5 Things We Can Learn from Boy Scouts Bankruptcy

• The Boy Scouts of America (BSA) bankruptcy reorganization plan creates some complex and controversial issues as a judge in Delaware ponders whether to confirm it.
• Created to stave off the flood of claimants for sexual abuse by Scoutmasters and other leaders, the plan could provide over $2.7 billion for the victims.
• 86% of survivors back the plan, but the ruling by Judge Laurie Selber Silverstein will probably lead to appeals.

Under the reorganization plan, the BSA, its 250 local councils, two settling insurance companies, and its troop sponsoring organizations will contribute to the fund created for the abuse victims. In addition, the plan will release these entities from further liability from other claims related to the matter. The plan has proponents and opponents, and these are the five things we can learn from it:

Protecting BSA From Future Liability Releases

The bankruptcy protection plan aims to protect the BSA from individual lawsuits by creating a settlement trust for the approximately 82,000 abuse victim claims.

Jessica Lauria, Boy Scouts attorney, argues that local BSA councils’ interconnection with the national organization means they need protection from future lawsuits since they will contribute to the fund for compensation.

According to Lauria, the same applies to the 41,000 sponsoring organizations that play a critical role in BSA operations. These organizations include community groups, religious organizations, and civic associations.

Local councils attorney Richard Nason agrees that the compensation fund becomes nonexistent without the liability releases because they could face litigation forcing them into bankruptcy. Additionally, he claims it would not only endanger abuse victims from claiming compensation but also the future of Scouting.

However, opponents say this is a deviation from the original plan for the national organization to fund the settlement fund. Lauria told the court that the initial plan had flaws and that the BSA could not support the settlement trust alone.

Stripping Some Abuse Victims of Their Rights

Edwin Caldie is the attorney representing Guam (an American territory) alleged abuse victims who have made claims against the Catholic church officials of the Archdiocese of Agana. According to him, including the local councils in the bankruptcy plan prevents Guam’s more than 100 victims from making claims because the Archdiocese in Guam sought bankruptcy protection in 2019.

Channeling these claims into the proposed settlement means they would not have the right to pursue the compensation from the insurance policies issued by the BSA. Caldie said, “From a common-sense perspective, the BSA decided to avoid and silence survivors of child sexual assault for decades by not reporting on the perpetrators.”

The U.S. Trustee, the government’s watchdog for bankruptcy, opposed the non-debtor releases included in the plan, claiming that not everyone in the group had made enough contributions.

Funding the Settlement Proposal

NPR reports that less than 10% of the $2.7 billion will come from the National Boy Scouts of America if the settlement proposal is approved. Also, more than half a billion dollars will come from the two hundred fifty local Boy Scout councils. In addition, BSA’s two largest insurance companies, The Hartford and Century Indemnity, will contribute over $1.5 billion. Finally, a quarter billion dollars will hit the settlement’s coffers from the Church of Jesus Christ of Latter-day Saints for claims involving them.

Evaluation Procedures

The scope and time of this case place it on a level rarely seen. David Buchbinder, the attorney for U.S. Trustee, accused the BSA of making the administrative process too confusing, complicated, and costly.

A provision allows claimants to claim $3,500 if they skip the evaluation process, but insurers feel that it could result in fraudulent claims.

Protecting Scouts in the Future

As part of the compensation plan, the BSA representative told the court that they aim to place further protection measures to prevent abuse against current and future generations of Boy Scouts.

The victim compensation plan is just one side of the coin; combating abuse is the other. According to the BSA, from the mid-1980s, they adopted prevention policies like having two leaders present and abuse-prevention training. But until a few years ago, they insisted that predators were not allowed to work with youth, only to admit that they had kept confidential files since 1920.

Final Word

One of the most prickly problems of the Boy Scout Bankruptcy remains the non-debtor third-party releases. Similar releases in other product liability cases mean that the benefits to non-debtor entities violate the due process rights of surviving victims. These releases are not allowed under the U.S. bankruptcy code but are often allowed by federal courts.

There are hopes that the bankruptcy plan will allow the organization to continue its 112-year-old work that has seen over 110 million young Americans participate in its programs