The judge presiding in the Boy Scouts of America bankruptcy approved the organization’s request to sell its warehouse and distribution center in North Carolina for approximately $13.5 million and re-lease the property to the buyer.
The BSA wants to use some of the proceeds from the sale approved by the court on Friday as part of its contribution to a proposed $2.6 billion fund to compensate tens of thousands of men who say they were sexually abused in their homes. childhood while involved in scouting.
After a month-long trial, Judge Laurie Selber Silverstein continues to debate whether to approve the Boy Scouts’ reorganization plan.
The Boy Scouts of America filed for bankruptcy protection in February 2020 to avoid a flood of lawsuits alleging child sexual abuse by Scout leaders and volunteers over several decades. At the time, the BSA was facing about 275 filed lawsuits and was aware of about 1,400 other pending claims. But more than 82,200 abuse claims have been filed in the bankruptcy.
Lawyers for BSA insurers, including those who have since reached settlements and now support the plan, said the huge volume of claims is an indication of fraud and the result of aggressive customer solicitation by lawyers and aggregators for-profit claims.
The reorganization plan calls for the BSA and its 250 local councils, along with insurance companies and troop-sponsoring organizations, to contribute some $2.6 billion in cash and property to a fund for victims of abuse. In return, these entities would be cleared of further liability, meaning they could not be sued for allegations of Scout-related abuse.
At Friday’s hearing, Silverstein noted that the findings the BSA and plan sponsors are asking her to make in confirming the plan present her with problems she has never faced before as a bankruptcy judge.
“Quite frankly, probably none of my previous rulings in eight years have really dealt with this particular type of issue, where there are such extensive conclusions that people are asking me to make, and where the conclusions are particularly controversial,” she said.
When a lawyer representing a group of insurers opposed to the plan noted that the BSA had filed hundreds of pages of documents in the early hours of Friday morning with changes and revisions to the plan, the judge assured him that he would have time to review and respond to them. before she reigns.
“You are not in danger of a decision coming in the next few days,” Silverstein said. She must decide a host of contentious and complex issues involving not just the scouts, but the BSA’s insurers, its 250 local councils and tens of thousands of troop sponsoring organizations.
Opposing insurers have argued that the plan violates their rights under the policies they issued and that the conclusions plan supporters want Silverstein to make would tie them to the proposed trust distribution procedures and make it difficult to challenge the decisions. of complaint. In an email, a lawyer for abuse plaintiffs described these binding trust distribution proceedings as a “holy grail” that mass tort attorneys have been pursuing for years. Insurers say the judge’s approval would set a dangerous precedent that tort attorneys would use to their advantage in future lawsuits.
Perhaps the most contentious issue, and the one fraught with the most legal difficulties, is whether third parties, including settlement insurers, local councils and troop sponsors, should be allowed to evade any future liability by contributing to the victims’ fund, or at least not opposing the plan.
Some survivors claim that releasing their claims against nondebtor third parties without their consent violates their due process rights. The US bankruptcy trustee, the government’s “watchdog” in Chapter 11 bankruptcies, argues that such discharges are not permitted under the bankruptcy code.
These non-consensual third party waivers, spawned by asbestos and product liability cases, have been criticized as an unconstitutional form of “bankruptcy grifting”, where non-debtor entities gain benefits by joining a debtor to resolve mass tort litigation in the event of bankruptcy.