Bankruptcy watchdog challenges legal shield in Boy Scouts abuse deal

  • US Trustee Says Shield Not Allowed Under Bankruptcy Law
  • The official Survivors Committee has yet to weigh in

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(Reuters) – The U.S. Justice Department’s bankruptcy watchdog on Monday objected to the Boy Scouts of America’s proposed reorganization plan and underlying $2.7 billion sexual abuse settlement, claiming that it offers impermissible legal protections to insurers and local councils of the bankrupt youth organization, among others.

The US administrator said in a filing in court that non-debit releases provided to insurers and others, who have not filed Chapter 11 claims, in exchange for settlement contributions are not permitted by bankruptcy law.

“The plan lacks even a superficial discussion of why the nondebtor releases are necessary,” the U.S. trustee said in Monday’s filing, while noting that the releases were so broadly drafted that it doesn’t It was unclear who was covered by them.

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BSA filed for bankruptcy in February 2020 to resolve allegations by former Scouts spanning decades that they were abused by troop leaders as children. Since then, more than 82,000 abuse claims have been filed in bankruptcy.

The plan aims to resolve all of these claims through the $2.7 billion settlement, which will be funded by insurers, local councils (which are independent legal entities) and the BSA itself, among others. Insurers, local councils, committees that represent survivors of abuse, current and former BSA officers and employees, and organizations that have chartered Scouting units and activities will be among those covered by non-debit releases. . Anyone who has personally committed or been accused of committing abuse is not protected.

The U.S. administrator also opposed these types of releases in the Chapter 11 case of OxyContin maker Purdue Pharma LP. In December, a federal judge overturned a bankruptcy court’s approval of those releases for members of the Sackler family who own Purdue. Purdue appealed that decision, but it, the Sacklers and several states also initiated mediation to reach an amended settlement of the opioid litigation.

BSA won the support of 73.57% of abuse survivors who voted on the plan, but this figure is lower than the 75% sought. Under the plan, survivors would receive compensation based on the severity of the abuse they suffered, among other factors.

The official committee representing victims of bankruptcy abuse, which has long opposed the deal, has yet to file documents outlining its views on the plan. He has previously argued that the payouts the plan offers to survivors who have filed claims are too low. However, a BSA lawyer said last week that “significant progress” had been made in providing more support to survivors.

BSA representatives did not immediately respond to a request for comment.

The case is In re Boy Scouts of America, US Bankruptcy Court, District of Delaware, No. 20-10343.

For the Boy Scouts: Jessica Lauria, Mike Andolina, Matt Linder and Laura Baccash of White & Case; and Derek Abbott and Andrew Remming of Morris, Nichols, Arsht & Tunnell

For the US Administrator: David Buchbinder and Hannah McCollum

Read more:

Boy Scouts lawyer touts ‘significant progress’ toward sexual abuse settlement

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