Boy Scouts: Tentative deal with official sex abuse claimants
Dover, Del. — Two years after filing for Chapter 11 protection amid a flood of child sex abuse lawsuits, the Boy Scouts of America has reached a tentative settlement with an official bankruptcy committee representing more than 80,000 men who say they were molested as children by Scout leaders and others.
The settlement announced Thursday comes just two weeks before the start of a hearing at which a Delaware judge will hear arguments on whether she should confirm the BSA’s proposed reorganization plan.
All told, the compensation fund would total more than $2.6 billion, which would be the largest aggregate sexual abuse settlement in U.S. history.
The official abuse claimants committee, known as the tort claimants committee or TCC, was appointed by the U.S. bankruptcy trustee to act in and represent the best interests of all sexual abuse survivors. It has long maintained that the BSA’s plan to compensate abuse victims was “grossly unfair,” representing only a fraction of potential liabilities of insurers and local Boy Scout councils, and a fraction of what they can pay.
But after weeks of intense discussions that extended late into the night Wednesday, the committee announced that it had negotiated “important and positive modifications” to the BSA’s plan. It is now recommending that abuse claimants who voted against it change their votes.
Judge Laura Selber Silverstein will hold a case status hearing Friday.
The committee said it had accomplished three primary goals with the revised plan, including enhancing child protection measures for Boy Scouts going forward and ensuring independent governance of the settlement fund that will distribute payments to eligible abuse claimants.
Retired Texas bankruptcy judge Barbara Houser, who served as lead mediator in Puerto Rico’s bankruptcy, has been nominated to be the settlement fund trustee. It’s unclear whether there are other candidates.
The revised plan also provides abuse claimants the ability to sue insurance companies and local troop sponsoring organizations, such as churches and civic groups, that do not enter into settlements within one year of the reorganization plan taking effect.
The agreement is expected to intensify pressure on remaining plan opponents, including certain insurance companies and an ad hoc committee representing 10 Catholic dioceses and archdioceses and the Catholic Mutual Relief Society of America, a church-affiliated nonprofit that insures hundreds of dioceses, religious orders and institutions.
John Humphrey, co-chair of the TCC, said the BSA’s failure to win sufficient support for its previous plan forced the organization and local councils back to the negotiating table.
“Survivors empowered themselves when they voted in sufficient numbers to block confirmation of the previous plan,” he said in a statement.
The Boy Scouts, based in Irving, Texas, sought bankruptcy protection in February 2020, seeking to halt hundreds of individual lawsuits and create a fund for men who say they were sexually abused as children. Although the organization was facing 275 lawsuits at the time, it found itself facing more than 82,000 sexual abuse claims in the bankruptcy case.
In a statement Thursday, the Boys Scouts said that, with the addition of the official abuse claimants committee, “all significant survivor constituencies” support the reorganization plan.
Voting by abuse claimants on the previous plan showed about 73.5% of 53,596 valid ballots supporting the plan. The Boy Scouts were hoping for at least 75%. Under the rules for a typical Chapter 11 case, the Boy Scouts needed approval of two-thirds of sexual abuse claimants who voted. However, because the BSA plan includes liability releases for non-debtor third parties, including local BSA councils, insurers and troop sponsoring organizations that contribute to the victims fund, a higher level of support likely will be required.
Regardless of the level of support, plan opponents, including the U.S. bankruptcy trustee, argue that it cannot be confirmed if non-debtor third parties are released from liability without the consent of holders of abuse claims.
In a court filing Monday, the bankruptcy trustee, who acts as a “watchdog” in such cases to ensure compliance with the U.S. bankruptcy code, argued that the third-party releases violate the due process rights of claimants and are not authorized under the bankruptcy code.
The reorganization plan calls for the Boys Scouts and its roughly 250 local councils to contribute up to $786 million in cash and property, and assign certain insurance rights, to the fund. In return, they would be released from further liability.
The BSA’s two largest insurers, Century Indemnity Co. and The Hartford, would contribute $800 million and $787 million respectively. Other insurers have agreed to contribute about $69 million.
The BSA’s former largest troop sponsor, the Church of Jesus Christ of Latter-day Saints, commonly known as the Mormon church, has agreed to contribute $250 million into the fund for abuse claims involving the church. Congregations affiliated with the United Methodist Church have agreed to contribute $30 million.
The sponsoring organizations, like settling insurers, would be released from further liability in exchange for their contributions.