Boy Scouts of America bankruptcy update: Key agreement reached ahead of confirmation hearing
A critical agreement has been reached between the Boy Scouts of America and the official committee representing sexual abuse survivors as the nonprofit eyes an end to its two-year-long bankruptcy case.
The Tort Claimants Committee, along with other attorneys representing abuse survivors who previously objected to the Boy Scouts' plan to exit bankruptcy, have agreed to settlement terms that will be added to the plan, according to court documents filed Thursday, Feb. 10.
Survivors who filed claims in the case were asked to vote on the plan before a December deadline. A preliminary voting report, filed in early January, indicated 73% of 53,888 valid ballots were cast for the plan, with under 27% against.
A two-thirds majority is needed to pass, though the Scouts were hoping for more: 75%. In sexual abuse cases, bankruptcy court judges – who make the final decision – typically have been looking for a greater level of support.
The new agreement may get Boy Scouts to an optimal level of support as the Tort Claimants Committee said it is now recommending survivors change their "no" votes to "yes."
However, some objections to the plan remain.
The U.S. Trustee, which serves as a watchdog on bankruptcy cases, filed an objection to the plan on Feb. 7, arguing that third-party releases within the plan are unconstitutional, not authorized by the bankruptcy code and go against precedent.
Boy Scouts' plan largely hinges on those releases, which allow parties that haven't filed for bankruptcy in the case — including the religious and civic organizations that sponsor Scout troops — to be released from liability for decades of sexual abuse in exchange for contributing to monetary settlements.
Judge Laurie Selber Silverstein will review those objections and evaluate the plan at confirmation hearings scheduled for Feb. 22.
What led up to this point? And what's in the plan? Below is a synopsis of the bankruptcy case so far.
If you are one of the 82,000 who filed a claim in the case, visit the Boy Scouts' restructuring website for more information including contact information for questions.
Boy Scouts file for bankruptcy protection
After months of speculation and mounting civil litigation, Boy Scouts filed Chapter 11 paperwork in February 2020 in U.S. Bankruptcy Court in Delaware, amid declining membership and a drumbeat of child sexual abuse allegations. Even in the beginning, the Scouts' case was unprecedented in both scope and complexity.
In court filings, the Boy Scouts said it faced 275 abuse lawsuits in state and federal courts around the country, plus another 1,400 potential claims.
BANKRUPTCY PROTECTION: Boy Scouts files Chapter 11 in the face of thousands of child abuse allegations
FUTURE OF SCOUTING:What we know about victims, assets and the future of the BSA
Role of local councils becomes point of contention
Boy Scouts of America has argued that the national organization should be the only entity required to cover financial settlements in the sexual abuse cases that landed the organization in dire financial straits.
The national organization describes its relationship with local councils as essentially a franchise arrangement: The national group handles the development of Scout content and structure, licensing, training, human resources, legal support and information technology; the local councils are separate legal entities that run the troops.
However, attorneys for survivors of abuse say the local councils bear much of the responsibility for that abuse, and shouldn't be protected from liability. They further accused Boy Scouts of attempting to shield assets – the majority of which are owned by local councils, not the national organization.
In the original bankruptcy filing, the national organization estimated it owns $70 million in land and buildings.
The USA TODAY Network found $101 million in local councils’ property in the state of New York alone.
TENSIONS RISE: What is the role of local councils' role in Boy Scouts bankruptcy proceedings?
Record number of sexual abuse claims filed
A historic 90,000-plus sexual abuse claims were filed by the November 2020 deadline – making it the largest-ever child sex abuse case involving a single national organization.
Roughly 10% of those claims were duplicates, dropping the number to 82,000.
Additional vetting will happen after a plan is confirmed and a trustee is appointed to administer the trust. That process is likely to include a review of information provided by claimants, including the name of their abuser as well as the location and date of the abuse.
UNPRECEDENTED: Nearly 90,000 file sexual abuse claims against the Boy Scouts
Boy Scouts' first plan to get out of bankruptcy
In March, Scouts proposed paying roughly $220 million toward a trust to compensate survivors and another $300 million from a voluntary contribution from local councils.
The number is a fraction of the $1 billion of the organization's estimated value, and a sliver of the value of its subsidiaries, including local councils and various trusts and endowments, which USA TODAY estimates could exceed $3.7 billion.
The proposal equated to roughly $6,000 per survivor if divided evenly – and was universally met with pushback.
More: Boy Scouts of America plan to exit bankruptcy would pay abuse survivors an average of $6,000 each
More: Boy Scouts says it's safe, and offers sex abuse victims just 80 days to file claim. Victims balk.
Boy Scouts propose historic settlement amount
In July, Boy Scouts more than doubled its initial offer of compensation to sexual abuse survivors – increasing the contribution from the national organization to $219 million and from the local councils to $600 million.
The $850 million settlement has been praised as the largest for sex abuse claims in U.S. history. Yet, it remains unclear how the plan would get anywhere close to Boy Scouts' own estimation of the value of the claims, which they say is between $2.4 billion and $7.1 billion. In a footnote, Scouts acknowledged the settlement reached with victims' attorneys will only cover 10% to 30% of the total value.
