Boy Scout Sex Abuse Class Action Sidetracked by Bankruptcy

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When the Boy Scouts of America filed for bankruptcy, the class action suit over allegations of child sex abuse was automatically stayed in favor of a plan that will create a Victims Compensation Trust.

Just how much money will be set aside is hard to tell, but if Catholic Church litigation is any indication, it could be millions of dollars.

“BSA consistently misrepresented itself as a safe, wholesome, values-based organization where scouts would be prepared for life, when BSA knew, in fact, that its programs were infested with pedophiles, its organization-wide abuse problem dated back to the 1910s, and the rampant abuse in its programs was doing serious harm to thousands of boys,” wrote plaintiffs’ attorney Carl S. Kravitz in the Jan. 6 complaint.

BSA declared, in its voluntary chapter 11 petition, $1 billion to $10 billion in estimated assets and up to $1 billion in liabilities. Its proposed bankruptcy plan provides for a trust to assume sole and exclusive responsibility and liability for all abuse claims.

“This should have no impact on individual criminal matters, but a release or waiver, if signed by plaintiffs, will absolve the BSA of any further claims,” said R. Scott Williams, an attorney and partner in RumbergerKirk’s Birmingham, Ala., law office.

As previously reported, the Roman Catholic Church in Los Angeles apologized for priest abuses after a $660 million settlement involving more than 508 alleged victims. Like the Los Angeles diocese, BSA has extended an apology.

“The Boy Scouts of America is committed to fulfilling our social and moral responsibility to equitably compensate victims who suffered abuse during their time in scouting, while also ensuring that we carry out our mission to serve youth, families and local communities for years to come,” a BSA representative told PacerMonitor News. “Our plan is to use this chapter 11 process to create a trust that would provide equitable compensation to victims.” 

Because the bankruptcy petition, filed on Feb. 18 in Delaware district court, takes precedence over the class action complaint filed in District of Columbia district court, there will likely be no jury trial. Critics are fuming.

“I hope that more of these institutions do not try to use bankruptcy courts to protect them from the harm they have done to children,” said Adriana Alcalde, an attorney with New York-based law firm Eisenberg & Baum. “If people’s student loans can’t be discharged in bankruptcy, why should these organizations that allowed some horrific abuses to occur be awarded protections?”

According to the complaint against BSA, plaintiffs were each sexually abused as minors by a BSA scoutmaster or scout leader.

“Plaintiffs were as young as eight years old when they were abused by a BSA scoutmaster or scout leader, either in connection with a scouting activity or in related attacks,” said Mr. Kravitz. “Plaintiffs have suffered severe and life-long injuries from the abuse.”

BSA will continue operating as the bankruptcy court determines an amount of money to pay victims as well as an amount to continue operations based on the organization’s market value, including dues that parents pay, insurance, proceeds from interest and any endowment funds. Although plaintiffs will have a say if they think the victim’s fund is too small and the operating fund too large, the bankruptcy judge is the ultimate authority.

“The bankruptcy court now has jurisdiction to deal with judgements,” said Ms. Alcalde. “BSA liability to victims could be capped and, if so, the victims could end up getting the bad end of the deal.”

Like BSA, some 24 U.S. Catholic dioceses and religious orders have filed for bankruptcy protection during the ongoing sexual abuse crisis within the Catholic Church, according to BishopAccountability.org.

The Diocese of Buffalo, N.Y., is the latest to announce its bankruptcy in New York Western Bankruptcy court just last month due to renewed allegations under New York’s Child Victims Act.

“It allows the Diocese to continue uninterrupted its mission throughout Western New York while working to settle claims with existing Diocesan assets and insurance coverages,” according to a statement posted on the website maintained by Western New York Catholic.

While filing a bankruptcy petition protects BSA from shutting down entirely, it also offers some benefits to victims.

“The advantage of settling in bankruptcy court includes expediting and streamlining the process for making claims and ensuring that all claims are treated fairly,” said Mr. Williams. “No jury trial means the absence of payment of fees to attorneys, which could take away from the victims’ fund and operating fund.”

The only way a claimant can avoid settling in bankruptcy court along with other plaintiffs against BSA is if he files a lawsuit against an individual Boy Scout troop or Boy Scout camp in his state. That’s because local troops and Boy Scout camps are their own independent nonprofit entities.

“They would need to be sued individually unless there’s an order by the judge that includes them in the pending bankruptcy litigation,” Mr. Williams said.

A brand new person who has not previously filed a complaint against BSA will not be allowed to sue in federal district court, either. Instead, he is required to join the pool of existing litigants under the pending bankruptcy proceeding and share in the proceeds that will eventually be deposited into the victims’ fund.

For example, Bill Haley alleges he was sexually abused as an adolescent while participating in Boy Scouts Troop 511 of Tulane Apartments in Memphis, Tenn. The 43-year-old recently joined the pool of litigants in bankruptcy court through his attorney Andrew Van Arsdale.

“All prior claims against BSA and its officers are required to be directed to the trust for payment because it is the only resource for recovery,” Mr. Williams said.

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