Bankruptcy Update: Boy Scouts File Revised Reorganization Plan

In the face of more than 80,000 child sexual abuse claims, the Boy Scouts of America proposed a second reorganization plan during bankruptcy proceedings. If accepted, this plan will determine how much compensation is paid to survivors of Boy Scouts abuse.

Boy Scouts’ Revised Reorganization Plan

To resolve the sexual abuse claims, the Boy Scouts needs to propose an acceptable reorganization plan. Currently, the scouting organization is proposing a victim trust to compensate abuse survivors. 

The initial and revised plans propose settlement contributions from the national organization and local councils. Both plans contain a $115 million contribution from the national organization in cash and assets, including multiple Norman Rockwell paintings. 

However, the revised plan increases the proposed contribution from local councils. The proposed contribution rose from $300 million to $425 million in the revised plan. 

In return for financial contributions, local councils and sponsor organizations, such as the Latter-day Saints, will be shielded from further liability and litigation. 

Many local councils across the country face multiple sexual abuse lawsuits. These lawsuits have been suspended during the national organization’s bankruptcy proceedings. 

Insurance companies may also contribute to the trust to avoid liability.

The Hartford Contributes $650M To Victim Trust

In April 2021, the insurance company The Hartford agreed to pay $650 million to the victim bankruptcy trust. Like local councils, by contributing to the trust, The Hartford would be freed from its financial obligations. 

Victim attorneys and advocates were appalled by this settlement contribution. Many claim the insurance company is liable for billions of dollars rather than millions. 

If the revised plan is accepted with contributions from insurance companies, victims may receive significantly less money than they deserve.

Boy Scouts’ “Plan C” To Pay Abuse Claims

So far, the two proposed reorganization plans protect the national organization, local councils and sponsors from future liability. However, if the revised plan is not accepted, the national organization may need to move to a plan excluding local councils and third parties. 

This backup plan would leave 253 local councils to fight lawsuits themselves. Additionally, the backup plan would rely heavily on insurance companies to pay survivors. 

This could make things extremely complicated because the national organization and local councils tend to share insurance policies. 

This backup plan could save the Boy Scouts millions of dollars in legal fees. However, it could also make it more difficult for survivors to receive compensation.

Plan Critics Demand More For Survivors

Critics of the Boy Scouts’ proposed plans say the plans offer inadequate payouts for survivors. The first plan would have offered each survivor an average of $6,000. For many survivors, this amount would barely repay the cost of years of therapy. 

The Boy Scouts estimates $2.4 to $7.1 billion will be available for abuse victims depending on which plan is accepted — the revised plan or the backup plan. However, the official tort claimants committee (TCC) estimates the value of sexual abuse claims is around $103 billion. Thus, either plan from the Boy Scouts falls woefully short of repaying victims. 

An official committee representing survivors has challenged the Boy Scouts for control of the bankruptcy case. The committee wishes to draft a reorganization plan themselves.

History Of Abuse In The Boy Scouts

More than 90,000 claims of sexual abuse were filed against the Boy Scouts of America by November 2020.  Thousands of former scouts were abused as children by scout leaders and volunteers. The abuse allegations date back decades. 

The national organization kept records of abuse allegations but, historically, did little to protect scouts from further abuse. 

In February 2020, the national scouting organization filed for bankruptcy to handle the growing number of abuse claims. 

Even prior to the debate over reorganization plans, the bankruptcy proceedings have been filled with contention. The Boy Scouts has been accused of undervaluing and protecting its assets from survivors. 

There is also much debate around the liability of the national organization and the local councils. Thus far, the bankruptcy proceedings have protected local councils from litigation. This is despite claims by the national organization that local councils are separately run and operated entities, similar to a franchise. 

Only time will tell if the latest revised plan is accepted by survivors and claimants or if another attempt at resolution will be made.