Future liability releases at centre of Boy Scouts bankruptcy

Protecting local Boy Scouts of America councils and troop sponsoring organizations from future. Liability for child sex abuse claims is critical to the U.S. group’s reorganization plan. BSA attorneys told a Delaware bankruptcy judge Tuesday.

Attorneys opposing the plan countered that liability releases for non-debtor third parties. Are neither fair nor necessary, and that they infringe. The rights of abuse survivors to seek compensation for their abuse.

The Boy Scouts, based in Irving, Texas, petitioned for bankruptcy protection in February 2020. Seeking to halt hundreds of individual lawsuits and create a settlement trust for abuse victims. Although the organization faced about 275 lawsuits at the time.

The reorganization plan calls for the Boys Scouts and its 250 local councils, along with settling insurance companies. And troop sponsoring organizations, to contribute some US$2.6 billion in cash. And property and assign their insurance rights to a settlement trust fund for abuse victims. More than half that money would come from the BSA’s two largest insurers, Century Indemnity Co. and The Hartford. Those companies would contribute $800 million and $787 million, respectively.

Parties Contributing To The Settlement

The local BSA councils are not debtors in the bankruptcy, but Boy Scouts attorney Jessica Lauria argued. That they are inextricably intertwined with the national organization and deserve to be protected. From future lawsuits in exchange for contributing to the compensation fund.

“There can be no doubt that there is an identity of interests, and frankly an extreme interconnectedness. Between the local councils and the national organization,” Lauria said. Sponsoring organizations similarly are closely tied to BSA and local councils and critical to their operations, she added.

Richard Mason, an attorney for the local councils, told Judge Laura Selber Silverstein that without the liability releases, the compensation fund “basically evaporates.”

Absent approval of the BSA’s plan, the local councils would face “massive litigation” and would be forced to seek bankruptcy protection themselves, endangering the future of Scouting and the ability of abuse survivors to obtain compensation, Mason added.

But opponents questioned why the liability releases for local councils and sponsoring organization. They noted that the Boy Scouts proposed a plan last year under which the settlement. Trust would be funded only by the national organization, and only for claims made against it. Under that plan, the councils and local sponsoring organizations would make no contribution and would have no protection from liability for abuse claims.

Silverstein Noted

“Debtors said that was workable, feasible,” Silverstein noted. “So why is it necessary to have this elaborate, interconnected, intertwined plan for the Boy Scouts?”

Lauria replied that “BSA-only plan” may have been feasible when first proposed. But that it was never “optimal”. She also noted that the BSA has spent some $100 million more on professional fees. The bankruptcy since then and can’t afford to fund a settlement trust on its own at this point.

Edwin Caldie, an attorney representing scores of alleged abuse victims in Guam, argued that the BSA’s current plan unfairly strips them of their rights to pursue abuse claims against Catholic church officials.

The Guam group includes creditors with claims against the Archdiocese of Agana. Which sought bankruptcy protection in 2019 amid a flood of child sex abuse claims. Many of those claims involve the late priest Louis Brouillard.

BSA Plan

The BSA plan would channel claims against the Guam diocese into the proposed BSA settlement trust. Without the consent of survivors and unfairly deprive them of the ability to pursue BSA insurance policies, Caldie said.

“From a common sense perspective, the BSA made a decision to shun and silence survivors of child sexual assault for decades and did not report their perpetrators for decades,” Caldie said. ”…. The Guam survivors are not terribly comfortable with ‘greater good’ arguments now, especially made buy the BSA.”