Boy Scouts of America falls short in bid to emerge from sex-abuse bankruptcy

The Boy Scouts of America’s plan to emerge from bankruptcy with a $2.7-billion settlement suffered a major setback this week, but the youth group and lawyers for thousands of men who were sexually abused in the ranks say they will continue to work toward a deal.

The Scouts’ opening bid was rebuffed when it failed to garner “overwhelming support” — which both sides defined as 75% — from the nearly 54,000 abuse survivors who voted on the proposed settlement, touted as the largest of its kind in U.S. history.

A preliminary tally released late Tuesday showed the reorganization plan fell just short of what was needed to be confirmed by the bankruptcy judge presiding over the case. The count put the “yes” votes at 73%.

“Survivors understood that the Plan does not adequately compensate them,” John Humphrey, co-chairman of the official tort claimants committee appointed by the bankruptcy trustee to represent all victims, said in a statement.

The committee, which had recommended a “no” vote, said the results would force the Scouts to negotiate a better deal. James Stang, bankruptcy counsel to the committee, said an acceptable plan would involve not only more money but other provisions such as improved child-protection measures for Scouts.

“We want to get a better deal for our folks so we can make a recommendation to vote for it,” he said. “Right now, we’re not there. But we are working hard.”

In a statement Wednesday, the Boy Scouts said it hoped to enhance the settlement, which is scheduled for a Feb. 22 confirmation hearing before U.S. Bankruptcy Judge Laurie Selber Silverstein in Delaware.

“We are encouraged by these preliminary results and are actively engaging key parties in our case with the hope of reaching additional agreements, which could potentially garner further support for the Plan before confirmation,” it said.

Attorneys in the case and others familiar with the Scouts’ negotiations said the group hopes to sweeten the deal sufficiently to persuade enough of the claimants who rejected the proposal to change their votes to “yes.”

Changing votes would not require a do-over of the election, they said.

The preliminary results, disclosed in a bankruptcy court filing, capped a contentious two-month voting period in which plaintiffs’ lawyers squared off against each other, some hailing the settlement as the best deal possible for more than 82,000 claimants, while others denounced it as woefully insufficient.

The Boy Scouts of America and its local councils had agreed to contribute about $820 million of the proposed settlement amount, with nearly $1.6 million coming from two major insurers, and $250 million from the Church of Jesus Christ of Latter-day Saints and other sponsoring organizations. They include Methodist congregations, which agreed to contribute $30 million.

Even that historically large total would have yielded only “pennies on the dollar” of the claims’ true value, according to opponents, who contended that it let the Boy Scouts and others off the hook for billions more in damages.

The settlement also would have released the Boy Scouts and other contributors from civil liability for sexual abuse that occurred before the bankruptcy.

Tuesday’s report on the vote comes just shy of two years after the Boy Scouts filed for Chapter 11 bankruptcy protection in February 2020 to stave off a mounting wave of sex abuse lawsuits. The bankruptcy put a hold on hundreds of lawsuits to allow for the negotiation of a global settlement. It also required new abuse claims to be handled in that venue rather than in state courts.

A researcher hired by the Scouts to analyze its internal records in 2019 identified 7,819 suspected abusers and 12,254 victims — a fraction of the number who filed claims.

By Nov. 16, 2020, the court-mandated deadline for filing claims, more than 92,000 were submitted, many from accusers recruited by law firms through TV and internet advertisements. Some 10,000 claims were later weeded out as duplicate filings or otherwise invalidated.

The massive response far outstripped all expectations. Plaintiffs’ lawyers predicted that the number of claims and the total payouts to settle them would easily eclipse those in the sex abuse scandal that engulfed the U.S. Catholic Church more than a decade ago.

At the time, Boy Scout leaders called the massive response “gut-wrenching” and apologized in a statement.

“We are devastated by the number of lives impacted by past abuse in Scouting and moved by the bravery of those who have come forward,” it said. “We are heartbroken that we cannot undo their pain.... We are deeply sorry.”

The Scouts also have called the reorganization plan a “critical step” toward equitably compensating abuse survivors while continuing to carry out its mission.

The tort claimants’ committee estimated last month that the settlement would work out to an average of $28,000 per claim. Some claimants would be paid more, others less, depending on several factors including the severity of the abuse and where it occurred.

“In a case involving horrific abuse of children, average payments of approximately $28,000 do not begin to justly compensate survivors,” said Richard Pachulski, one of the committee’s attorneys, contrasting it with a recent settlement with USA Gymnastics and the U.S. Olympic and Paralympic Committee, which will pay some 500 sexual abuse survivors about $800,000 each.

Jason Amala, a sexual abuse attorney whose firm represents more than 1,000 men in the bankruptcy, called the proposal “a poorly constructed plan driven by a group of lawyers who wanted to achieve a quick, cheap bankruptcy settlement.”

He and others who opposed the plan say its main proponent, a coalition of mass tort law firms, opted for expedience by settling with the Scouts’ insurers.

In a statement Wednesday, the Coalition of Abused Scouts for Justice, which has 18,000 members and says its affiliated law firms represent more than 63,000 clients in the bankruptcy, challenged that assertion. It reaffirmed its support for the proposal, saying it “provides survivors with the best and fastest avenue to closure, as well as just, fair and equitable compensation.”

“The Coalition continues to reach across lines and actively negotiate with all parties to further grow the compensation fund, ensure child sex abuse survivors can advise and are appointed to the Boy Scouts of America’s National Executive Board and boards of local councils, and receive the compensation so rightfully owed to them,” it said.

Others say too much time and money has been expended already.

Timothy Kosnoff, a veteran sexual abuse attorney who with two other law firms represents more than 15,000 claimants, said the preliminary vote report raised serious questions about how the ballots were distributed, collected and counted.

But even if the results are taken at face value, he said, the Boy Scouts has failed to garner the support it needed. He urged Judge Silverstein to dismiss the case, teeing up a liquidation that would probably spell the end of the 112-year-old organization. Youth membership in the organization has been declining in recent years and stands at about 1.1 million, according to its most recent annual report.

“She has got to step in and say, ‘Enough, Boy Scouts, I gave you your shot to come up with a consensual plan and you didn’t. It’s not my job to save you.’ “