Update: Boy Scouts' Bankruptcy Plan with $2.7B Abuse Settlement Fund Gains Approval

August 2, 2022

As reported by Law 360's Vince Sullivan on Friday, July 29, 2022, the Boy Scouts of America have received approval from a Delaware bankruptcy judge for a $2.7 billion settlement fund to deal with over 80,000 claims of childhood sexual abuse. The settlement fund will be funded by the BSA, its local councils and charter organizations, and insurers that signed settlement deals with the debtor. Those entities will be released from future liability related to the sex abuse claims in exchange for their contributions to the trust. The BSA will also buy back the coverage policies free and clear of all obligations to the settling insurers. There is insurance coverage of up to $4.4 billion available in the case, meaning direct abuse claims will be satisfied in full, according to an expert valuation.

This case has drawn scrutiny in recent years, but the releases in favor of non-debtor entities have been deemed fair and appropriate given the contributions of the released parties. The settlement has been supported by the debtors, the unsecured creditors committee, the tort claimants committee, the future claims representative, the Coalition of Abused Scouts for Justice, the settling insurers, and 85.72% of direct abuse claimants.

The case also includes optionality for abuse claimants to pursue recovery outside of the settlement trust. Claimants can opt to bring their claims in the tort system or fight for a higher recovery from the trust via an independent review option that will run a trial-like process with trust-appointed neutrals. The bankruptcy court expressed support regarding the most important aspect of this plan, which is that it gives survivors a choice.

While the opinion was lengthy, attorneys for the Coalition, which represents about 70,000 of the abuse claimants in the case, told Law360 that the settlement contributions and associated releases remained intact. The major takeaway is that the vast majority of the capital contributions that will be sent to the trust and distributed to victims were approved by the court.

This ruling represents a significant milestone in the financial restructuring of the Boy Scouts of America. The BSA's proposed plan of reorganization won overwhelming support from survivors of past abuse in Scouting, with more than 85% voting to approve it. The court recognizes the value of the BSA's proposed plan of reorganization and overruled the vast majority of objections to confirmation.

This settlement is an extraordinary case crying out for extraordinary solutions. The combination of the monetary and non-monetary aspects of the plan are fair to the holders of abuse claims. This ruling provides some closure to the victims and allows them to begin the healing process. The BSA can now move forward with a new commitment to prevent future abuse and promote safety for all members.

The case is In re: Boy Scouts of America and Delaware BSA LLC, No. 1:20-bk-10343, in the U.S. Bankruptcy Court for the District of Delaware.

Law360's article can be found here: Boy Scouts Get Approval For $2.7B Abuse Settlement Fund.