The Boy Scouts of America Bankruptcy Filing

Given its increasing financial exposure, and in attempting to manage mass tort liability, the not-for-profit Boy Scouts of America (BSA) has followed the lead of about 20 Roman Catholic dioceses by seeking reorganization through Chapter 11 bankruptcy protection.

The filing has triggered what might be one of the larges bankruptcy cases in history as a result of thousands of grown men alleging that as Boy Scouts, they were sexually abused by scoutmasters and other leaders. Their eligibility to file lawsuits was only recently extended by various states when statute of limitations laws were extended. By virtue of the automatic bankruptcy stay, BSA is allowed some breathing room during which discussions can be held to try and resolve the flood of lawsuits.

While the bankruptcy filing allows BSA to put the lawsuits against it on hold for the time being, the organization might be compelled to sell some of its extensive real estate holdings. In remarking on the filing, a BSA spokesman stated that seeking bankruptcy relief had two primary goals. Those are to “equitably compensate victims who were harmed during their time in Scouting and continue carrying out its mission for years to come.” It’s the intent of BSA to use the Chapter 11 bankruptcy process as a vehicle for establishing a Victims Compensation Trust Fund “that would provide equitable compensation to victims.” BSA’s bankruptcy petition listed its assets as being somewhere between $1 billion and $10 billion with its liabilities being between $500 million and $1 billion.

BSA has encouraged all victims of abuse to come forward. As per BSA court documents, more than 12,000 boys have been sexually abused by about 7,800 scoutmasters and leaders in the last 100 years. The bankruptcy court will set a deadline for the filing of claims. How much compensation that each claimant might receive will probably depend on the value of any assets that will be turned over and the number of claimants.

An attorney a Seattle law firm that represents more than 300 claimants in 30 states said that the BSA filing “is much bigger than the bankruptcies involving the Catholic Church.” BSA had contemplated bankruptcy since late 2018. The entire Chapter 11 process is expected to take 18 months to two years from the date of filing.

With the filing of the bankruptcy petition, each individual loses their opportunity to have a jury decide their case. A jury could be the most powerful weapon that an abuse victim can have. That’s likely one of the main reasons that BSA filed for bankruptcy. It gives the organization the opportunity to avoid jury trials. At the time of the filing, BSA also asked the bankruptcy court for entry of an order protecting all of its local councils from lawsuits. Any such order might indirectly protect churches and local civic groups that sponsor troops too. The Seattle attorney said, “Juries don’t like fact patterns where children are abused by trusted leaders.”

BSA says that Scouting is now safer than ever. It maintains that 90% of the abuse claims against it are connected with abuse that occurred more than 30 years ago.

Lee McFarland

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I write about current events which affect attorneys.