Boy Scouts of America will begin to compensate sexual abuse victims from a $2.4 billion trust

The Boys Scouts of America will pay victims of sexual assault under a $2.4 billion reorganization plan that took effect Wednesday.

The plan allows the Texas-based Boy Scouts to continue operating while compensating more than 80,000 men who said in a 2020 lawsuit they were sexually assaulted as children.

Doug Kennedy, co-chair of the bankruptcy’s official committee of abuse plaintiffs, said survivors can now take “an important step toward some degree of resolution for their abuse.”

With the plan going into effect, assets will gradually begin to flow into a settlement fund that will evaluate claims and make payments to survivors of abuse.

However, it may take months for victims to see their payouts as the Texas federal bankruptcy hires financial advisers to overlook the funds.

The victims will receive money from a $2.4 billion reorganization plan that went into effect Wednesday

“This is an important milestone for the BSA as we emerge from a three-year financial restructuring process with a global resolution passed with overwhelming support from more than 85 percent of survivors involved in the case,” said Roger Mosby, CEO and president of Boy Scouts. in a prepared statement.

The plan went into effect after the Third U.S. Circuit Court of Appeals denied a request from the plan’s opponents to issue an adjournment while they appealed the plan’s approval by a federal district court.

The refusal of the suspension allows the plan to formally go into effect, but opponents are expected to continue to appeal.

The plan’s opponents have argued that the staggering number of claims, combined with other factors, suggests the bankruptcy process has been rigged.

Meanwhile, U.S. Bankruptcy Judge Laurie Selber Silverstein held a hearing Wednesday to consider requests that the Boy Scouts be allowed to pay more than $20 million in legal fees and attorneys’ fees for a coalition of law firms representing those who claim to have been abused.

Those law firms are expected to take about 40 percent of all payments to the trust’s clients.

Nevertheless, lawyers for the Coalition of Abused Scouts for Justice argued that Silverstein should grant their “relatively modest” request that the Boy Scouts of America pay a portion of their fees because of the “extraordinary contribution” they made in developing a reorganization plan .

The coalition played a dominant role in the bankruptcy, despite the existence of the Civil Service Commission.

Coalition law firms represent nearly 18,000 plaintiffs and are affiliated with more than two dozen law firms that collectively represent more than 60,000 plaintiffs.

The plan’s opponents have suggested that the massive number of claims was the result of a nationwide marketing effort by personal injury attorneys who teamed up with for-profit damage aggregators to drum up clients.

With the plan going into effect, assets will gradually begin to flow into a settlement fund that will evaluate claims and make payments to survivors of abuse

However, it may take months for victims to see their payouts as the Texas federal bankruptcy hires financial advisers to overlook the funds

Silverstein in 2021 rejected an earlier proposal for the Boy Scouts to pay millions of dollars in fees and expenses to attorneys hired by coalition law firms.

The judge noted that such a payment would come out of the pockets of abuse plaintiffs, a concern she reiterated on Wednesday.

Silverstein noted that when the coalition was formed, she wanted to know who was funding it. “Is it coming out of the pockets of the plaintiffs, or is it coming out of the pockets of the law firms?” she remembered asking. “And the answer was, ‘It’s coming out of the pockets of the law firms.’

The judge questioned whether the request for compensation is not simply a “surcharge” to abuse plaintiffs, because otherwise the money would go to the settlement trust.

She suggested that the coalition was essentially a ‘splinter group’ of the official commission, and that its work overlapped with the commission’s work.

“Do they have to pay their fees if I have a group, an official commission, that is charged and has a fiduciary obligation to the entire constituency of the survivors? I have trouble with that,” said Silverstein, who did not immediately rule.

Under the plan, the Boy Scouts of America will contribute less than 10% of the settlement fund. Local Boy Scout councils, which run day-to-day operations for troops, offered to contribute at least $515 million in cash and property, subject to certain protections for local organizations that sponsor troops, including religious entities, civic associations and community groups.

The majority of the compensation fund will come from the Boy Scouts’ two largest insurers, Century Indemnity and The Hartford, which have reached settlements asking them to contribute $800 million and $787 million, respectively.

Those amounts represent a fraction of the billions of dollars in potential liability exposure they faced. Smaller insurers agreed to contribute about $69 million.

Other insurers, many of which offered overinsurance, have declined to settle. They allege that the procedures for distributing funds would violate their contractual rights to contest claims, set a dangerous precedent for mass tort lawsuits, and result in massive payouts.

Under the plan, insurance companies, local Scout councils and troop sponsoring organizations will receive broad liability waivers that protect them from future sexual abuse lawsuits in exchange for contributions to the compensation fund.

Some abuse survivors argue that releasing their claims against those non-debtor third parties without their consent violates their rights to a fair trial.

Such third-party releases, arising from asbestos and product liability cases, have been criticized as an unconstitutional form of “bankruptcy,” where non-debtor entities gain benefits by joining a debtor to resolve mass tort in bankruptcy.