The Boys Scouts of America will begin paying sexual assault victims from the $2.4 billion bankruptcy reorganization plan that took effect Wednesday.
The plan allows the Texas-based Boy Scouts to continue operating while compensating the more than 80,000 men who said in a 2020 lawsuit they were sexually abused as children.
Doug Kennedy, co-chair of the Formal Bankruptcy Commission for Abuse Claimants, said survivors can now “take an important step toward some degree of resolution for their abuse.”
As the plan goes into effect, assets will begin to gradually flow into a settlement trust fund that will assess claims and distribute payments to abuse survivors.
However, it can take months for victims to see their payment, as the Texas federal bankruptcy hires financial advisors to overlook the money.
More than 80,000 men have claimed they were sexually abused while participating in the Boy Scouts of America to seek compensation
The victims will receive money from a $2.4 billion bankruptcy reorganization plan that went into effect on Wednesday
“This is a significant milestone for BSA, as we emerge from a three-year financial restructuring process with a global resolution approved with overwhelming support from more than 85 percent of survivors involved in the case,” said Roger Mosby, CEO and CEO of Boy Scouts. in a prepared statement.
The plan went into effect after the US Third Circuit Court of Appeals denied a request by opponents of the plan to issue a stay while they appeal federal district court approval of the plan.
The refusal to reside means the plan can officially go into effect, but opponents are expected to continue pursuing their appeals.
Opponents of the plan have argued that the staggering number of claims, when combined with other factors, indicates that the bankruptcy process has been manipulated.
Meanwhile, US Bankruptcy Judge Lori Silber Silverstein held a hearing on Wednesday to consider requests to allow the Boy Scouts to pay more than $20 million in legal fees and attorneys’ expenses to a coalition of law firms representing those who allege they were abused.
These law firms are expected to take about 40 percent of any client payments out of the fund.
However, attorneys for the Offended Scouts Alliance for Justice argued that Silverstein should agree to their “relatively modest” request that the Boy Scouts of America pay a portion of their fees because of the “extraordinary contribution” they made to the development of the reorganization plan.
The coalition played a dominant role in the bankruptcy, despite the existence of the official commission.
The coalition law firms represent approximately 18,000 claimants and belong to more than two dozen law firms collectively representing more than 60,000 claimants.
Opponents of the plan suggested that the huge number of claims was the result of a nationwide marketing effort by personal injury attorneys working with for-profit claims aggregators to drum up clients.
As the plan goes into effect, assets will gradually begin flowing into a settlement trust fund that will assess claims and distribute payments to abuse survivors.
However, it can take months for victims to see their payment, as Texas federal bankruptcy hires financial advisors to tip over money.
Silverstein in 2021 rejected an earlier Boy Scout proposal to pay millions of dollars in fees and expenses to attorneys hired by the coalition law firms.
The judge indicated that any such payments would come from the abuse claimants’ pockets, which she reiterated on Wednesday.
Silverstein indicated that when the coalition was formed, she wanted to know who was funding it. Is it from the pockets of the claimants, or does it come out of the pockets of the law firms? I remembered the question. And the answer was, “It comes out of the pockets of law firms.”
The judge questioned whether the fee request was not simply an “additional cost” for the claimants’ abuse, since the money would otherwise go to the settlement fund.
She noted that the coalition was essentially a “splinter group” from the official committee, and that its work was to duplicate that of the committee.
Should they be paid when I have a group, a formal committee, that is charged and has a fiduciary obligation to the entire circle of survivors? said Silverstein, who did not immediately judge.
Under the plan, the Boy Scouts of America would contribute less than 10% of the settlement fund. Local Scout boards, which run the troops’ day-to-day operations, have offered to contribute at least $515 million in cash and property, on the condition that some protection be given to local organizations sponsoring the troops, including religious entities, civic associations, and community groups.
The bulk of the compensation fund will come from the two largest insurers, Century Indemnity and The Hartford, which have reached settlements requiring them to contribute $800 million and $787 million, respectively.
And those sums represent a fraction of the billions of dollars in potential liability exposure they faced. The smaller insurers agreed to contribute about $69 million.
Other insurers, many of which offered excess coverage, refused to settle. They contend that the actions to distribute the funds violate their contractual rights to challenge claims, set a dangerous precedent for class tort litigation, and result in grossly inflated payments.
Under the plan, insurance companies, local Scout boards, and organizations sponsoring the troops will receive broad declarations of liability that protect them from future sexual assault claims in return for contributing to the compensation fund.
Some abuse survivors argue that releasing their claims against those non-debtor third parties without their consent violates their due process rights.
Such third-party versions, spawned by asbestos and product liability cases, have been criticized as an unconstitutional form of “decline bankruptcy,” in which non-debtor entities obtain benefits by joining with the debtor to resolve group tort claims in bankruptcy.
