Boy scouts delay bankruptcy step after judge questions legal fees and insurer’s agreement

Lawyers for the Boy Scouts of America are postponing a key bankruptcy hearing scheduled to begin this week, following a court ruling that casts uncertainty over the future of the case.

Lawyers filed court documents on Friday postponing a hearing until September 21, which was scheduled to begin on Wednesday. The hearing must determine whether the judge approves a disclosure statement that explains the Boy Scouts reorganization plan to creditors. Approval of the statement is required before creditors can vote on the plan.

The move comes a day after the judge approved BSA’s proposal to strike a deal that includes an $ 850 million fund to compensate tens of thousands of men who say they were sexually abused as children by Boy Scout leaders and others. Importantly, however, she rejected two key provisions of the deal, potentially jeopardizing the deal the Boy Scouts hoped to use as a springboard to come out of bankruptcy later this year.

The deal involves the National Boy Scout Organization, around 250 local Boy Scout Councils and lawyers representing some 70,000 men who say they were sexually assaulted as a child decades ago while engaged in activities related to children. scouts. It is fought by insurers who have issued policies for local boy scouts and councils, lawyers representing thousands of other victims of abuse, and various religious denominations who have sponsored local boy scout troops.

In her ruling, Judge Laura Selber Silverstein refused to grant a request to allow the Boy Scouts to pay millions of dollars in legal fees and expenses for attorneys hired by law firms that represent tens of thousands. of abuse seekers.

Silverstein said she had several concerns about the demand for costs, including whether an ad hoc group called the Coalition of Abused Scouts for Justice duplicates the efforts of the official victims committee appointed by the US bankruptcy trustee, and whether the coalition brings a substantial contribution to the case. She also noted that any payment of legal fees by the Boy Scouts, or the Victims Fund, to lawyers for abuse claimants “went directly or indirectly out of the pockets of their clients, and even out of the pockets of all. victims of abuse “.

Silverstein also rejected BSA’s request under the authorization deal to withdraw from an April deal in which insurance company The Hartford would pay $ 650 million to the fund for abuse claimants. in exchange for being released from all other responsibilities. The judge said the Hartford settlement was a separate matter from the deal and that the BSA’s attempt to use the deal as a way to opt out of that deal was inappropriate.

The move was a setback for the Boy Scouts and supporters of the deal, who argued that the arrangement on fees and the removal of the Hartford settlement were essential parts of the deal.

The Boy Scouts, based in Irving, Texas, filed for bankruptcy protection in February 2020 in a bid to end hundreds of individual lawsuits and create a huge compensation fund for thousands of people. men who were assaulted as children by Scout leaders or other leaders. Although the organization faces 275 lawsuits at the time of filing, it now faces some 82,500 sexual abuse claims in the bankruptcy case.

Under the deal, 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 manage the day-to-day operations of the Boy Scout troops, are said to contribute $ 600 million. In addition, the national organization and local councils would transfer their rights to Boy Scout insurance policies to the victims fund. In return, they would be released from any future liability for abuse claims.

Lawyers for insurance companies and organizations that have sponsored local Boy Scout troops argue that the deal and the proposed reorganization plan deny them their rights to defend themselves against abuse claims. They also claim that the Boy Scouts failed to provide essential information that plaintiffs and other creditors should consult before deciding whether or not to approve a reorganization plan.

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