Boy Scouts’ $2.7B plan to exit bankruptcy is at risk of failure

The Boy Scouts of America's $2.7 billion plan to exit bankruptcy and compensate thousands of men who say they were sexually abused failed to move forward Tuesday, giving hope to plaintiff attorneys seeking a better deal.

After less than 75% of 54,000 claimants voted to approve the deal, the Official Tort Claimants' Committee, and its co-chair John Humphrey, said survivors were aware of the plan's deficiencies.

"The Boy Scouts tout the plan and the settlements as historically high," Humphrey said in a statement Wednesday. "When considered from the perspective of the individual abuse survivor, the settlements are historically low."

Since August, the committee has urged thousands of claimants attending town hall meetings to vote no on the plan, saying it does not do enough to reform the Scouts' youth protection program and is "woefully" inadequate.

Responding to a request for comment Wednesday, the Boy Scouts of America said the voting report, indicating that 73% of the voting claimants approved the deal, is a preliminary one and it hopes to gain more votes and ultimately confirm the plan.

"Of those survivors who cast individual ballots as opposed to being included in a master ballot filed by their attorneys, more than 86.5% support the plan," A Boy Scout spokesperson said in a statement

In addition to the settlement amount being inadequate, critics of the plan say it should not include third-party, non-debtor releases that would shield local boy scout councils, chartered organizations and their respective insurance carriers from current and future liability.

San Diego attorney Irwin Zalkin of the Zalkin Law Firm who represents almost 150 plaintiffs in the bankruptcy, said proponents of the deal appear to be motivated to settle claims quickly.

"This deal is very illusory," Zalkin said. "I think that those attorneys that have promoted heavily are attorneys that have 1000s of cases, have financial commitments of their own, and want to get this done. They walk away with millions of dollars. They win, insurance companies win, Boy Scouts win, local councils win, charters win, and survivors lose."

The preliminary voting report showed that roughly 27% of eligible claimants voted to reject the plan and an even larger percentage of claimants would have voted to reject the plan if one did not include claimants who elected to receive a $3,500 expedited payment, according to the committee.

The Coalition of Abused Scouts for Justice, an ad hoc committee of approximately 18,000 abuse survivors, represented by law firms who collectively represent more than 63,000 childhood sexual abuse survivors, said it supports the plan.

Like the scouts, the coalition said more than 85% of the survivors who directly submitted their votes, were in favor of the plan, "as opposed to several law firms who opposed the plan that used a so-called 'master ballot' created by those firms to vote to reject on behalf of their clients, irrespective of the diverse interests of those clients."

"Three out of four survivors voted in favor of the $2.7 billion plan negotiated by the Coalition, because it's the largest sex abuse settlement in history, includes key protections for current and future Scouts, and provides compensation without further delay," a coalition spokesperson said in an email Wednesday. "The Coalition of Abused Scouts for Justice and others support the plan because it provides survivors with the best and fastest avenue to closure, as well as just, fair and equitable compensation."

U.S. Bankruptcy Judge Laurie Selber Silverstein will consider the settlement plan at a hearing scheduled for Feb. 22 in a Delaware bankruptcy court. One of the key questions the committee plans to raise is whether third parties should be released from liability under a channeling injunction. Boy Scouts of America, 20-10343-LSS (Del. Bankruptcy Ct., filed Feb. 18, 2020).

Commonly used in asbestos, and other mass tort cases, a bankruptcy plan can include, under bankruptcy code 524(g), a provision barring claimants from asserting claims against insurance carriers and other third parties considered in the plan.