Boy Scouts to file bankruptcy plan as victims, insurers disagree
The Boy Scouts of America plan to file an amended reorganization proposal by Tuesday that would include a back-up plan if it cannot get the support it needs from survivors of sexual abuse seeking compensation from youth organization.
White & Case Boy Scouts lawyer Jessica Lauria made the announcement during a virtual status conference before U.S. bankruptcy judge Laurie Selber Silverstein in Wilmington, Delaware on Monday afternoon. She said recent mediation between the organization, its insurers and various groups representing survivors had led to “momentum” but no global agreement on her proposed restructuring plan.
The youth organization filed for bankruptcy in February 2020 in the face of nearly 300 lawsuits accusing gang leaders of sexual abuse spanning decades. The Boy Scouts submitted a reorganization plan proposal to bankruptcy court in March that would establish a settlement trust for the roughly 85,000 sexual assault complaints filed in the Chapter 11 case. The trust would be funded by a mixture of cash, artwork, certain oil and gas interests, and insurance policies. The plan also calls for local councils, which are not debtors in bankruptcy, to contribute $ 300 million to the trust in exchange for discharges against potential future lawsuits.
Lauria told the judge on Monday that the amended plan will include a backup option if the organization is unable to involve a sufficient number of survivors in the current proposal. In this scenario, the Boy Scouts would switch to a plan that did not include local council input and relied heavily on insurance proceeds to compensate survivors.
This plan would be “worse than suboptimal” for survivors, Lauria said, as it would raise complicated issues regarding insurance policies shared with local councils, making it more difficult to compensate survivors. But, she noted, it would also save the Boy Scouts millions of dollars in legal fees, which as of March had hit $ 100 million, by moving the case forward faster.
The back-up plan looks like a similar proposal the official committee of civil liability claimants – which represents the survivors – made in court documents. The committee, represented by Pachulski Stang Ziehl & Jones, asked Silverstein to reject the Boy Scouts’ request to extend his exclusive period to file a plan so he could submit his own competing proposal. This proposal, according to the committee, would eliminate contributions and releases from the local council and would depend on the insurance companies for almost all of the compensation.
A hearing on the exclusivity period is set for Thursday.
Meanwhile, some insurers are also dissatisfied with the current plan and continue to urge the judge to consider their requests for an investigation into allegations of sexual abuse that they believe are not legitimate.
Lauria informed the judge on Monday that the Boy Scouts would soon be filing a motion for an estimate of all sexual abuse complaints. The organization, however, opposes a similar request from groups of survivors, who have requested that the issue of the estimate be considered by a federal district court. The Boy Scouts say the case should be decided in bankruptcy court.
The tort plaintiffs committee recently estimated in court documents that the claims are worth $ 102.7 billion.
The case is In re Boy Scouts of America, United States Bankruptcy Court, District of Delaware, No. 20-10343.
For the Boy Scouts: Jessica Lauria, Michael Andolina, Matthew Linder and Laura Baccash of White & Case; and Derek Abbott and Andrew Remming of Morris, Nichols, Arsht & Tunnell
For insurers: Tancred Schiavoni and Gary Svirsky of O’Melveny & Myers; Stamatios Stamoulis by Stamoulis & Weinblatt; James Ruggeri and Joshua Weinberg of Shipman & Goodwin; Philip Anker, Danielle Spinelli and Joel Millar of Wilmer Cutler Pickering Hale and Dorr; and Erin Fay from Bayard
For the official Complainants Committee: James Stang, Iain Nasatir, John Morris, James O’Neill and John Lucas of Pachulski Stang Ziehl & Jones
For the Abused Boy Scouts Coalition: David Molton, Sunni Beville and Eric Goodman of Brown Rudnick; Lawrence Robbins, Ariel Lavinbuk, William Trunk and Joshua Bolian of Robbins Russell Englert Orseck Untereiner & Sauber; and Rachel Mersky from Monzack Mersky Browder and Hochman