Westlaw News

Boy Scouts to file back-up bankruptcy plan as victims, insurers remain at odds

The Boy Scouts of America is planning to file an amended reorganization proposal by Tuesday that would include a back-up plan if it cannot secure the support it needs from sexual abuse survivors who are seeking compensation from the youth organization.

Boy Scouts attorney Jessica Lauria of White & Case made the announcement during a virtual status conference before U.S. Bankruptcy Judge Laurie Selber Silverstein in Wilmington, Delaware on Monday afternoon. She said that recent mediation among the organization, its insurers, and various groups representing survivors has led to “momentum” but no global deal on its proposed restructuring plan.

The youth organization filed for bankruptcy in February 2020 in the face of nearly 300 lawsuits accusing troop leaders of sexual abuse spanning decades. The Boy Scouts submitted a reorganization plan proposal to the bankruptcy court in March that would establish a settlement trust for the approximately 85,000 sexual assault claims filed in the Chapter 11 case. The trust would be funded through a mix of cash, artwork, certain oil and gas interests and insurance policies. The plan also calls for local councils, which are not debtors in the bankruptcy, to contribute $300 million to the trust in exchange for releases against future potential lawsuits.

Lauria told the judge on Monday that the amended plan will include a back-up option if the organization is unable to bring a sufficient number of survivors on board with the current proposal. In that scenario, the Boy Scouts would shift to a plan that does not include the local council contribution and relies heavily on insurance proceeds for compensating the survivors.

That plan would be “worse than sub-optimal” for the survivors, Lauria said, as it would raise complicated issues surrounding shared insurance policies with local councils, which would make it harder for the survivors to be compensated. 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 along faster.

The back-up plan resembles a similar proposal that the official tort claimants’ committee – which represents survivors – has made in court papers. The committee, represented by Pachulski Stang Ziehl & Jones, has asked Silverstein to reject the Boy Scouts’ request to extend its exclusive period to file a plan so that it can submit its own, competing proposal. That proposal, according to the committee, would eliminate the local council contributions and releases and rely on insurance carriers for substantially all of the compensation.

A hearing on the exclusivity period is set for Thursday.

Meanwhile, certain insurers are also dissatisfied with the current plan and are continuing to urge the judge to consider their requests to investigate sex abuse claims that they believe may not be legitimate.

Lauria informed the judge on Monday that the Boy Scouts will file a motion soon seeking an estimation of all of the sex abuse claims. The organization is opposing a similar request from survivor groups, however, which have asked that the estimation matter be taken up by a federal district court. The Boy Scouts say the matter should be decided in bankruptcy court.

The tort claimants’ committee recently estimated in court papers that the claims are worth $102.7 billion.

The case is In re Boy Scouts of America, U.S. 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 the insurers: Tancred Schiavoni and Gary Svirsky of O’Melveny & Myers; Stamatios Stamoulis of 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 of Bayard

For the official tort claimants’ committee: James Stang, Iain Nasatir, John Morris, James O’Neill and John Lucas of Pachulski Stang Ziehl & Jones

For the Coalition of Abused Scouts: 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 of Monzack Mersky Browder and Hochman