At issue is whether claims that are time-barred under statutes of limitations will be eligible for payouts. In many states, victims are barred from filing lawsuits over abuse after a period of time has passed; however, laws in roughly two dozen states have changed in recent years.
Under the Boy Scouts' plan, claimants who live in states with restrictive statutes of limitations will be dinged an unspecified amount, or they can take an expedited payment of $3,500. Insurers argue that any plan requiring them to pay those claims violates both their policies and bankruptcy code because lawsuits on those same claims wouldn't be viable in civil court.
HISTORIC SETTLEMENT: Boy Scouts offer to compensate sexual abuse victims $850
UPDATES:Settlement OK'd by judge, but amounts for survivors still unknown
Details of Boy Scouts' plan become clear
Within the hundreds of pages of the Boy Scouts' reorganization plan and accompanying court documents are explanations for how the 82,000 abuse claims will be vetted and paid out.
One person – the bankruptcy trustee – will make the decisions, guided by three main topics: how severe the abuse was, where it occurred and how well the claimants can document it.
How much money will be available for victims once their claims are evaluated is another of many unknowns holding up the case 18 months after it was filed.
A USA TODAY analysis of court filings suggests that as many as half of those who filed claims could end up with a few thousand dollars – a fraction of what their counterparts have been allotted in more than a dozen bankruptcy cases involving Catholic dioceses.
The plan also sets up commitments to keep scouts safer, including:
A Child Protection Committee with abuse survivors will be established. Boy Scouts must present its youth protection program, along with proposed changes, to the committee for three years.
The Scouts will hire an independent third party to review its youth protection program.
The Scouts will publish information from its Volunteer Screening Database – also known as the Ineligible Volunteer files – which identifies volunteers accused of abuse.
PAYOUTS: In Boy Scouts bankruptcy, which sexual abuse victims will get a settlement?
Plan goes out for a vote
Silverstein signed an order in late September allowing the nonprofit's plan for reorganization to be voted on by creditors, including tens of thousands of sexual abuse survivors.
It marked the first time abuse survivors had a direct say in the Boy Scouts' plan.
On Dec. 13, an $800 million settlement was announced with another of Boy Scouts' primary insurers, Century Indemnity Co.. Also included is an additional $40 million from local councils, upping their contribution to $640 million.
The settlement would increase the value of the trust for survivors to around $2.6 billion.
VOTE: Survivors will soon vote on Boy Scout's plan to exit bankruptcy, a crucial next-step in case
Before the end of the voting period, Boy Scouts announced that congregations affiliated with the United Methodist Church had agreed to contribute $30 million to the victims' trust. A committee representing Methodist churches that sponsored Scout groups also agreed to help raise another $100 million.
Voting results
Initial results released on Jan. 4 fall below the results Boy Scouts' had hoped to achieve.
“We are encouraged by these preliminary results and are actively engaging key parties in our case with the hope of reaching additional agreements, which could potentially garner further support for the plan before confirmation,” the Boy Scouts said in a statement.
Preliminary results: Boy Scouts bankruptcy plan may miss mark in vote by abuse claimants
U.S. Trustee's objection
A governmental watchdog on the bankruptcy case filed an objection citing several issues with Boy Scouts' plan to exit bankruptcy, primarily focused on third-party releases that make up the bulk of the plan.
In its objection filed Feb. 7, the U.S. Trustee states the releases are unconstitutional and violate bankruptcy code. It argued the scope of those releases "is so broad that the universe of parties that will be released, and the universe of parties whose claims will be extinguished, is unknown."
The releases have been extended to some of Boy Scouts' insurers, local councils, sponsoring organizations including the Mormon Church, and others, meaning those organizations can't be sued for any potential involvement in the child sexual abuse that persisted in Boy Scouts for decades.
Similar objections have been filed by the U.S. Trustee in other notable bankruptcy cases recently, including the case of OxyContin maker Purdue Pharma. A release of the Seckler family that owns Purdue was overturned by a federal judge late last year.
The Trustee also objected to the payment of certain professional fees which it said fall outside of bankruptcy code. USA TODAY found that lawyers, financial advisors and consultants working on the case could walk away with as much as $1 billion in fees.
Big winners in the Boy Scouts bankruptcy: Attorneys, who could walk away with $1 billion
Support from survivor committee
A few days after the U.S. Trustee filed its objection, the official committee representing abuse survivors in the case agreed to updates to the plan and dropped its objections, according to a mediator's report filed Feb. 10.
In a statement, the Tort Claimants Committee said three revisions to the plan resulted in the group's support: enhanced child protection procedures; independent oversight of the settlement trust for survivors; and a path to additional compensation for survivors.
"For the first time in the history of the BSA, survivors have a seat at the table to make sure that child safety is BSA’s first priority,” said Doug Kennedy, a co-chair of the Tort Claimants Committee and a Scout sexual abuse survivor.
The Coalition for Abused Scouts for Justice, which also represents survivors but broke off from the official committee, has praised the agreement as the result of weeks of positive negotiations. The Coalition said in a statement that the plan provides $2.7 billion in compensation for survivors, which may increase as negotiations with other parties continues.
This article originally appeared on USA TODAY: Boy Scouts bankruptcy update: What to know about settlements, more
