Boy Scouts of America Files for Bankruptcy

The Boy Scouts of America (BSA) has filed for Chapter 11 bankruptcy protection. The organization filed bankruptcy in response to the growing number of lawsuits. The lawsuits allege scouts were sexually abused by the scout leaders charged with their care.

The bankruptcy filing will result in a restructuring of the organization. This restructuring will provide funds to be placed in a settlement trust. From this trust, the funds will be used to compensate the victims. For many victims, the Boy Scouts bankruptcy filing raises many questions.

Bankruptcy Will Help the Boy Scouts Pay Abuse Victims

Chapter 11 bankruptcy is a form of bankruptcy that allows a corporation to restructure its debt. This allows a company to pay its creditors over time while still functioning as a business. In this case, many of the creditors are sexual assault victims.

The Boy Scouts then acts as a “debtor in possession.” The organization keeps possession and control of its assets and continues to operate. The Boy Scouts must submit to the court a plan of reorganization. This plan must disclose all its assets and liabilities. The court will then have to approve the plan.

Before victims can agree to any settlement, the court will decide what assets are subject to the bankruptcy proceeding. According to the Boy Scouts’ bankruptcy filing, it has an annual revenue of $285 million. Its assets total $1.4 billion that could be used for settlement compensation. It also reported between $500 million and $1 billion in liabilities.

Lawyers for the victims assert that assets belonging to local and regional Boy Scouts councils should be made available to compensate victims. These assets include thousands of acres of campsites and recreational facilities, including a new 2,800-acre, $65 million youth camp in Texas.

The Boy Scouts claims the national organization is a separate entity from the local and regional councils.

The End of the Boy Scout Era

Thousands of sexual abuse lawsuits have been filed and thousands more expected. It remains uncertain if the Boy Scouts will be able to continue its day-to-day operations, regardless of restructuring.

In response to ongoing abuse allegations, the Boy Scouts implemented one of the most comprehensive programs to prevent institutional sexual abuse. The Youth Protection Program contains policies designed to protect children from abuse. Additionally, its policies protect scout leaders from false allegations.

One such policy is the “Two Deep” leadership policy. This policy prohibits any adult leader from ever being alone with any youth member.

Despite its reforms to protect children, diminishing membership and the growing number of lawsuits may be too much to sustain.

For example, if 5,000 claimants receive awards averaging $1 million each, the compensation would total $5 billion. Even if insurance covered half, the Boy Scouts would still have to produce $2.5 billion in assets to compensate victims.

The Boy Scouts has already paid the largest punitive damage award in the United States. In this verdict, the Boy Scouts paid $18.5 million to an individual plaintiff in a child abuse case.

In that case, the court ordered the Boy Scouts of America to release historically confidential files. These files are known publicly as the “Perversion Files.” The perversion files documented approximately 1,200 cases of abuse between 1965 and 1985. It also included thousands of files of “ineligible volunteers.” These were men who the Boy Scouts considered unfit to serve as volunteer scout leaders. However, many of these people continued to serve in the organization.

Time for Victims to File Sexual Abuse Claims

On February 18, 2020, the Boys Scouts filed for bankruptcy in a federal court in Delaware. The effect of the bankruptcy filing on victims is three-fold.

1. Depending on what assets are subject to the bankruptcy proceeding, the value of the trust could be limited. In some cases, it could be woefully insufficient to fairly compensate all victims.
2. It puts on hold any cases already filed against local or regional councils. Lawyers for these victims protest that the Boy Scouts should not be able to use a bankruptcy proceeding to protect the assets of its affiliates. This was a tactic that the Catholic Church employed when many of its dioceses filed bankruptcy in the face of similar claims of priest sex abuse.
3. It forces victims who have not yet come forward with allegations to file claims as creditors within the Delaware bankruptcy proceeding, regardless of where or when their abuse occurred. The window for filing a claim as a bankruptcy creditor will be much smaller than the time allowed for filing claims under individual state statutes. This is especially significant in states that recently expanded their respective legal deadlines. Lawyers claim this violates the victims’ rights to due process under the United States constitution.