Boy Scouts bankruptcy plan set for vote by abuse claimants

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FILE – In this Feb. 12, 2020, file photo, a statue stands outside the Boy Scouts of America headquarters in Irving, Texas. Tens of thousands of men who say they were molested as children by scoutmasters and others will soon get a chance to vote on the Boy Scouts of America’s reorganization plan. Votes are due by Dec. 14, 2021, and the judge has scheduled a January hearing on whether the plan should be approved. (AP Photo/LM Otero, File)

DOVER, Del. (AP) — More than a year and a half after the Boy Scouts of America sought bankruptcy protection amid an onslaught of child sex abuse allegations, tens of thousands of men who say they were molested as children by scoutmasters and others will soon get a chance to vote on a BSA reorganization plan.

The Boy Scouts, based in Irving, Texas, sought bankruptcy protection in February 2020, seeking to halt hundreds of individual lawsuits and create a fund for men who say they were sexually abused as children. Although the organization was facing 275 lawsuits at the time, it’s now facing more than 82,000 sexual abuse claims in the bankruptcy case.

Despite the plan being sent out to abuse claimants for a vote, there are several issues involving Boy Scouts insurers and local troop sponsoring organizations that remain unresolved.

Here is a look at where the case stands:

DISCLOSURE STATEMENT

Following a hearing that stretched over two weeks, a judge on Thursday approved a revised disclosure statement that outlines and explains the Boy Scouts’ reorganization plan.

Approval of the disclosure statement was required before the Boy Scouts could begin sending out ballots to abuse claimants and other creditors to vote on the plan.

Among the issues discussed at the disclosure statement hearing were provisions for ensuring that ballots and informational packages are sent to all claimants, including men who are incarcerated, while protecting the privacy of those who do not want Boy Scouts-related communications sent to their homes.

The judge and attorneys also discussed provisions to ensure that law firms that represent multiple abuse claimants and want to submit “master ballots” on behalf of their clients prove they have obtained permission from each client who does not wish to submit a ballot himself.

THE PLAN

The plan calls for the Boys Scouts and its roughly 250 local councils to contribute up to $820 million in cash and property into a fund for abuse claimants. They also would assign certain insurance rights to the fund. In return, the local councils and national organization would be released from further liability for sexual abuse claims.

The plan also includes settlement agreements involving one of the Boy Scouts’ major insurers, The Hartford, and its former largest troop sponsor, the Church of Jesus Christ of Latter-day Saints, commonly known as the Mormon church. The Hartford has agreed to pay $787 million into the fund for abuse claimants, and the Mormons have agreed to contribute $250 million for abuse related to the church’s scouting programs. In exchange, both entities would be released from any further liability involving child sex abuse claims.

Attorneys for the Boy Scouts and abuse claimants say they still hope to reach settlements with other insurers and sponsoring organizations, but it’s unclear whether they will be successful.

COMPETING RECOMMENDATIONS

The official committee appointed by the U.S. bankruptcy trustee to represent and act in the best interest of all sexual abuse survivors is recommending that abuse claimants reject the Boy Scouts’ plan.

In a draft letter filed with the court, the nine abuse survivors on the committee said the plan is “grossly unfair,” and represents only a fraction of the settling parties’ potential liabilities and what they should and can pay.

According to the committee, a key flaw is that settlements with local Boy Scout councils would leave them with more than $1 billion in cash and property above what they need to fulfill the scouting mission. The committee also notes that sponsoring organizations such as churches and civic groups can avoid liability for abuse claims dating to 1976 simply by transferring their interests in insurance policies purchased by the BSA and local councils to the victims fund, without contributing any cash or property.

Meanwhile, attorneys separately representing tens of thousands of abuse claimants have submitted their own letter urging abuse claimants to vote for the plan. They say it will result in billions of dollars in compensation for abuse survivors and represents the best possible outcome for them.

The letter was drafted by attorneys representing an ad hoc group called the Coalition of Abused Scouts for Justice and the court-appointed advocate for those who might file claims in the future, including men who have repressed memories of their abuse. The coalition represents almost 18,000 abuse claimants and is affiliated with more than two dozen law firms that collectively represent more than 60,000 claimants.

TALLYING THE VOTE

A key point of contention has been a plan provision allowing an abuse claimant to receive an “expedited distribution” payment of $3,500, with virtually no questions asked, and avoid the claim evaluation process.

Such payments are expected to be an attractive option for those who have filed false claims, claims that lack required information and may not survive the claims evaluation process, and claims that would be barred in nonbankruptcy lawsuits because of the passage of time.

Those who do not opt for the $3,500 payments would have their claims scrutinized under trust distribution procedures, risking uncertain recoveries on an uncertain timetable in return for a potentially larger payment.

Attorneys for the official committee representing abuse victims have expressed concern that people opting for the $3,500 payments could improperly sway the vote in favor of the plan. The judge declined the committee’s request to approve two separate voting classes, one for those accepting the expedited payment and the other for those who don’t. She did order, however, that any claimant wanting to take the $3,500 payment must indicate so on his ballot.

“We’re going to know … whether the votes of the survivors who choose the $3,500 distribution swing the class,” the judge said last week.

CASE TIMELINE

With the judge’s approval of the disclosure statement, ballots and informational packages will be sent to more than 82,000 abuse claimants over the next two weeks. Ballots must be returned by Dec. 14, and a preliminary report on the voting results is due a week later. A final voting report is due by Jan. 4.

The judge has scheduled a hearing to begin on Jan. 24 to consider the voting results and to decide whether the plan meets the requirements of the bankruptcy code and should be approved.

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