DOVER, Del. – A bankruptcy judge approved a Boy Scouts of America proposal Thursday to enter into a settlement that includes an $ 850 million fund to compensate tens of thousands of men who say they were sexually abused when they were young. by Scout leaders and others. .
But the judge also rejected two key provisions of the deal, which could jeopardize the deal the organization hoped to use as a springboard out of bankruptcy later this year.
After three days of testimony and argument, Judge Laura Selber Silverstein accepted the BSA’s request to enter into an agreement involving the national Boy Scouts organization, approximately 250 local Boy Scout councils, and attorneys representing some 70,000 men who they say they have been sexually abused for decades. He does while participating in Boy Scout related activities.
The settlement was opposed by insurers that issued policies for Boy Scouts and local councils, attorneys representing thousands of other abuse victims, and several church denominations that have sponsored local Boy Scout troops.
It was not immediately clear how Thursday’s ruling will affect the future of the bankruptcy case, as she rejected two important provisions in the restructuring support agreement.
“Basically, everyone will have to go back to the drawing board,” said Paul Mones, an attorney who represents hundreds of abuse plaintiffs. “I think this is going to cause a reboot.”
While ruling that BSA officials exercised proper business judgment as required by law in entering into the settlement, the judge declined to grant a request that the Boy Scouts be allowed to pay millions in legal fees and attorney’s fees hired by law firms representing dozens of people. of thousands of abuse plaintiffs.
Silverstein said he had several concerns about the fee request, including whether the ad hoc group called the Coalition of Abused Scouts for Justice is duplicating the efforts of the official victims committee appointed by the US bankruptcy administrator, and whether the coalition you are making a substantial contribution to the case.
The judge also noted that coalition attorneys had emphasized last year that their legal fees would be paid by individual law firms they represented, and that abuse plaintiffs would not be responsible for those costs.
Silverstein said that any payment of legal fees by Boys Scouts, or by the victims’ fund, which was also contemplated in the agreement, “comes directly or indirectly from the pockets of their clients and, in fact, from the pockets of all victims of abuse “.
“Any funds diverted from abuse victims, especially to pay an obligation for their attorneys, should be closely scrutinized,” he said.
Silverstein also denied the BSA’s request under the agreement for permission to withdraw from an April settlement in which insurance company The Hartford would pay $ 650 million to the abuse claimant fund in exchange for being released from any additional liability.
Silverstein said the Hartford settlement was a separate topic from the settlement, and that the BSA’s attempt to use the settlement as a vehicle to back away from that settlement was wrong.
“You can’t just pile up whatever relief you want and put it into an application to approve a (deal),” he said. “… The request to determine the obligations of the debtor or, conversely, the damages of Hartford, is not appropriate in this context.”
A spokesperson for The Hartford said the company declined to comment.
Irwin Zalkin, an abuse plaintiff attorney who opposed the settlement, said the judge “gutted” the key conditions that supporters hoped to “fit” her into.
“In my opinion, the (agreement) has become ineffective,” Zalkin said.
The Boy Scouts of America issued a statement describing the ruling as “a major advance” in the case. The BSA also indicated that it would present a court docket on the timing of a hearing that was scheduled to begin Wednesday. The hearing is to determine whether the judge will approve a disclosure statement that explains the Boy Scouts’ reorganization plan to creditors. Approval of the disclosure statement is required before ballots can be sent to claimants of abuse to vote on a plan.
The Boy Scouts, based in Irving, Texas, sought bankruptcy protection in February 2020 in an effort to stop hundreds of individual lawsuits and create a huge compensation fund for thousands of men who were sexually abused as youngsters by scoutmasters. or other leaders. Although the organization faced 275 lawsuits at the time of filing, it now faces some 82,500 complaints of sexual abuse in the bankruptcy case.
Under the agreement, the Boy Scouts would contribute up to $ 250 million in cash and property to a fund for victims of child sexual abuse. Local councils, which run the daily operations of Boy Scout troops, would contribute $ 600 million. In addition, the national organization and local councils would transfer their rights to Boy Scout insurance policies to the victim fund. In return, they would be released from future liability for abuse claims.
Opponents of the deal argued that BSA officials did not fully inform themselves or exercise proper business judgment in entering into the deal. They noted that the Boy Scouts board of directors never adopted a resolution approving the deal, and that decision-making authority was delegated to an executive committee and a handful of people in a bankruptcy task force.
“Having reviewed the evidence, I conclude that the debtors were sufficiently informed to make this decision,” Silverstein said. “And although a specific resolution (of the board) would have been preferable, the evidence is clear that the debtors approved the transaction.”
“A court is particularly inadequate to address strategic business decisions like this one,” added the judge. “Debtors may ultimately be wrong in their assessment, but that is not the test of business judgment.”