The judge presiding over the Boy Scouts of America bankruptcy has approved the organization's request to sell its warehouse and distribution center in North Carolina for roughly $13.5 million and lease back the property from the buyer.
The BSA wants to use some of the proceeds from the sale approved by the court Friday as part of its contribution to a proposed $2.6 billion fund to compensate tens of thousands of men who claim they were sexually abused as children while involved in Scouting.
After a monthlong trial, Judge Laurie Selber Silverstein continues to weigh whether to approve the Boy Scouts’ reorganization plan.
The Boy Scouts of America sought bankruptcy protection in February 2020 to stave off 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 roughly another 1,400 pending claims. But more than 82,200 abuse claims have been submitted in the bankruptcy.
Attorneys for BSA insurers, including those that have since reached settlements and now support the plan, have said the sheer volume of claims is an indication of fraud and the result of aggressive client solicitation by attorneys and for-profit claims aggregators.
The reorganization plan calls for the BSA and its 250 local councils, along with settling insurance companies and troop sponsoring organizations, to contribute some $2.6 billion in cash and property to a fund for abuse victims. In return, those entities would be released from further liability, meaning they could not be sued for Scout-related abuse claims.
At Friday’s hearing, Silverstein noted that the findings that the BSA and plan proponents are asking her to make in confirming the plan present her with issues that she has never previously faced as a bankruptcy judge.
“Quite frankly, probably none of my previous rulings in eight years really dealt with this particular type of issue, where there are such extensive findings that people are asking me to make, and where the findings are particularly controversial,” she said.
When an attorney representing a group of insurers opposed to the plan noted that the BSA had filed hundreds of pages of documents in the wee hours Friday morning with plan modifications and revisions, the judge assured him that he would have time to review and respond to them before she rules.
“You’re not in danger of a forthcoming decision in the next few days,” said Silverstein. She must decide a host of controversial and complex issues involving not just the Boy 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 policies they issued, and that the findings that plan supporters want Silverstein make would bind them to the proposed trust distribution procedures and make it difficult to challenge claim decisions. In an email, one attorney for abuse claimants described such binding trust distribution procedures as a “Holy Grail” that mass tort lawyers have been chasing for years. Insurers say approval by the judge would set a dangerous precedent tort lawyers would use to their advantage in future lawsuits.
Perhaps the most contentious issue, and the one most fraught with legal difficulty, is whether third parties, including settling insurers, local councils and troop sponsors, should be allowed to escape future liability by contributing to the victims fund, or at least not objecting to the plan.
Some survivors argue that releasing their claims against non-debtor third parties without their consent violates their due process rights. The U.S. bankruptcy trustee, the government’s “watchdog” in Chapter 11 bankruptcies, argues that such releases are not allowed under the bankruptcy code.
Such nonconsensual third-party releases, spawned by asbestos and product-liability cases, have been criticized as an unconstitutional form of “bankruptcy grifting,” where non-debtor entities obtain benefits by joining with a debtor to resolve mass-tort litigation in bankruptcy.
