Boy Scouts Must Change $2.7 Billion Sex Abuse Fund, Judge Rules

(Bloomberg) — The Boy Scouts of America must adjust their plan to create the biggest sexual abuse compensation fund in the U.S. in order to win final court approval for the $2.7 billion proposal, a judge ruled.

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The decision by a federal judge in Wilmington, Delaware, came after weeks of testimony from abuse experts, financial advisers and insurance specialists over whether it would be fair — and legal — for the Boy Scouts to route those abuse claims to the compensation fund instead of allowing them to proceed in court. The fund would compensate 82,000 people who claim they were molested while part of the 112-year-old organization.

In a complicated ruling of almost 300 pages that included more than 750 footnotes, US Bankruptcy Court Judge Laurie Silverstein declined to make certain legal findings demanded by the Boy Scouts. One example was her refusal to make particular factual findings related to rules governing the trust fund’s distribution.

For the Boy Scouts to exit bankruptcy oversight, they need Silverstein to approve their proposed reorganization. The plan is based on the trust fund and the lengthy procedures it would use to determine how much each victim is entitled to receive.

In her conclusion, Silverstein didn’t say whether she was approving or denying the complex compensation fund, but instead simply told the Boy Scouts that they “have decisions to make regarding the plan and need sufficient time to determine how to proceed.”

Silverstein said she would hold a court hearing on the status of the reorganization after Boy Scouts have reviewed her detailed ruling.

After a rocky start to the bankruptcy case in 2020, the Boy Scouts eventually settled with the main victims’ groups, several wealthy local scouting councils and some insurance companies. Those groups kicked in the $2.7 billion and voted overwhelmingly in favor of the proposal.

At the start of the case, the Boy Scouts faced about 1,400 abuse claims. An advertising blitz by law firms seeking clients pushed that number to 82,000. Some insurance companies attacked the increase, claiming a substantial number of the allegations were likely to be fake.

The holdout insurers, including American International Group Inc., Liberty Mutual Holding Co. and Travelers Cos., tried to convince Silverstein to reject the compensation fund by arguing that the rules for deciding who should be paid and how much are unfair.

A few dozen abuse claimants also opposed the plan, saying they should be able to pursue their lawsuits in a traditional court, instead of seeking compensation from the fund. Silverstein overruled some of those objections in her opinion released Friday.

Read more: Boy Scout Victim Fund Unfair to Insurers, Companies Argue

The plan to create the trust distribution fund was also opposed by the U.S. Trustee, a federal bankruptcy watchdog, which argues that too many groups and individuals are being released from liability in the deal.

The case is Boy Scouts of America, 20-10343, U.S. Bankruptcy Court, District of Delaware (Wilmington).