Judge OKs Boy Scouts’ plan for victim fund

DOVER, Del. — A bankruptcy judge Thursday approved a proposal by the Boy Scouts of America to enter into an agreement that includes an $850 million fund to compensate tens of thousands of men who say they were sexually abused as youngsters by Scout leaders.

But the judge also rejected two key provisions of the deal, potentially jeopardizing the agreement that the organization had been hoping to use as a springboard to emerge from bankruptcy later this year.

Following three days of testimony and arguments, Judge Laura Selber Silverstein granted the BSA’s request to enter into an agreement involving the national Boy Scouts organization, roughly 250 local Boy Scout councils, and attorneys representing some 70,000 men who say they were sexually abused as youths decades ago while engaged in Boy Scout-related activities.

The agreement calls for the Boy Scouts and local councils to contribute $850 million into a fund for abuse claimants. The deal was opposed by insurers who issued policies to the Boy Scouts and local councils, attorneys representing thousands of other abuse victims and various church denominations that have sponsored local Boy Scout troops.

It was not immediately clear how Thursday’s ruling will affect the future of the bankruptcy case, given that she rejected two significant provisions in the restructuring support agreement.

“Basically, everybody’s going to have to go back to the drawing board,” said Paul Mones, an attorney representing hundreds of abuse claimants. “I think this is going to cause a reset.”

While ruling that BSA officials exercised proper business judgment as required under the law in entering into the agreement, the judge refused to grant a request that the Boy Scouts be allowed to pay millions of dollars in legal fees and expenses of attorneys hired by law firms that represent tens of thousands of abuse claimants.

As part of the deal, the Boy Scouts agreed to pay millions of dollars in legal fees and expenses incurred by law firms representing a group called the Coalition of Abused Scouts for Justice. Law firms affiliated with the coalition represent some 63,000 abuse claimants and were among the supporters of the agreement.

Silverstein said she had several concerns about the fee request, including whether the coalition is duplicating efforts by the official victims committee appointed by the U.S. bankruptcy trustee, and whether the coalition is making a substantial contribution to the case.

The judge also noted that coalition attorneys had emphasized in a court filing last year that their legal fees would be paid by individual law firms they were representing, and that abuse claimants would not be responsible in any way for those costs.

Silverstein said any payment of legal fees by the Boys Scouts or by the victims fund, which was also contemplated in the agreement, “comes directly or indirectly out of their clients’ pockets, and indeed the pockets of all abuse victims.”

Silverstein also denied the BSA’s request under the agreement for permission to withdraw from an April agreement in which insurance company The Hartford would pay $650 million into the fund for abuse claimants in exchange for being released from any further liability.

She said the Hartford settlement was a separate issue from the agreement.

“You can’t just roll up any relief you want and put it in a request to approve [a restructuring support agreement],” she said.

Irwin Zalkin, an attorney for abuse claimants who opposed the agreement, said the judge “gutted” key conditions that supporters were hoping to “box her into.”

“In my view the [restructuring support agreement] has been rendered toothless,” Zalkin said.

A spokesperson for the Boy Scouts of America had no immediate comment on the ruling.