The Battle of Bankruptcy: A Look at the Boy Scouts Sex Abuse Case
On July 29, 2022, a bankruptcy judge approved in part and rejected in part the Boy Scouts of America’s reorganization plan.[1] The 281-page ruling came months after hearings on the Proposed Settlement Plan ended.[2] The plan paves the way for $2.7 billion in settlement for over 80,000 survivors, making it the “largest sex abuse lawsuit in history.”[3] Those who filed claims alleged sex abuse at the hands of trusted scoutmasters, camp leaders, and other Boy Scouts employees.
A Long Time Coming
Although the plan eventually passed, it has been a long uphill legal fight for survivors and their attorneys. In February 2020, Boy Scouts of America (“BSA”) filed for Chapter 11 bankruptcy after several states “changed laws that allowed victims to sue over decades-old allegations.”[4] Over 82,000 cases were filed against the organization by the November 2020 claim deadline.[5] Those who came forward with claims “hope to illuminate a problem that has plagued but never fully exposed the Boy Scouts, an institution that for 109 years has vowed to teach youngsters good manners, useful skills and a sense of right and wrong.”[6]Because of the sheer volume of cases, Boy Scouts of America opted to file bankruptcy which essentially consolidated the cases into the Bankruptcy Court.[7] In turn, survivors lost their right to a civil jury trial.[8]
“The basic idea of bankruptcy is that an insolvent company surrenders its assets, which are used to pay creditors in an orderly fashion under court supervision.”[9] In the eyes of the bankruptcy court, the victims are viewed as creditors, “even if their cases against the Boy Scouts have not been resolved.”[10] In a traditional bankruptcy case, the organization itself pays out money to their creditors and the remaining debt is forgiven. However, in this case, “the Boy Scouts are proposing a settlement through their bankruptcy plan that would give independent, well-heeled, sex abuse defendants, including municipalities, community organizations, schools, and churches, the benefits of a bankruptcy discharge, without having to go through the bankruptcy process that would make their assets available to compensate abuse survivors.”[11] As the Boy Scouts have pushed for the plan, “all of its troop sponsors – entirely independent non-bankrupt entities – will receive releases for their sex abuse liability… even go[ing] so far as to erase any liability for abuse that occurred while the children were in the custody of outside organizations” such as scout sponsored camps with police departments, fire departments, and youth church programs.[12] In this way, the troop sponsors would sign over their insurance coverage to a trust to compensate survivors and would not themselves have to pay anything for the release.
Changing Tides for Mass Tort Cases
This type of release is new but not uncommon. “While bankruptcy courts would not historically approve releases of non-debtors, that has changed, and now wealthy tort now defendants regularly piggyback on others’ bankruptcy cases.”[13] This same type of liability release for non-debtors has been used in the mass tort case against members of the Sackler family who own Purdue Pharma, the maker of OxyContin.[14] In March 2022, nine state attorneys general agreed to drop their objection to a deal granting immunity from opioid lawsuits.[15] “The [Sackler] family has agreed to increase the amount it pays from personal holdings from roughly $4.5 billion under a previous settlement to $6 billion” in exchange for each of their own releases.[16]
In total, the Proposed Settlement Plan required the Boy Scouts of America itself to contribute “less than 10% of the proposed settlement fund, consisting of property valued at about $80 million, an $80 million promissory note, and roughly $20 million cash.”[17] “The local BSA councils, which run day-to-day operations for troops, offered to contribute at least $515 million in cash and property, and an interest-bearing note of at least $100 million.”[18] The majority of money would come from the organization’s largest insurers, Century Indemnity and The Hartford, “which reached settlements calling for them to contribute $800 million and $787 million, respectively.”[19] Other organization insurers agreed to contribute about $69 million.[20] The BSA’s former largest troop sponsor, the Church of Jesus Christ of Latter-day Saints, would contribute $250 million for abuse claims involving the Mormon Church, while the United Methodist Church affiliates would contribute $30 million.[21] In portions of the plan that the judge rejected, the judge opined that she couldn't approve a $250 million settlement between the Boy Scouts and the Church of Jesus Christ of Latter-day Saints and could not make determinations related to the Boy Scouts' insurance coverage.”[22] Judge Silverstein said the settlement “went too far in attempting to protect the church from abuse claims that only were loosely connected to scouting activities.”[23]
The Battle Ahead for Survivor
While the Boy Scouts have been battling sexual abuse allegations since the 1920s, the decision to file a lawsuit creates a new mental and legal battle for survivors and their attorneys.[24] In 2012, a judge ordered the release of thousands of internal documents known as the “perversion files” that “detailed a list of troop leaders accused of pedophilia.”[25] The organization compiled these comprehensive details but never turned them over to the authorities to investigate. As a result, many victims never came forward for various reasons, including abuser’s threats, ostracization, and credibility. According to a 2020 report from Child USA, 86 percent of child sexual abuse goes unreported but those victims and survivors those who do report don’t come forward until an average age of 52.[26] These victims now face tough civil statutes of limitations. According to the BSA Modified Fifth Plan of Reorganization, claimants’ settlements will be reduced based on the civil statute of limitation in the state where their abuse occurred.[27] A statute of limitation is “the amount of time after you reach the age of 18 before your claim is no longer […] enforceable – the amount of time is different in every state, territory, or other location.”[28] For example, “for a rape claim filed in Alabama, where child abuse survivors can file lawsuits only until their 25th birthdays or within two years of the abuse, the base range will drop to between $6,000 and $60,000, down from $600,000.”[29]
Nevertheless, “while we primarily measure civil justice in this society through monetary awards and verdicts, it is also true that non-monetary elements of settlements can have an extraordinarily healing impact on child.”[30] For example, public apologies, symbolic gestures, and policy changes can be cathartic for victims.[31] Although victims may not receive as much money as they would predict, or as quickly, the BSA restructuring could provide an opportunity to bring solace to victims. For example, the United Methodist Church has not only contributed money to the trust but also “agreed to have leaders hear the experiences of survivors, publish a series of articles on scouting group abuse and steps to prevent future abuse, and review their youth protection policies to ensure they are being adequately implemented.”[32]
With the many legal twists and turns the Boy Scouts’ bankruptcy has posed, this case proves to be not only one of the largest in history but also one of the most legally complex.
