Judge delays start of Boy Scouts bankruptcy plan hearing

Associated Press [New York NY]

February 11, 2022

By Randall Chase

The judge presiding over the Boy Scouts of America bankruptcy has delayed the start of a trial to determine whether the BSA’s reorganization plan should be confirmed after an agreement with the official committee representing more than 80,000 men who say they were molested as children by Scout leaders and others resulted in several new plan provisions.

During a three-hour hearing Friday, Judge Laura Selber Silverstein pushed back the start of the confirmation hearing from Feb. 22 to March 9. The Boy Scouts had asked for only a one week delay, while plan opponents said they would need several weeks to analyze and respond to changes in the plan.

The move follows Thursday’s announcement of a tentative agreement between the BSA and the official abuse claimants committee, known as the tort claimants committee or TCC. The committee was appointed by the U.S. bankruptcy trustee to represent and act in the best interests of all sexual abuse survivors. It had long maintained that the BSA’s plan to compensate child sex abuse victims was “grossly unfair,” representing only a fraction of the potential liabilities of insurers and local Boy Scout councils, and a fraction of their ability to pay.

But after weeks of intense discussions, the committee said it had negotiated important changes to the plan and is now recommending that abuse claimants who had voted against it change their votes.

Among other things, the new plan provides abuse claimants the ability to sue insurance companies and local troop sponsoring organizations, such as churches and civic groups, that do not enter into settlements with the trustee who would oversee a $2.6 billion victims compensation fund.

The new plan ratchets up the pressure on remaining opponents, including certain insurance companies and an ad hoc committee representing various Roman Catholic entities, including a church-affiliated nonprofit that insures hundreds of dioceses, religious orders and institutions.

Attorneys for the ad hoc committee and the dissenting insurers argued Friday that the new plan bears no semblance to the plan that abuse claimants voted on last year. They said they deserve more time to find out how and why the changes were made, and how they affect their clients. They also said the settlement with the TCC was made possible only because the Boy Scouts, without the judge’s knowledge or permission, improperly granted the TCC and certain other parties extensions to the court-ordered Feb. 4 deadline to object to the plan.

An attorney for the U.S. bankruptcy trustee, which acts as a “watchdog” in Chapter 11 cases to ensure compliance with the U.S. bankruptcy code, also took the Boy Scouts to task. David Buchbinder said the plan has changed so much since last fall that the BSA needs to send out supplemental disclosures so abuse claimants and troop sponsoring organizations can fully understand what’s going on.

“The debtor needs to explain how these proposed revisions improve the plan for (abuse claimants),” Buchbinder said, adding that the changes also leave troop sponsoring organizations “even more confused.”

Buchbinder argued in a Monday court filing the plan cannot be confirmed if provisions allowing non-debtor third parties to be released from liability without the consent of holders of abuse claim remain in place. He argued that the third-party releases for local Boy Scout councils, certain troop sponsoring organizations and settling insurers violate the due process rights of claimants and are not authorized under the bankruptcy code.

Meanwhile, critics of the plan note that, under the changes unveiled Thursday, the BSA appears to be backing away from the findings of its own hired expert regarding the value of abuse claims. The Boy Scouts now assert that the conclusions of Charles Bates have not been agreed to by any other party, and that his conclusions are not a binding estimation of the BSA’s liability. The BSA also said it will consult with abuse claimants’ attorneys who are supporting the plan on what testimony Bates should provide.

James Hallowell, an attorney for AIG, a dissenting insurer, said Bates’ findings support insurers’ arguments that the plan will result in claims values that exceed the values historically paid by the Boy Scouts before they filed for bankruptcy. Mitch Karlan, another attorney for AIG, said the Boys Scouts now apparently agree with the official abuse claimants committee that Bates’ findings are wrong.

“What’s novel about it is that Dr. Bates is, of course the debtor’s expert, who apparently is being thrown under the bus,” he said.

Silverstein told attorneys that she had “flagged the issue” regarding Bates.

“It jumped off the page,” she said.