Roadblocks are continuing to pop up in the Boy Scouts of America bankruptcy case as the organization tries to finalize a reorganization plan built around a global resolution of thousands of sexual abuse claims by former Boy Scouts.
Attorneys for the youth organization filed a motion on Monday asking a Delaware bankruptcy judge to extend a preliminary injunction that halted lawsuits against local BSA councils and sponsoring organizations during the bankruptcy.
BSA attorneys said the filing was necessary because the official tort claimants committee that represents sexual abuse victims refused to consent to an extension, despite doing so several times in the past.
The current injunction expires March 19. The BSA, which hopes to emerge from bankruptcy this summer, is seeking an extension through July 19.
Attorneys for the BSA argue that maintaining the injunction is critical to restructuring efforts, including enabling local councils and chartered organizations to participate in mediation and, ultimately, make “a substantial contribution” to a settlement and global resolution of abuse claims. Allowing lawsuits against local councils and sponsoring organizations to proceed will make it difficult, if not impossible, for the BSA to both equitably compensate abuse survivors and ensure that the organization can continue to carry out its charitable mission, they contend.
“The TCC is apparently willing to gamble with the fortunes of abuse survivors and the debtors when the stakes are the highest,” BSA attorneys wrote, referring to the tort claimants committee.
An attorney for the committee did not immediately respond to an email seeking comment Tuesday.
Monday’s court filing came just days after the bankruptcy judge heard arguments on a request by insurance companies for permission to serve document requests on 1,400 people who have filed sexual abuse claims and to question scores of them under oath in an effort to determine whether there is widespread fraud in the claims process.
More than 95,000 sexual abuse claims have been filed in the case. Before the bankruptcy filing, the BSA had been named in about 275 lawsuits and told insurers it was aware of another 1,400 claims. The number of lawsuits has more than tripled in the past year to about 860 lawsuits in more than 110 state and federal courts. Roughly 600 were filed after the organization first sought the preliminary injunction.
The Boy Scouts of America, based in Irving, Texas, sought bankruptcy protection last February in an effort to halt hundreds of individual lawsuits and create a compensation fund for men who were molested as youngsters decades ago by scoutmasters or other leaders.
The roughly 250 local councils, which run day-to-day operations for local troops, are not listed as debtors in the bankruptcy and are considered by the Boy Scouts to be legally separate entities, even though they share insurance policies and are considered “related parties” in the bankruptcy case.
Attorneys for abuse victims made it clear from the onset of the bankruptcy that they would go after campsites and other properties and assets owned by councils to contribute to a settlement fund.
But the tort claimants committee has been frustrated with the response by local councils to requests for document production and information on their financial assets. After seeking court permission last year to issue subpoenas for information it claimed was being withheld by the BSA and its local councils, the committee filed a complaint last month challenging BSA’s contention that two-thirds of its listed $1 billion in assets, more than $667 million, are “restricted assets” unavailable for creditors.
More than half of the purportedly restricted assets, $345.4 million, consists of a note receivable from Arrow WV, a non-profit entity that was formed by the BSA in 2009 and which owns the Summit Bechtel Reserve in West Virginia, home to the National Scout Jamboree. The BSA leases the Summit from Arrow WV and provides the services required for its operation.
The tort committee contends that there is no restriction that could be applied to the Arrow WV note.
The BSA’s purportedly restricted assets also include three “High Adventures Facilities” valued at more than $63 million. They are the Philmont Scout Ranch in New Mexico, the Northern Tier in Minnesota and the Florida Sea Base. The committee asserts that there are no specific deed restrictions or donor restrictions that preclude the sale of those facilities and use of the proceeds to pay creditors. It also claims that the BSA previously took the position that they were unrestricted.
Attorneys for the BSA noted in Monday’s court filing that the tort claimants committee has received some 327,000 pages of documents regarding local council assets, the nature of restrictions on those assets, and historical transactions.
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