10 Sep, 2022

Boy Scouts Dodge Bankruptcy With $2.46B Settlement

Posted by : Ed Lott, Ph.D., M.B.A.

The Boy Scouts of America secured approval of a $2.46 billion reorganization plan from a bankruptcy judge on Thursday that will allow the youth organization to exit Chapter 11 and settle decades of claims by more than 80,000 men who say they were abused as children by troop leaders.

The biggest change in the amended plan was the removal of a $250 millon settlement payment from the Church of Jesus Christ of Latter-day Saints. The reorganization will allow the Boy Scouts to continue its scouting mission free from the threat of costly litigation.

The Boy Scouts lined up support for the settlement plan from 86 percent of claimants who voted on it and from its two largest insurers. Some abuse victims and insurers continued to oppose the settlement, and a group of insurers has said they are likely to appeal. The money individual abuse survivors stand to gain from the bankruptcy plan ranges from $3,500 to $2.7 million, depending on the severity of the alleged abuse, where and when it occurred, and other factors.

Though legal hurdles remain, the ruling by Judge Laurie Selber Silverstein in Delaware on Thursday marked an important milestone for the BSA, which sought bankruptcy protection more than two years ago to stave off a flood of lawsuits alleging child sexual abuse by Scout leaders and volunteers.

Lawyers for some of the victims said the amount an individual survivor may receive from the bankruptcy plan depends on multiple factors relating to the alleged abuse.

The plan calls for the BSA and its local councils, along with settling insurance companies and troop sponsoring organisations, including Catholic institutions and parishes, to contribute to a fund for survivors. In return, those groups would be shielded from future lawsuits over Scout-related abuse allegations.

More than 80,000 men have filed claims saying they were abused as children by troop leaders around the country.

“Credit to the courageous survivors that this breakthrough in child and scouting safety has been achieved,” said attorney Jeff Anderson, whose firm represented more than 800 Boy Scout abuse survivors.

Anderson said most of the $2.46 billion is to be paid to survivors, but some funds would be set aside in a trust to continue litigation against entities that have not settled, mainly insurance companies.

It will likely take months for any of the abuse claimants to receive compensation.

Anderson said the settlement has drawn mixed reactions from his clients. Many are proud they stood up and demanded a cleanup of the Irving, Texas-based Boy Scouts, while others feel like they were dismissed because the organization “hid behind the statute of limitations” in some states.

A federal district judge must now sign off on Silberstein’s ruling. Opponents are expected to file an appeal.

When it filed for bankruptcy, the BSA faced about 275 filed lawsuits and was aware of numerous other potential cases. More than 80,000 abuse claims were eventually filed as part of the bankruptcy.

Attorneys for BSA insurers argued early on that the sheer volume of claims was an indication of fraud and the result of aggressive client solicitation by attorneys and for-profit claims aggregators.

While some of those insurers later negotiated settlements, other insurers continued to oppose the plan.

They argued that the procedures for distributing funds from the compensation trust would violate their contractual rights to contest claims and set a dangerous precedent for mass litigation.

“Today’s order means abuse survivors will get the compensation they deserve and millions of youth will benefit from scouting for years to come,” said Richard Mason, an attorney representing local Boy Scouts councils that contributed to the settlement.

The Coalition of Abused Scouts for Justice, which represents the majority of abuse claimants in the case, said the bankruptcy ruling would set up the largest sexual abuse settlement fund in history.

Coalition attorney Anne Andrews said she was “overjoyed for survivors…. They wanted Boy Scouts to survive, and they wanted to ensure this never happened to another child.”

The Boy Scouts said it was “enormously grateful” to abuse survivors who helped craft the settlement.

The Boy Scouts filed for bankruptcy in February 2020 after being hit by a flood of sexual abuse lawsuits as several U.S. states passed laws allowing accusers to sue over allegations dating back decades.

Those claimants became creditors of the organization, who had to sign off on any plans to restructure and exit bankruptcy.

The Boy Scouts lined up support for the settlement plan from 86% of claimants who voted on it and from its two largest insurers.

Some abuse victims and insurers continued to oppose the settlement, and a group of insurers has said they are likely to appeal.

The appeals must be addressed in order for the Scouts to emerge from bankruptcy.

The Boy Scouts organization said it will work to resolve the appeals in federal district court to complete the settlement.

The money for the settlement comes from the Boy Scouts, local councils, insurers and organizations that have chartered Scouting units and activities, including churches.

Lawyers had warned the 112-year-old organization might not survive without a wide-ranging settlement of abuse litigation. Silverstein voiced concern earlier in the bankruptcy that the litigation had “the potential to end the Boy Scouts as it currently exists.”

The organization has apologized and said the organization is committed to fulfilling their “social and moral responsibility to equitably compensate survivors.”

Be Sociable, Share!