Lamenting that no amount of money could ever outweigh “the abuse claimants have suffered,” the court shot down the appeal of a small fraction of sexual abuse victims who appealed the plan’s terms.
By Alexandra Jones | Courthouse News Service
The Third Circuit shot down a group of sexual abuse survivors’ appeal to overturn the Boy Scouts of America’s $2.46 billion bankruptcy reorganization plan on Tuesday.
“As the Bankruptcy Court poignantly observed, ‘no compensation will ever be enough’ for the abuse claimants have suffered,” wrote U.S. Circuit Judge Cheryl Krause, a Barack Obama appointee, in the panel’s unanimous ruling. “The plan nonetheless permits survivors to pursue their claims through the Trust Distribution Procedures and recover for at least some fraction of the suffering they have endured.”
At an appellate hearing in November, 144 of the roughly 82,000 victims voiced their staunch objections to the plan’s non-debtor releases and insurance settlements. Under the releases, they must relinquish the ability to take up future sex abuse lawsuits against involved insurers, local Boy Scout groups and troop sponsors that contributed to the victims’ compensation fund.
Designed to settle tens of thousands of sexual abuse claims against the Boy Scouts from men who say they were preyed upon as children, the BSA’s plan has allowed the Texas-based organization to operate despite being forced into bankruptcy. A Delaware bankruptcy judge approved it in 2022. In 2023, a Delaware federal court affirmed the ruling, and it went into effect.
The plan has been in effect for roughly two years and paid thousands of survivors, with less than 10% of the settlement fund coming from the Boy Scouts. A large chunk was provided by local Boy Scout groups that provided $515 million in cash and property in exchange for liability protections.
But the majority of the funding came from insurers Century Indemnity and The Hartford, which contributed $800 million and $787 million, respectively. An attorney for the settling abuse victims said in November that a reversal of the settlement would be damaging to his clients, who had already had to relive their abuse to receive payouts.
Delia Wolff, an attorney with the Guam Bar Association, had argued on these victims’ behalf that the settlement — designed to provide payouts for tens of thousands of sexual abuse claims against the organization — was “clearly unlawful” and that they shouldn’t have to sign away liability as part of the sweeping settlement that was approved by 86% of the sexual abuse survivors in the case.
Tuesday’s ruling, however, made clear that due to the timing of the appeal, the court cannot now disrupt the nonconsensual third-party releases “at this late stage,” even though a similar plan proposed today would “be unconfirmable,” Krause wrote.
She acknowledged that the Supreme Court’s June 2024 Purdue ruling — which held that the Sackler family, who own Purdue Pharmaceuticals, could not shield themselves from future lawsuits from OxyContin victims in their $6 billion opioid settlement by using bankruptcy code — would support the victims’ appeal, if not for the stage of the settlement.
“That temporal happenstance, we recognize, is a bitter pill to swallow, ‘but bankruptcy inevitably creates harsh results for some players,’” the judge said.
U.S. Circuit Judges Marjorie Rendell, a Bill Clinton appointee, and Anthony Scirica, a Ronald Reagan appointee, rounded out the panel for this ruling.
The Boy Scouts of America sought bankruptcy protection in early 2020 after being named a defendant in hundreds of sexual abuse lawsuits.
Wolff did not immediately respond to a request for comment on the ruling Tuesday, nor did lawyers for BSA.