Boy Scouts, Pressured to End Bankruptcy, Explore Leaving Local Councils Behind
By Andrew Scurria and Becky Yerak
The Boy Scouts of America, under pressure to end a costly
bankruptcy case, are exploring an exit from chapter 11 that
abandons the youth group's longstanding goal of protecting hundreds
of affiliated local councils from sex-abuse litigation.
The Boy Scouts put forth an alternative chapter 11 plan that
would resolve sex-abuse liabilities for only the bankrupt national
organization, while leaving local councils spread across the
country open to thousands of legal claims.
The contingency plan isn't a first choice for the Boy Scouts,
which filed for bankruptcy in part to shield the local councils and
the wealth they hold from potentially devastating legal exposure
over childhood sexual abuse. Since filing for bankruptcy last year,
the Boy Scouts have favored a broad deal between abuse victims and
local councils, which are tied to the institution but aren't
themselves in bankruptcy.
That remains on the table, Boy Scouts lawyer Jessica Lauria said
in the U.S. Bankruptcy Court in Wilmington, Del. But if the
preferred plan falls to gain traction among victims or can't clear
bankruptcy court, the Boy Scouts would pivot to an alternative
version that only covers the national organization, she said.
In that scenario, local councils in California, New Jersey, New
York and other states would be exposed to the kind of legal action
that the Boy Scouts had filed for bankruptcy to resolve.
A Boy Scouts spokesman said that while the national-only plan
isn't their preferred path, they "must be prepared to move forward
with an alternative plan if necessary."
The Boy Scouts have apologized for past failures to protect
children and said they want to compensate those who suffered abuse
through a chapter 11 filing mean to corral litigation and ease the
The bankruptcy case also opened a potential route for local
councils to make a contribution, in return for the same blanket
protection against sex-abuse lawsuits that the national
organization would receive. They are counting on the settlement
plan to absolve them of abuse-related liabilities, and avoid the
need to file for bankruptcy themselves.
A proposed settlement trust would evaluate claims and administer
payments, drawing on contributed assets and insurance policies,
which victims are counting on for a big chunk of the compensation
Negotiations with local councils have concerned how much they
should contribute to the compensation trust to earn their liability
release. The Boy Scouts have suggested they chip in $300 million, a
figure they haven't agreed to and that abuse victims have rejected
A widespread deal hasn't emerged as the Boy Scouts move closer
to a self-imposed summer deadline to exit from chapter 11. Ms.
Lauria said Monday the alternate plan would save professional fees,
already hovering around $100 million, and end the bankruptcy on
But there would be no contributions from local councils and no
centralized forum to liquidate claims and compensate victims, she
said. Abuse victims would retain their rights to bring lawsuits
against local councils, as well as church, schools and other groups
that sponsored troops and allegedly failed to screen out
When the Boy Scouts entered bankruptcy, they expected about
12,000 sex-abuse claims to emerge. Instead, nearly 84,000 men
stepped forward seeking compensation, making the it the largest
chapter 11 case filed over sexual abuse.
Some of the largest and wealthiest local councils were named in
thousands of abuse claims, enough to put them under severe
financial strain if they can't buy peace with victims through the
bankruptcy case. In court papers filed Monday, the Boy Scouts said
that without a global resolution, all survivors would be "forced to
revert to the tort system and likely into bankruptcy courts across
the country as local councils confront a tidal wave of abuse
Some local councils have already put camp properties on the
block to raise money for the compensation trust. The settlement
offer the Boy Scouts have put forth doesn't include signed
commitments from local councils, or their insurance rights.
Ricky Mason, a lawyer negotiating on behalf of local councils,
said in Monday's hearing that they are prepared to contribute cash
and insurance rights but that the amounts need to be realistic.
Write to Andrew Scurria at Andrew.Scurria@wsj.com and Becky
Yerak at email@example.com
(END) Dow Jones Newswires
April 13, 2021 10:02 ET (14:02 GMT)
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