Bankruptcy Judge Allows Boy Scouts To Proceed With $850M Settlement Proposal But Huge Hurdles Remain

On August 19, Federal Bankruptcy Court Judge Laura Selber Silverstein approved what is called a “Restructuring Support Agreement” (RSA) advanced by the Boy Scouts of America (BSA) as part of its latest proposed Chapter 11 bankruptcy plan to resolve sexual abuse survivor claims and reorganize to remain in business. While the Judge agreed that the BSA could move forward with its Chapter 11 bankruptcy plans, the Judge also made clear that her ruling was not in any way an approval or endorsement of the proposed settlement.

This is NOT A SETTLEMENT AGREEMENT, as it has been wrongly referred to by many media outlets. The RSA is merely a contract between the BSA and other certain parties involved in the bankruptcy that have agreed to promote or propose a plan that requires a vote of approval by all claimants and final approval by Judge Silverstein.

The judge simply approved, in part, the agreement among these parties to cooperate to try and get ultimate court approval of the proposed plan. As the judge made clear following the three-day hearing on the RSA, the court was only deciding that the BSA used good business judgment in trying to go forward with proposing its plan.

Judge Silverstein expressly stated on the record that she was not approving the plan that includes a supposed contribution of $250 million (a combination of cash, art collection, property, and a note) by the BSA and $600 million (a combination of cash, property, and a note) that the local councils will try to contribute. With about 82,500 sex abuse claimants in the BSA bankruptcy case, a substantial number of law firms representing survivors strongly argued that these amounts are far too low.

Judge Silverstein also expressly stated on the record that by allowing the BSA and other parties to proceed with the RSA, she was not approving the pending disclosure statement, voting procedures, or any other issue raised by the BSA in seeking approval of the RSA cooperation agreement. In her ruling she stated: “Let me emphasize the limited nature of my ruling today. I am being asked to approve Debtor's entry into the RSA. I am not approving the term sheet, the fourth amended plan, any disclosure statement, or anything else, and the order I entered today does not suggest that I will do so or need to do so.^” The judge also stated that: “unless there are further resolutions, this case is headed toward an epic confirmation fight.”

In conversation with AP News, Attorney Irwin Zalkin of The Zalkin Law Firm stated that the agreement was now “toothless,” as Judge Silverstein “gutted” its key conditions.

“The Zalkin Law Firm, along supported by more than 30 other law firms representing claimants, is opposed to the BSA’s proposed plan for many reasons,” Attorney Zalkin said. “It may compromise insurance coverage; it is woefully inadequate to fairly compensate survivors; and it allows for releases to be given to local councils without the councils meeting the bankruptcy legal requirement that they make a substantial contribution to the settlement fund for the survivors. These issues will be raised and dealt with before any plan can be approved by Judge Silverstein.”

Attorney Zalkin and other opponents of the deal also argued that BSA officials did not exercise proper business judgment—the crux of the ruling. They noted to AP News that the BSA board of directors “never adopted a resolution approving the agreement, and that decision-making authority was delegated to an executive committee and a handful of people on a bankruptcy task force.”

A Staunch Advocate for Survivors

Attorney Irwin Zalkin has extensive experience in representing sexual abuse survivors whose abusers have filed for bankruptcy to avoid accountability. He served as lead negotiator in the child sex abuse litigation against the Roman Catholic Bishop of San Diego during its bankruptcy proceedings, which resulted in a global settlement of nearly $200 million for survivors. He also helped negotiate a $660 million global settlement against the Roman Catholic Archbishop of Los Angeles, which sought bankruptcy protection once hit with a wave of child sex abuse claims.

If you or a loved one has been the victim of child sex abuse in the BSA, our national attorney team at The Zalkin Law Firm is here to help. We’ll fight tooth and nail for you. Call (800) 477-2989 or contact us online for a free consultation.