based on and consistent with the abuse regulations and litigation results of the BSA before bankruptcy.

But Silverstein has repeatedly pushed back against proponents of the plan, wondering which bankruptcy code provisions would apply to the conclusions they seek. She noted that she was not being asked to approve a particular claim settlement, as is often the case in bankruptcies, and suggested that the arguments of regime supporters instead involve the settlement of claims, which is a different question with a different standard of approval.

“There is no right way to resolve 82,000 claims, … but what is this trust supposed to do … and why do I find it to be consistent, fair or equitable?” she asked.

Silverstein also questioned whether she could reject the plan if she believed the BSA’s track record of handling abuse claims was not fair or appropriate.

“I don’t know if any of the settlements the debtors reached in pre-petition were fair,” she said. “…I have no fact to make a conclusion like that.”

Under the plan, the Boy Scouts and its approximately 250 local councils would contribute up to $786 million in cash and property and allocate certain insurance rights to the victims’ fund. The BSA’s two largest insurers, Century Indemnity Co. and The Hartford, would contribute $800 million and $787 million, respectively, while other insurers agreed to pay around $69 million.

The organization’s former biggest troop sponsor, The Church of Jesus Christ of Latter-day Saints, commonly known as the Mormon Church, is reportedly paying $250 million for abuse claims involving the church. Congregations affiliated with The United Methodist Church agreed to contribute $30 million.

Abuse plaintiffs would also be allowed to sue insurance companies and local troop-sponsoring organizations, such as churches and civic groups, that don’t make settlements within a year of the law taking effect. reorganization plan.

As it stands, the compensation fund would total more than $2.6 billion, which would be the largest comprehensive sexual abuse settlement in US history. The average recovery per plaintiff, however, would be significantly lower than other sexual abuse scandal settlements involving large numbers of victims.