Trial over approval of Boy Scouts bankruptcy plan begins
DOVER, Del. (AP) — More than two years after the Boy Scouts of America sought bankruptcy protection amid an onslaught of child sex abuse allegations, a judge began a trial Monday to determine whether to confirm its proposed reorganization plan.
The trial in U.S. Bankruptcy Court in Delaware is expected to stretch over several weeks as attorneys and witnesses battle over complex issues. They include insurance rights, liability releases, the value of some 80,000 child sex abuse claims and how such a huge number of claims came to be filed.
The Boy Scouts, based in Irving, Texas, sought bankruptcy protection in February 2020 in an effort to halt hundreds of individual lawsuits and create a fund for men who say they were sexually abused as children involved in Scouting. Although the organization faced 275 lawsuits at the time, it found itself the subject of more than 82,000 sexual abuse claims in the bankruptcy case.
The reorganization plan calls for the Boys Scouts and its roughly 250 local councils to contribute up to $786 million in cash and property and assign certain insurance rights to a fund for abuse claimants. In return, they would be released from further liability.
The BSA’s two largest insurers, Century Indemnity Co. and The Hartford, would contribute $800 million and $787 million, respectively, into the compensation fund. Other insurers have agreed to contribute about $69 million. The organization’s former largest troop sponsor, the Church of Jesus Christ of Latter-day Saints, commonly known as the Mormon church, would contribute $250 million for abuse claims involving the church. Congregations affiliated with the United Methodist Church have agreed to contribute $30 million.
The troop-sponsoring organizations and settling insurers also would be released from further liability in exchange for their contributions.
All told, the compensation fund would total more than $2.6 billion, which would be the largest aggregate sexual abuse settlement in U.S. history. The average recovery per claimant, however, would be significantly less than in other settlements of sex abuse scandals involving large numbers of victims. The University of Southern California, for example, agreed last year to an $852 million settlement with more than 700 women who accused a longtime campus gynecologist of sexual abuse.
The BSA’s plan faces objections from several opponents, including the U.S. bankruptcy trustee, who acts as a watchdog in such cases to ensure compliance with bankruptcy laws.
Opponents argue, among other things, that the liability releases for non-debtor third parties — including local BSA councils, insurers and troop-sponsoring organizations — violate the due process rights of abuse claimants and are not authorized under the bankruptcy code.
Several insurers that have not settled maintain the procedures for distributing funds to abuse claimants violate the insurers’ rights under policies they issued and would allow payment of claims that would not win damages in civil lawsuits.
The first and only witness to testify Monday was Devang Desai, a Florida attorney who has played a central role in the bankruptcy as a member of the BSA’s National Executive Board, National Executive Committee and Bankruptcy Task Force.
Desai, a former Eagle Scout, ended his direct questioning from BSA attorney Michael Andolina by noting that he had personally benefited from “all the good things that the Boy Scouts stands for.”
“I recognize that not everybody has had that quintessential experience that I had the benefit of having,” he said. “Sitting here on behalf of our organization, I’m sorry. We are sorry. But let that not sway us from the realities of all the great things that are happening in the Boy Scouts of America.”
Attorneys for plan opponents spent several hours peppering Desai with questions about the drafting of the plan and related settlements, as well as voting by abuse claimants and the value of their claims. He was also asked about the liability releases for Boy Scout entities and third parties, and challenges facing the organization. Those challenges include 45 years of membership declines and a current membership equal to what the BSA had in 1938.
Desai also was questioned about the $266 million the BSA has spent to date on professional fees in the bankruptcy — money that won’t be available to compensate abuse victims.
“It has been an expensive process, and one we would like to end,” he said.
The trial comes just weeks after the Boy Scouts announced a settlement with the official abuse claimants committee appointed by the U.S. bankruptcy trustee to represent all sexual abuse survivors.
The committee had long maintained that the BSA’s plan was “grossly unfair” to abuse victims but said last month that it had won important concessions.
The revised plan, for example, allows abuse claimants to sue insurance companies and local troop-sponsoring organizations, such as churches and civic groups, that do not enter into settlements within one year of the reorganization plan taking effect. It also includes enhanced child protection measures and provisions to ensure independent governance of the compensation fund.