Future liability releases at center of Boy Scouts bankruptcy

DOVER, Del. BSA attorneys explained Tuesday to a Delaware bankruptcy judge that protecting local Boy Scouts of America Councils and troop sponsoring organisations from future liability for child abuse claims is crucial to the national group’s reorganization plan.

Attorneys opposing the plan countered that liability releases for non-debtor third parties are neither fair nor necessary, and that they infringe on 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, more than 82,000 sexual abuse claims have been filed in the bankruptcy case.

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 $2.6 billion in cash and property and assign their insurance rights to a settlement trust fund for abuse victims. The Hartford and Century Indemnity Co., the largest insurers of the BSA, would contribute more than half of that amount. Those companies would contribute $800 million and $787 million, respectively. In exchange, the parties to the settlement trust would be exempted from any further liability for sexual abuse claims that date back decades.

Although the local BSA councils aren’t considered debtors in bankruptcy proceedings, Jessica Lauria, Boy Scouts attorney, argued that they are inextricably linked to the national organization and should be protected from any future lawsuits in return for contributing to the compensation fund.

“There is no doubt that there are a number of common interests and, frankly, an extreme interconnectedness between the local councils, and the national organization,” Lauria stated. She added that sponsoring organizations are also closely tied to the BSA and local councils, and essential to their operations.

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 liability releases for local councils as well as the sponsoring organization were necessary for the BSA’s bankruptcy recovery. They pointed out that the Boy Scouts had proposed a plan last summer under which the settlement trust would only be funded by the national organization and not for any claims against it. The plan would not allow local sponsoring organizations or councils to contribute and would not protect them from abuse claims.

“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 in the bankruptcy since then and can’t afford to fund a settlement trust on its own at this point.

Edwin Caldie is an attorney representing hundreds of victims of abuse in Guam. He claims that the current plan of the BSA unfairly restricts their rights to sue 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, who was also a BSA Scoutmaster and who was accused of molesting more than 100 children. Caldie stated that the BSA plan would channel Guam diocese’s claims into the proposed BSA Settlement Trust without the consent of survivors. This would unfairly deprive them from the ability to pursue BSA policies.

Caldie claimed that the settling insurances used “extortionist tactics” to negotiate with the Boy Scouts in order to obtain liability releases to the extent they were not entitled under their policies.

He also dismissed the idea that a small number of survivors should be allowed to interfere in the approval of a plan for reorganization that is supported by tens or thousands of claimants.

” “From a common-sense perspective, the BSA decided to silence survivors of child sexual abuse for decades and didn’t report their perpetrators until decades later,” Caldie stated. “…. The Guam survivors are not terribly comfortable with ‘greater good’ arguments now, especially made buy the BSA.”

Closing arguments on whether the judge should approve the BSA plan are expected to conclude Wednesday.