The Boy Scouts of America (“BSA”) filed for Chapter 11 Bankruptcy on 18 February 2020. A number of reasons were given for filing for bankruptcy, but the main ones were stated to be as a result of declining membership and following receipt of a number of claims of historic sexual abuse by troop leaders. At the time of filing BSA stated it faced 275 abuse claims plus potential (it believed) for a further 1,400. However, since actually filing for bankruptcy it is understood there are now in the region of 82,500 claims outstanding and pending until bankruptcy has been finalised.
It is important to take a step back and see how matters reached this point. According to a 1993 CBS investigation, BSA had been sued more than 50 times since 1981 up to that point, paying more than $15 million (approximately £11.4 million at today’s exchange rate) in damages. Fast forward a few years, BSA was involved in litigation in 2010 that resulted in an award of damages in the sum of $19.9 million (approximately £14.6 million), which is the largest ever award for a single individual against the organisation.
During the course of this litigation more than 20,000 confidential documents were disclosed. Those records named more than 1,000 banned volunteers and appear to suggest that BSA had kept track of suspected and known abusers, consistently failing to report them to police or inform parents or the public of the extent of the problem. The records later became known as the “perversion files” and seemed to have triggered several further claims against BSA. In 2019 BSA hired a researcher to analyse internal records that identified 7,819 suspected abusers and 12,254 victims, which is a fraction of the number of victims who have filed claims.
In more recent years and as a result of the change in the civil statute of limitation BSA faced hundreds, if not thousands, of abuse lawsuits. The change in limitation meant that it allowed those victims who had previously been statute barred from bringing their claim a one year period to bring their claim which was due to end on August 2020; however, this was extended for a further year due to the pandemic.
BSA filed for bankruptcy in February 2020 and one aspect of the proceedings is that the court sets a deadline for when claims are to be filed. An unprecedented 92,000 (approximately) sexual abuse claims were filed by the November 2020 deadline making it the largest ever child sex abuse case involving a single national organisation. (The number has now been reduced to around the 82,500 figure stated earlier due to duplication.) Those individuals who missed the November 2020 deadline are barred from filing suit against the national organisation in the future.
The Chapter 11 bankruptcy that has been applied for essentially allows BSA to settle its debts, reorganise and continue to operate. By filing for bankruptcy, BSA can consolidate all lawsuits against the organisation and pursue a settlement that potentially is far lower than settlements outside of bankruptcy.
Understandably this has gained a lot of criticism but is a path which several other organisations have taken when faced with mounting abuse litigation, including USA Gymnastics and dioceses in the Catholic Church. It is also worth noting that it is the national organisation that has filed for bankruptcy, meaning the local councils of BSA can continue to run as normal. This is a major point of dispute as the local councils often own their own assets and lawyers for the victims believe those assets should be included in the national bankruptcy.
In order to satisfy and in turn be granted the Chapter 11 filing BSA intends to create a trust and a scheme within that trust which would identify what award an individual would receive based on the severity of the abuse and when it occurred. One person – the bankruptcy trustee – will make the decisions guided by three main topics: the severity of the abuse, where it occurred and how well the claimants can document it.
Under the plan, claimants who live in states with restrictive statutes of limitations will be awarded an unspecified amount or alternatively can take an expedited payment of $3,500 (approximately £2,575).
Another element to all of this is the involvement of insurers. BSA has been attempting to rely on insurance cover in order to increase the total amount of money available in the scheme in the hope that contribution from insurers will generate enough money for an agreement to be reached. In the past insurers have refused to pay claims because of the contents of the perversion files stating that BSA failed to take effective preventative measures to stop the abuse. In addition, insurers argue that by proposing to make awards to claimants who live in states with restrictive statutes of claims violates both their policies and bankruptcy code because they wouldn’t be viable lawsuits in civil court.
However, following a long period of discussion, one of BSA’s primary insurers, Chubb Ltd, has confirmed that it will contribute $800 million (£58.8 million approximately) to the pot. It is believed this would bring the total amount of money available to more than $2.7 billion (£1.99 billion). Contributions will also be made by BSA, its local councils and the Church of Jesus Christ of Latter day Saints.
Unfortunately this plan suffered a major setback when the victims voted on 28 December 2021 and the plan failed to gather enough support. Both sides had defined “overwhelming support” to be 75% of those voting on the proposal and it is understood it was narrowly missed with 73% voting in favour.
BSA must now try to enhance the settlement, but may be running out of time as the confirmation hearing is currently scheduled for 22 February 2022. If an agreement cannot be reached then it is within the judge’s power to dismiss the case resulting in probable liquidation and an end to the 112-year-old organisation.
For more information, please contact Lauranne Nolan.
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