DOVER, Del. — A Delaware judge ruled Thursday that the Boy Scouts of America may enter into a pivotal $850 million agreement aimed at settling thousands of child sex abuse claims, but rejected two key provisions of the deal. The organization hopes to use the agreement as a springboard to emerge from bankruptcy later this year.
After three days of testimony and arguments, the judge granted the BSA’s request to enter into an agreement involving the national Boy Scouts organization, about 250 local Boy Scout councils and attorneys representing some 70,000 men who say they were sexually abused as youngsters decades ago while engaged in Boy Scout-related activities. The agreement calls for the Boy Scouts and local councils to contribute $850 million into a fund for abuse claimants.
The agreement was opposed by insurers who issued policies to the Boy Scouts and local councils, attorneys representing thousands of other abuse victims, and various church denominations that have sponsored local Boy Scout troops.
It was not immediately clear how the judge’s ruling will affect the future of the bankruptcy case, given that she rejected two significant provisions in the agreement.
While ruling that BSA officials exercised proper business judgment as required under the law in entering into the agreement, the judge refused to grant a request that the Boy Scouts be allowed to pay millions of dollars in legal fees and expenses of attorneys hired by law firms that represent tens of thousands of abuse claimants.
She also denied the BSA’s request under the agreement for permission to withdraw from an April agreement in which insurance company The Hartford would pay $650 million into the fund for abuse claimants in exchange for being released from any further liability.
The Boy Scouts of America, based in Irving, Texas, sought bankruptcy protection in February 2020 in an effort to halt hundreds of individual lawsuits and create a huge compensation fund for thousands of men who were molested as youngsters by scoutmasters or other leaders. Although the organization was facing 275 lawsuits at the time of the filing, it is now facing some 82,500 sexual abuse claims in the bankruptcy case.
Under the agreement, the Boy Scouts would contribute up to $250 million in cash and property to a fund for victims of child sexual abuse. The local councils, which run day-to-day operations for Boy Scout troops, would contribute $600 million. In addition, the national organization and local councils would transfer their rights to Boy Scout insurance policies to the victims fund. In return, they would be released from future liability for abuse claims.
Opponents of the deal argued that BSA officials failed to fully inform themselves or exercise proper business judgment in entering into the agreement. They noted that the Boy Scouts 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.
The judge rejected two controversial provisions in the agreement that opponents had highlighted.
One allows the Boy Scouts to back out of a settlement they reached in April with one of their insurers, The Hartford. The Hartford agreed to pay $650 million into the victims fund in exchange for being released from any further obligations. The Boy Scouts sought to withdraw from the agreement after attorneys for abuse claimants, who estimate the liability exposure of BSA insurers in the billions of dollars, maintained that their clients would never support a plan that includes it.
The agreement also included a provision under which the Boy Scouts would pay millions of dollars in legal fees and expenses incurred by law firms representing an ad hoc group called the Coalition of Abused Scouts for Justice. Law firms affiliated with the coalition represent some 63,000 abuse claimants and were among the supporters of the agreement.
Despite the partial approval of the agreement, the Boy Scouts still face a host of objections to the disclosure statement.
Opposing lawyers argue it does not fully inform creditors and leaves too many unanswered questions regarding insurance issues and the treatment of local councils and sponsoring organizations. They also say the proposed voting procedures accompanying the disclosure statement improperly put abuse claimants with valid cases on the same footing with some 60,000 claims presumably barred because of statutes of limitations in various states.