Purdue Decision Applies to Boy Scout Bankruptcy

 

The Supreme Court’s Purdue Pharma decision applies directly to the Boy Scout bankruptcy, putting the BSA bankruptcy plan in peril. This is good news for our Dumas & Vaughn clients who appealed the BSA plan because it is a bad deal for abuse claimants. The Supreme Court vindicated the arguments of these sex abuse victims in the BSA bankruptcy who have argued all along that nonconsensual third-party releases are unlawful.

Our  clients, and the thousands of other victims of Scout abuse who opposed the plan (see Note 1 below), now have the law clearly on their side. It is up to the Third Circuit Court of Appeals to apply the Purdue decision to the BSA bankruptcy plan, which is based on the same kind of nonconsensual releases for third parties.

The Purdue decision shows that Boy Scout sex abuse victims cannot be forced to give up – without their consent – claims against troop sponsors and Local Councils. Just like the non-bankrupt Sackler family cannot get a release from liability in Purdue Pharma’s bankruptcy, non-bankrupt Local Councils and troop sponsors cannot get a release from liability in BSA’s bankruptcy.

The Purdue decision did not carve out the BSA plan. The Supreme Court in Purdue said it had no opinion about how its decision would apply to bankruptcy plans that provided full compensation or that were substantially consummated. That statement does not preclude overturning the BSA plan based on the ruling in Purdue. The BSA plan does not fully compensate abuse victims (see Note 2 below). The BSA plan has not been substantially consummated because the BSA Settlement Trust for victims has not been funded yet; only a tiny, tiny fraction of settlement money has been paid to abuse claimants; and the deadline for filing claims is still weeks away.

The Third Circuit must still rule on our appeal in the BSA bankruptcy. But at least now the law on non-consensual third-party releases is clear.

NOTES

Note 1: 8,073 of abuse claimants voted against the BSA plan: You may have read or heard in the news that “86%” of sex abuse claimants voted to confirm the BSA bankruptcy plan. That is simply not true. Only 59% of abuse claimants voted in favor of the plan. Only 56,536 of the 82,000 abuse claimants voted on the plan at all. Of those that voted, 48,463 voted in favor. That means that 86% of those that voted voted in favor of the plan. But that is only 59% of all abuse claimants. 8,073 abuse claimants voted to reject the plan and opposed confirmation, including claimants represented by plan-supporting attorneys. This plan garnered supporting votes from only 59% of the 82,200 direct abuse claimants. The abuse survivors who voted to reject the plan total over 14% of the 56,536 who voted, and roughly ten percent of all direct abuse claimants.

Note 2: No full compensation for victims: Whether abuse claimants will be paid full value is one of the most hotly contested issues on appeal. There is simply not enough money in the Settlement Trust to pay full value on the claims. Claimants may get only cents on the dollar. The plan itself does not promise full payment. The Settlement Trustee does not promise full payment. See, for example, the Settlement Trust website: “[Y]ou may not receive payment of the full value that the Trustee assigns to your Abuse Claim.”

The Settlement Trust only has $2.46 billion promised to it and administrative costs estimated at ten percent, leaving $2.2 billion to pay abuse claimants. The average pre-bankruptcy settlement was $649,521. (Unfortunately, BSA has insisted that the historic settlement spreadsheet admitted as an exhibit at trial be filed under seal, so I can’t share it with you.) Splitting $2.2 billion among 82,200 claimants will pay them an average of only approximately $27,000, which is 96% less than pre-bankruptcy claimants. That is not full compensation or anything near it.

 

 

 

 

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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