[1] Randall Chase, Ruling Leaves Questions about Boy Scouts Bankruptcy Plan, U.S. News (July 29, 2022), www.usnews.com/news/us/articles/2022-07-29/ruling-leaves-questions-about-boy-scouts-bankruptcy-plan.
[2] Id.
[3] Michael Mooney, Boy Scouts Sex Abuse Ruling Leaves Questions About Settlement, Axios Dallas (July 31, 2022), www.axios.com/local/dallas/2022/07/31/boy-scouts-sex-abuse-ruling
[4] Id.
[5] Eliott C. McLaughlin and Amir Vera, At Least 92,000 have Filed Sex Abuse Claims Against the Boy Scouts, Legal Team Says, CNN (Nov. 16, 2020), www.cnn.com/2020/11/16/us/boy-scouts-sex-abuse-deadline-bankruptcy/index.html
[6] Elina Dockterman, These Men Say the Boy Scouts’ Sex Abuse Problem is Worse Than Anyone Knew, Time, (June 1, 2019), www.time.com/longform/boy-scouts-sex-abuse/ (explaining “Hundreds of individual sex abuse cases have been brought against the Scouts over the last several decades, and in 2010, a judge ordered the organization to make public an internal list of men accused of preying on boys”).
[7] In re Boy Scouts of Am. & Delaware BSA, LLC, No. 20-10343 (LSS), 2022 WL 3030138, at *1 (Bankr. D. Del. July 29, 2022)
[8] Id.
[9] Adam J. Levitin, The Boy Scouts are Abusing the Boy Scouts System, Bloomberg Law (Nov. 16, 2021), news.bloomberglaw.com/bankruptcy-law/the-boy-scouts-are-abusing-the-bankruptcy-system.
[10] Id.
[11] Id.
[12] Id.
[13] Id.
[14] Martha Bebinger and Brian Mann, Purdue Pharma, Sacklers Reach $6 Billion Deal with State Attorneys General, NPR (March 3, 2022), www.npr.org/2022/03/03/1084163626/purdue-sacklers-oxycontin-settlement
[15] Id.
[16] Id.
[17] Randall Chase, Ruling Leaves Questions about Boy Scouts Bankruptcy Plan, U.S. News (July 29, 2022), www.usnews.com/news/us/articles/2022-07-29/ruling-leaves-questions-about-boy-scouts-bankruptcy-plan.
[18] Id.
[19] Id.
[20] Id.
[21] Id.
[22] Mooney, supra note 3.
[23] Dietrick Knauth, Boy Scouts Walk Back $250 Mln Abuse Settlement with Mormon Church, Reuters, (Aug. 16, 2022), www.reuters.com/legal/litigation/boy-scouts-walk-back-250-mln-abuse-settlement-with-mormon-church-2022-08-15/ (opining “The previous settlement would have covered abuse perpetrated by a priest who was also a scout leader, even if the abuse did not occur at a scouting event.”)
[24] Maeve Walsh, Ohio Survivors of Boy Scout Sex Abuse Demand Fair Share of $2.7 Billion Settlement, NBC 4 (Aug. 5, 2022) www.nbc4i.com/news/local-news/ohio-survivors-of-boy-scout-sex-abuse-demand-fair-share-of-2-7-billion-settlement/.
[25] Id.
[26] Id.
[27] Torts Claimant Committee, Proposed Statute of Limitation Scaling Factor, www.tccbsa.com/proposed-statute-of-limitation.
[28] Id.
[29] Cara Kelly, Judge Approves Major Parts of Boy Scouts' Bankruptcy Exit Plan; Pieces Remain Unresolved, USA Today (July 29, 2022), www.usatoday.com/story/news/investigations/2022/07/29/judge-oks-boy-scouts-bankruptcy-plan-issues-remain-sexual-abuse/9584367002/.
[30] Kelly Clark, Esq, Institutional Child Sexual Abuse-Not Just A Catholic Thing, 36 Wm. Mitchell L. Rev., 220, 235 (2009).
[31] Id. at 236.
[32] Michael Gryboski, UMC to Contribute $30M to Boy Scout Abuse Survivor Fund, Christian Post (Aug. 5, 2022) www.christianpost.com/church-ministries/umc-to-contribute-30-million-to-boy-scout-abuse-survivor-fund.html.