Sex abuse victims fight to thwart Boy Scouts’ $2.4 billion bankruptcy payout plan

PHILADELPHIA (CN) — A group of sexual abuse survivors took on the Boy Scouts of America’s $2.46 billion bankruptcy reorganization plan at the Third Circuit on Wednesday, telling the court that the settlement — designed to provide payouts for tens of thousands of sexual abuse claims against the organization — is “clearly unlawful.”

Delia Wolff, an attorney with the Guam Bar Association, told the appellate panel that 144 victims stand in staunch objection to the plan’s non-debtor releases and insurance settlements, under which they must relinquish the ability to take up future sex abuse lawsuits against involved insurers, local Boy Scout groups, and troop sponsors that contributed to the victims’ compensation fund.

While her clients are just a small fraction of the roughly 82,000 sex abuse survivors involved in the settlement, she said they shouldn’t have to sign away liability as part of the sweeping settlement that was approved by 86% of the sexual abuse survivors in the case.

“Nobody can bargain away my clients claims without their consent,” said Wolff at the hearing, which lasted more than two hours, asking the court to either reverse the settlement determination or modify it.

She said that her argument was supported by the Supreme Court, which ruled in June that the Sackler family, who own Purdue Pharmaceuticals, could not shield themselves from future lawsuits from OxyContin victims in their $6 billion opioid settlement by using bankruptcy code.

Designed to settle tens of thousands of sexual abuse claims against the Boy Scouts from men who say they were preyed upon as children, the plan has allowed the Texas-based organization to operate despite being forced into bankruptcy. A Delaware bankruptcy judge approved it in 2022. In 2023, a Delaware federal court affirmed the ruling, and it went into effect.

Concerned about unleashing chaos, U.S. Circuit Judge Marjorie Rendell, a Bill Clinton appointee, pressed the dissenting victims’ on the real-life application of any sort of reversal of the settlement.

“What would happen as a practical matter if this plan were undone?” Rendell posed. “All the money gets returned and there will be suits left and right against the local chapters?”

The plan has been in effect for a year and a half and paid thousands of survivors, with less than 10% of the settlement fund coming from the Boy Scouts. A large chunk was provided by local Boy Scout groups that provided $515 million in cash and property in exchange for liability protections. But the majority of the funding came from insurers Century Indemnity and The Hartford, which contributed $800 million and $787 million, respectively.

Non-settling insurance companies also joined the Third Circuit appeal Wednesday. They claim a special opt-out provision for dissenters from third-party liability releases could make everyone happy without throwing the settlement into chaos.

Attorneys for appealing insurers said Wednesday that the distribution method for funds from the victims’ trust breach their contractual rights to contest claims. They argued the plan sets in place a dangerous precedent for future mass torts.

However, Evan Smola, an attorney with Hurley Law, spoke on behalf of the settling sexual abuse victims Wednesday and reminded the panel that during the 18 months the plan has been in effect, his clients have already faced such hardships that a reversal of the settlement would be damaging to them.

This includes going through processes like filling out an 81-page questionnaire detailing intricate details of their sexual abuse, providing extrinsic evidence — such as old scouting memorabilia — to prove they were involved in the organization, and disclosing their abuse to third parties who could serve as their affidavits.

“They’ve relived their abuse, heard attorneys talk about their abuse and dissect their abuse, and finally, thousands, indeed, more than 10,000 claimants have finally reached something approximating the end of this ordeal,” said Smola.

He also pressed that a reversal could further delay payouts, and some older survivors don’t have much time left to wait. He said 250 victims his firm represents have passed away in the last four years.

“Many of them specifically instructed us not to tell their families about their claim,” Smola said. “So when they died, their claim died too.”

He urged the plan to be allowed to go forward in its entirety.

U.S. Circuit Judge Cheryl Krause, a Barack Obama appointee, emphasized the need for a timely resolution on behalf of all victims involved.

“The court is certainly aware as we talk about these interesting legal issues that behind them are real people and their horrific experiences are what brought all of us, at the end of the day, to court here to discuss these issues,” said Krause.

The Boy Scouts of America sought bankruptcy protection in early 2020 after being named as defendant in hundreds of sexual abuse lawsuits.

U.S. Circuit Judge Anthony Scirica, a Ronald Reagan appointee, rounded out the panel.