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Introduction
The Boy Scouts of America has filed for Chapter 11 bankruptcy protection, according to court files in Delaware bankruptcy court. The filing was done early on Tuesday, February 18, 2020. All of it began with one man in 2010.
The purpose of this Brandon’s Blog is to define the issues that caused this insolvency filing and to answer whether there ever was a similar type of bankruptcy protection filing under the Canadian insolvency system.
It all started with Kerry Lewis
In 2010, Kerry Lewis, a Portland Oregon man, won a lawsuit against Boy Scouts of America. Lewis was a sexual abuse victim. A jury found the Boy Scouts of America must pay $18.5 million in punitive damages for the abuse he experienced in being continuously molested by a Scout leader in the 1980s. Because of the bankruptcy protection filing, rather than potentially having their day in court, plaintiffs with unpaid judgements, and also alleged victims who have pending legal actions, will now need to file claims bankruptcy court.
The Boy Scouts of America have applied for bankruptcy protection, after being barraged by hundreds of sex-abuse lawsuits. Over 12,000 children are believed to have been sexually abused by Boy Scouts volunteers.
The Boy Scouts of America is the largest scouting organization and one of the largest youth organizations in the United States, with about 2.3 million youth participants and about one million adult volunteers. They have actually been encountering decreasing membership as well as thousands of lawsuits, with many more prospective legal actions yet to be filed. They are now dealing with new claims of sexual abuse from about 800 men throughout the country, according to attorneys representing them.
Why the Boy Scouts of America filed for bankruptcy protection
The Boy Scouts of America invested massive amounts of time as well as cash on litigation rather than protecting the children– with virtually 3,000 hidden child molesters only the Scouts know about. In a statement to National Public Radio, the Boy Scouts of America said it is working with experts and explored all options available. They think this insolvency filing will certainly be the best way they can meet their social and moral obligations to equitably treat victims who experienced abuse throughout their time in Scouting.
They went on to say that their strategy will also make certain that it will allow them to continue to perform their goal to serve young people, families and regional communities through their programs.
The issue of troop leaders sexually assaulting Scouts has tormented the Boy Scouts of America for decades. It is just now that the weight of the newer accusations and lawsuits has ended up being too much to deal with without the Chapter 11 filing.
The national organization of the Boy Scouts of America is the only entity involved in the Chapter 11 filing. The national company has created a method that intends to safeguard its local scouting councils and also the billions of dollars in properties they hold. They believe that maintaining those assets out of the reach of sexual-abuse claims is the only method to make certain that Scouting will be able to proceed in America.
That is a crucial concern. Will the Boy Scouts of America be able to shield the assets of the regional councils, which possess camps and properties in prime real estate throughout the nation. Many are claiming the Boy Scouts of America cannot be changed. Under the Chapter 11 filing, they will be able to continue its operations, and all the current claims will be put on hold.
The bankruptcy protection plan
The Boy Scouts of America are urging victims to come forward after the 110-year-old organization filed for bankruptcy protection in the first step toward dealing with a barrage of sexual abuse lawsuits. They are creating a plan, so they can capture all lawsuits yet to be filed and be able to afford to pay off thousands of still-uncompensated sex abuse victims. The filing is also an effort to stop thousands of sexual abuse claims ending up being litigated in court.
I do not think that this legal maneuver will stop survivors from stepping forward and beaming light on the criminals as well as the terrible actions of the abusers concealed by the organization. Nonetheless, sufferers will now only have access to a pool of funds to be assigned for that objective. At the initial bankruptcy hearing, the Boy Scouts of America still have actually not shared the names of the perpetrators with the general public in spite of laying out a four-point strategy with transparency as the first point!
Jeff Anderson, whose law firm has represented Scout abuse survivors for decades believes the Boy Scouts of America is using the filing to keep the names of predators a secret. “I don’t believe that this legal maneuver by the Boy Scouts of America will stop survivors from coming forward and shining a light on the perpetrators and perilous practices hidden by the organization,…” said Anderson.
The Boy Scouts of America have filed for bankruptcy protection in hopes of working out a possibly massive victim payment plan for sex abuse victims. Across the country, they have already mortgaged major properties to get a line of credit. Specifically, the national organization of the Boy Scouts of America has initiated a voluntary financial restructuring to ensure they can equitably compensate all victims of past abuse in our programs, through a proposed Victims Compensation Trust.
Public tax records show the Boy Scouts of America has more than $1 billion in assets, not including the balance sheets of local chapters. They have yet to disclose what size the Victims Compensation Trust will be.
The effect of the filing
Speculation swirled over whether the Boy Scouts of America will continue to exist in its existing organization or whether smaller teams will be formed to carry on its mission. They are establishing an approach, so they can catch all claims yet to be submitted and likewise have the ability to settle thousands of still-uncompensated sex abuse sufferers. The bankruptcy protection filing is also an approach to stop countless sexual abuse claims winding up being prosecuted in court.
The Mormon church, a long supporter of the Boy Scouts of America, has already announced that they are ending their connection, after more than 100 years of a close relationship. If successful, the plan will ensure that they will be able to continue to carry out their mission to serve youth, families and local communities through their programs.
The intriguing question is, will attorneys for victims try to pierce through the national organization and claim that all the local councils are not really independent. Or, is the independence on paper only? Is it truly a vertically integrated company that exercises considerable impact over the local councils? Only time will tell if any of the abuse victim lawyers pursue this path to attempt to increase the size of the Victims Compensation Trust.
So, the Boy Scouts of America’s insolvency strategy is the same as USA Gymnastics and the Catholic diocese. Can victims of such sexual abuse ever really be compensated? The organization in some form will move on, but sufferers will live with their pain and their scars probably forever. They will certainly most likely lose their personal voice in their search for justice because of the bankruptcy filing. This will rob sufferers of an important part of the healing process.
Is there a Canadian statue to restructure like this?
The answer is yes. Although there are two federal insolvency regimes in Canada, the only one that should be used for a very large corporate restructuring like this one is the Companies’ Creditors Arrangement Act (CCAA). The CCAA is the Canadian equivalent to Chapter 11 of the US Bankruptcy Code. It is a Canadian federal law allowing insolvent corporations that owe their creditors in excess of $5 million to restructure their business and financial affairs.
The closest Canadian example where the CCAA was used to compensate victims that I can think of is the CCAA filing of the Canadian Red Cross Society. It needed to restructure as a result of some $8 billion of tort claims being asserted against it (and others, including governments and hospitals). The claims were by a large number of people who suffered tragic harm from diseases contracted as a result of a blood contamination problem that has haunted the Canadian blood system since at least the early 1980s.
Summary
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