Boy Scouts Lawyers Eye New Bankruptcy Reorganization Plan

DOVER, Del. (AP) — Attorneys for the Boy Scouts of America told a Delaware bankruptcy judge Monday that they plan to file a new reorganization plan after gaining little support for a previous proposal that has been roundly criticized by attorneys for child sex abuse victims.

Jessica Lauria, an attorney for the BSA, told Judge Laurie Selber Silverstein that an amended plan would be filed Tuesday “unless the stars align” and the Boy Scouts reach a meaningful resolution with one or more other parties Monday night.

Lauria said the new plan is designed to continue momentum from a three-day mediation session that ended April 1 in Miami. She acknowledged, however, that differences remain among attorneys representing abuse victims, insurers and other parties.

“There are some issues that will have to be litigated in connection with the plan,” Lauria said.

The revised proposal will include a default plan, or “Plan A,” similar to what the BSA proposed in March. It calls for a global resolution of abuse claims that includes a “substantial contribution” to a victims trust fund by the BSA’s local councils in return for a release from further liability. Local sponsoring organizations of Boy Scout troops that contribute to the victims trust also would be released from further liability under the amended plan, which, like the previous plan, also would provide a framework for settlements with BSA insurers.

Unlike the previous plan, however, the new plan will include an estimation of the Boy Scouts’ abuse liabilities, something that attorneys for abuse victims have said is critical in determining whether any reorganization plan adequately compensates victims.

“We’ve heard the parties loud and clear,” Lauria said, referring to court filings by victims’ attorneys seeking an estimation proceeding in federal district court in Delaware. The BSA, which argues that the estimation process should be overseen by the bankruptcy court, plans to object to those filings by Thursday’s deadline, Lauria said.

The Boy Scouts of America, based in Irving, Texas, sought bankruptcy protection last February in an effort to halt hundreds of lawsuits and create a compensation fund for men who were molested as youngsters decades ago by scoutmasters or other leaders.

Attorneys for abuse victims made clear from the onset that they would go after campsites and other properties and assets owned by local councils to contribute to a settlement fund. The local councils, which run day-to-day operations for local troops, are not debtors in the bankruptcy and are considered by the Boy Scouts to be legally separate entities, even though they share insurance policies and are considered “related parties” in the bankruptcy case.

The bankruptcy case has been bogged down by disputes over the provision of information by local councils about their financial assets, claims by the BSA that hundreds of millions of dollars worth of its own assets are restricted and unavailable to abuse victims, and concerns by BSA insurers that attorneys for abuse victims have submitted tens of thousands of claims without ensuring their validity.

The BSA’s previous plan proposed a $300 million contribution by local councils to a victims trust, about $115 million in cash and noninsurance assets from the BSA, and the assignment of BSA and local council insurance policies. In return, the 253 local councils and thousands of sponsoring organizations would be released from further liability.

The official tort claimants committee, or TCC, which is charged with acting as a fiduciary for all abuse victims in bankruptcy, has estimated the value of the roughly 84,000 sexual abuse claims at about $103 billion, describing those estimates were “extremely conservative.”

Richard Mason, an attorney for an ad hoc committee representing local Boy Scouts councils, said Monday that if the case proceeds to finalizing financial contributions from local councils, the committee needs to be “much more involved than what we recently have been asked to be.”

Mason also said that, while the councils are willing to contribute cash, property and insurance rights to a victims trust, “the amount and other terms, in our view, need to be realistic.”

Meanwhile, in the event that “Plan A” fails to win support from abuse victims, the BSA is also proposing a “Plan B” that would not involve contributions from, or liability releases for, local councils and sponsoring organizations. Lauria said such a plan would be “suboptimal” and would complicate any insurance settlements, given that BSA and its local councils have shared policies.

She noted that the BSA-only plan is similar to what has been proposed by the tort claimants committee. The committee has called for a plan that allows BSA to emerge from bankruptcy and continue its operations while leaving liability releases for local councils and sponsoring organizations to be negotiated later by the committee or the settlement trust, “but not for the relatively paltry sum offered by the local councils.”