Future Liability Releases At Center Of Boy Scouts Bankruptcy

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. More than half that money would come from the BSA’s two largest insurers, Century Indemnity Co. and The Hartford. Those companies would contribute $800 million and $787 million, respectively.

In exchange, the parties contributing to the settlement trust would be released from further liability for sexual abuse claims dating back decades.

The local BSA councils are not debtors in the bankruptcy, but Boy Scouts attorney Jessica Lauria argued that they are inextricably intertwined with the national organization and deserve to be protected from future lawsuits in exchange for contributing to the compensation fund.

“There can be no doubt that there is an identity of interests, and frankly an extreme interconnectedness, between the local councils and the national organization,” Lauria said. Sponsoring organizations similarly are closely tied to BSA and local councils and critical to their operations, she added.

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 the liability releases for local councils and sponsoring organization are needed in order for the BSA to emerge from bankruptcy. They noted that the Boy Scouts proposed a plan last year under which the settlement trust would be funded only by the national organization, and only for claims made against it. Under that plan, the councils and local sponsoring organizations would make no contribution and would have no protection from liability for 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, an attorney representing scores of alleged abuse victims in Guam, argued that the BSA’s current plan unfairly strips them of their rights to pursue abuse claims against 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.

The BSA plan would channel claims against the Guam diocese into the proposed BSA settlement trust without the consent of survivors and unfairly deprive them of the ability to pursue BSA insurance policies, Caldie said.

Caldie accused the settling insurers of using “extortionist” tactics in negotiations with the Boy Scouts to obtain liability releases to which they would not be entitled under the policies they issued.

He also rejected the notion that a relatively small number of survivors should not be allowed to interfere with approval of a reorganization plan supported by tens of thousands of other claimants.

“From a common sense perspective, the BSA made a decision to shun and silence survivors of child sexual assault for decades and did not report their perpetrators for decades,” Caldie said. ”.... 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.