DOVER, Del. — The judge presiding over the Boy Scouts of America bankruptcy expressed frustration Wednesday at the lack of progress in the case and ordered attorneys to work harder toward a plan that compensates child sexual abuse victims and ensures the BSA can keep operating.
Judge Laurie Selber Silverstein in Delaware opened Wednesday’s virtual hearing by telling attorneys she had read the “flurry of papers” they submitted recently, and that if she was holding the hearing in court rather than via Zoom, she might have a “discussion” with them behind closed doors.
The judge rejected the BSA’s request for an April 15 hearing to approve the disclosure statement outlining a reorganization plan submitted by the Boy Scouts earlier this month. It has been roundly criticized by attorneys representing abuse victims.
“I don’t see some very necessary information and documents … that I would want to see at a disclosure statement (hearing),” said Silverstein. The judge pushed back the hearing until late April and ordered attorneys to attend mediation sessions scheduled for later this month.
“Whether attending in person or attending via Zoom, I expect everybody to be there,” she said, telling attorneys to “bring your toothbrushes and be prepared to come to a resolution.”
“I don’t want to hear that someone decided it was inconvenient or they couldn’t show,” Silverstein added, noting that professional and attorney fees in the bankruptcy case have already cost the Boy Scouts more than $100 million.
“I think that is a staggering number, and progress needs to be made,” the judge said. “Victims need to be compensated appropriately, and the Boy Scouts’ mission needs to continue…. Every dollar to professional fees is a dollar that comes out of some creditor’s pocket.”
The Boy Scouts of America, based in Irving, Texas, sought bankruptcy protection last February in an effort to halt hundreds of lawsuits and create a compensation fund for men who were molested as youngsters decades ago by scoutmasters or other leaders.
Jessica Lauria, an attorney for the BSA, said she and her colleagues are frustrated that they have not been able to reach a consensus with creditors on a reorganization plan.
“We know we have a lot of wood to chop. I don’t think it’s the entire forest,” she said, adding that it is critical for the BSA to emerge from bankruptcy by late summer.
“We kick off recruiting in earnest in the fall, and the debtors need to put this bankruptcy matter behind them,” Lauria said. She also cited liquidity concerns, with the bankruptcy case costing about $10 million a month. She added the cost will only increase if litigation between attorneys for abuse victims and BSA insurers continues to escalate.
The bankruptcy case has been bogged down by disputes over the provision of information by local Boy Scouts councils about their financial assets, claims by the BSA that hundreds of millions of dollars worth of its assets are restricted and unavailable to abuse victims, and concerns by BSA insurers that attorneys for abuse victims have submitted tens of thousands of claims without ensuring their validity.
Philip Anker, an attorney for some BSA insurers, noted that the organization faced 275 filed abuse claims before seeking bankruptcy protection and is now facing more than 80,000 abuse claims.
“Something doesn’t smell right,” he said.
Attorneys for abuse victims made clear from the onset of the bankruptcy that they would go after campsites and other properties and assets owned by local councils to contribute to a settlement fund. The 250-odd local councils, which run day-to-day operations for local troops, are not debtors in the bankruptcy and are considered by the Boy Scouts to be legally separate entities, even though they share insurance policies and are considered ‘related parties’ in the bankruptcy case.
“I think there has to be a real change in attitude by the councils as to what assets could be disclosed to creditors, what their alternatives are, so they can make a decision on supporting the plan,” said James Stang, an attorney for the official tort claimants committee, which is charged with representing the interests of all abuse victims.
The current plan calls for a $300 million contribution from the local councils into a trust for abuse victims, although the form and timing of those contributions is uncertain. The BSA would contribute any unrestricted cash above the $75 million it says it needs to maintain operations, as well its collection of Norman Rockwell paintings and other artwork. The BSA also would sell a couple of its administrative facilities and rights to oil and gas interests in several states, but the plan leaves many unanswered questions about what other compensation might be available for abuse victims.
The official committee for abuse victims said in a court filing Tuesday that without meaningful negotiation the current plan is “the first step on a path to nowhere.”
