Boy Scout Bankruptcy in Race with Purdue Pharma

Today was the deadline to file all sex abuse claims in the Boy Scout bankruptcy. We’ve been hair-on-fire the last few weeks, getting the claims ready and filed for all my abuse survivor clients. We just got confirmation that the last one was successfully filed.

WHAT’S NEXT?

Now the big issue is what will happen with our appeal? Our firm is one of two law firms appealing the bankruptcy plan. The problem is that the BSA bankruptcy plan is based on the same kind of nonconsensual third-party releases that got the Saklers off the hook in the Purdue Pharma case. If the Supreme Court rules that nonbankrupt third parties can’t piggyback on someone else’s bankruptcy, then BSA’s plan could blow up.

WHAT THEN?

I think that could be a good thing. Unlike the Saklers who actually paid 50% of their assets ($6 billion) to get released, the Local Councils of the Boy Scouts got releases for paying less than 20% of their assets. And the “Chartered Organizations” that sponsored troops — the LDS Church, Catholic churches, civic organizations, etc. — paid not a penny of their own money and will get a full release. No victim will be able to sue any Local Council or Chartered Organization, regardless of their own wrongful conduct and even though these entities are not bankrupt.

You might hear that BSA abuse victims will be “paid in full” so these releases for nonbankrupt third parties are fine. That is not true. There is not enough money in the Boy Scout Settlement Trust to pay all the claimants the full value of their claims. Victims might get only 10 or 20 cents on the dollar. That is nowhere near payment in full.

When you read in the news that victims might get up to $2.7 million, that is the highest “value” a claim could be assigned under the “Matrix” system the Settlement Trust will use to value claims. But with $2.4 billion in the Settlement Trust and as many as 82,000 claimants, there isn’t enough money to pay everyone the full value assigned to their claim. Either the Settlement Trust will have to artificially reduce the “value” of claims – squeeze down the “value” to fit the amount of money – or the Trust will have to reduce the payment of claims. We will see how the Trust handles this problem, but whatever it does, the victims will never see payment of full value.

In the meantime, now we wait to see what the Supreme Court rules in the Purdue Pharma case. Then it will be up to the Third Circuit to decide how to apply that ruling to the Boy Scout bankruptcy.

 

Dumas and Vaughn Attorneys at Law has law offices in Portland, Oregon and serves clients in Oregon, Washington, Idaho, and other states.

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