The Boy Scouts Sexual Abuse Lawsuit Isn't Over Yet

You’ve probably heard about the Boy Scouts getting sued; it’s been going on for a while. That’s no surprise, as it involves over 82,000 claims of child sexual abuse. But did anything ever come of the legal battle? Well, the dust hasn’t exactly settled yet. Let’s catch you up on how we got here and where we stand now.

Lawsuits Launched Long Ago

It started over a decade ago. In 2011, a former scout filed one of the first and most notable actions against the BSA, alleging that he had been abused by a scoutmaster in the 1970s. Like with the #MeToo movement, there was a bit of a domino effect after the seal was broken. In the subsequent years, more allegations of sexual abuse within the BSA began to surface. As more victims came forward, the lawsuits began to mount.

In 2019, a coalition of law firms filed a lawsuit on behalf of hundreds of alleged victims of sexual abuse within the BSA. The lawsuit claimed that the BSA had failed to implement adequate safeguards to prevent abuse and that the organization had engaged in a cover-up to protect its reputation. For decades, they claimed, the BSA had been aware of instances of abuse but had often swept them under the rug or failed to take adequate action to prevent them from occurring in the first place. The result was a culture of silence and secrecy that allowed the alleged abuse to continue unchecked.

The lawsuit sought damages for the victims and called for the BSA to implement reforms to prevent future abuse. The BSA, not a particularly rich organization, increasingly struggled to cope with the financial burden of defending itself against the tidal wave of claims. The lawsuits numbered in the hundreds, and the BSA was facing potentially crippling liabilities as a result.

A Bankruptcy Hail-Mary

In February 2020, the BSA took the unprecedented step of filing for bankruptcy in response to the mounting number of lawsuits it was facing.

This was a desperate measure, but one that the BSA's leadership felt was necessary to ensure the organization's survival. The lawsuits posed a substantial financial burden on the organization, threatening its ability to continue its mission of providing educational programs and activities for young people.

The bankruptcy filing automatically stayed the lawsuits, preventing them from moving forward while the BSA reorganized its finances. By seeking Chapter 11 protection, the BSA was able to create a temporary reprieve from the constant barrage of legal claims.  On the other hand, the BSA's bankruptcy filing was seen by some as an admission that the organization had failed to adequately address the problem of sexual abuse within its ranks.

Restitution and Reorganization

As the bankruptcy process unfolded, the BSA committed to implementing stronger safety measures and enhancing its policies to protect the youth in its programs, aiming to rebuild trust with the public and ensure a safer environment for future generations. Despite the controversy surrounding the bankruptcy filing, the BSA's leadership expressed a commitment to using the process to create a fair and just compensation system for victims of abuse.

This would involve setting aside a significant portion of the organization's assets to create a fund for victims and working to establish a system for evaluating and paying out claims. It entailed a complex and difficult process, but one that BSA leaders felt was necessary to restore trust and credibility to the organization that had once been a cherished rite of passage for many American youth.

In June 2020, the BSA proposed a reorganization plan that would establish a victims' compensation fund, which would provide financial settlements to victims of sexual abuse. In September of 2022, a federal bankruptcy judge approved. The plan included a $2.46 billion settlement and was structured to enable the BSA to continue its operations while compensating tens of thousands of victims.

Strings Attached

Where was the money going to come from? Well, the biggest chunk came from insurance companies. Century Indemnity and The Hartford agreed to settlements that required them to contribute $800 million and $787 million, respectively. If that sounds like a lot, know that these contributions represented a fraction of their potential liability exposure.

Unsurprisingly (they did file for bankruptcy, after all), the BSA itself did not contribute much — less than 10% of the total amount. Perhaps more surprisingly, a big chunk came from local councils. These councils, responsible for the day-to-day operations of Scout troops, agreed to contribute at least $515 million in cash and property. On top of that, various organizations that sponsored Scout troops (e.g., religious entities, civic associations, and community groups) also contributed to the fund.

A major asterisk on all of this is that none of this money came without strings. The contributions of the local councils were contingent upon receiving certain protections from future lawsuits related to Scout-related abuse allegations. Similarly, the other organizations that had sponsored troops in the past and were set up the settlement such that they received broad liability releases as non-debtor “third parties” in return for their contributions to the fund, similarly protecting them from future sex abuse lawsuits.

Objections ...

The plan's approval marked a crucial milestone for the BSA, but it was met with resistance by various parties on both sides. Some victims' attorneys have argued that the proposed settlements were inadequate. While the plan was seen as a significant step towards accountability and restitution for the victims, critics have argued that it did not go far enough in holding the BSA accountable for its past failures.

A group of sexual abuse survivors also challenged the plan, arguing that it unfairly required them to relinquish their rights to pursue future legal claims against involved parties without their consent. They viewed the non-debtor releases as an unconstitutional form of "bankruptcy grifting," where entities not directly involved in the bankruptcy could benefit from the settlement without facing future lawsuits. These survivors argued that such releases violated their due process rights and sought either a reversal or modification of the settlement to protect their ability to seek justice.

And the plaintiffs weren’t the only ones with a bone to pick. Although Century Indemnity and The Hartford agreed to settle, other insurance companies (those that provided excess coverage above the liability limits of the primary policies) refused. These non-settling insurers opposed the reorganization plan, arguing that the procedures for distributing funds from the victims' trust violated their contractual rights to contest claims.

These insurers argued that the plan violated their contractual rights by setting procedures for distributing funds from the victims' trust without allowing them to contest claims. They also contended that the plan set a dangerous precedent for mass tort bankruptcies and improperly included non-debtor releases, which protected organizations that ran scouting programs from future lawsuits without the consent of some abuse survivors.

They were particularly concerned about the procedures for distributing funds from the victims' trust, which they believed could lead to inflated claims and payments. These insurers contended that the plan set a dangerous precedent by allowing non-debtor third parties, such as local councils and troop sponsors, to receive broad liability releases in exchange for their contributions to the settlement fund.

…Overruled?

Last year, the objecting parties had appealed to the Third Circuit and filed an emergency motion seeking to halt the plan while they appealed. Both the non-settling insurers and opposing survivors expressed concerns about the broader implications of the settlement plan. They feared that allowing such non-debtor releases and the associated procedures could set a precedent that might encourage similar strategies in other mass tort bankruptcies. Abuse survivors were concerned that this could affecting the rights of claimants future cases. Insurance companies were worried it could undermine the their future ability to contest claims and lead to unjust outcomes in mass tort cases.

Last week, a three-judge panel of the Third Circuit heard oral arguments. The judges expressed concerns about the practical implications of undoing the plan, such as returning funds and the potential for numerous lawsuits against local chapters. The court considered the doctrine of "equitable mootness," which prevents unwinding bankruptcy settlements when it would be unfair to do so. Based on how oral arguments went down, it appears as though the Third Circuit is unlikely to overturn the settlement, though we won’t find out for sure until an official ruling is handed down.

Related Resources:

• Trademark Dispute Between Girl Scouts and Boy Scouts Heats Up (FindLaw's Federal Courts)
• What Is Bankruptcy Law? (FindLaw's Learn About the Law)
• Can Bankruptcy Clear Lawsuit Judgments? (FindLaw's Learn About the Law)