Boy Scouts ask court approval for $850 million deal to emerge from bankruptcy

Attorneys for the Boys Scouts of America have asked a Delaware court to accept an $850 million deal that forms the basis of the organization's plan to emerge from bankruptcy.

The judge scheduled a hearing on Thursday to decide whether to approve the agreement, which involves the national Boy Scouts organization, roughly 250 local Boy Scout councils, and law firms representing approximately 70,000 men who claim they were abused as children by Scoutmasters and others.

It also includes the official victims' committee constituted by the bankruptcy trustee in the United States.

The Boy Scouts of America, located in Irving, Texas, filed for bankruptcy in February 2020. The submission was part of an effort to negotiate a global settlement of abuse allegations and establish a compensation fund for victims.

According to the agreement filed before U.S. Bankruptcy Judge Laura Selber Silverstein, the Boy Scouts have suggested contributing up to $250 million in cash and property to a fund for abuse victims. Local councils, which handle day-to-day operations for Boy Scout groups, would pay $600 million.

The national organization and councils would also surrender their rights to Boy Scout insurance policies to the victims' fund. In exchange, they would be relieved from further accountability for abuse allegations.

If accepted, the arrangement may result in one of the nation's biggest settlements in a sex abuse lawsuit.

Under Delaware's business judgment rule, courts usually accord considerable respect to a corporate board's decision-making unless there is proof that directors shirked their duties, had conflicts, or acted in bad faith.

The agreement is contested by insurers that provided insurance to the Boy Scouts and local councils, other legal firms representing thousands of abuse victims, and different Christian denominations that have funded local Boy Scout troops.

As part of the deal, the Boy Scouts are asking the judge to allow them to withdraw from a settlement struck in April with one of its insurers, The Hartford.

The Hartford agreed to pay $650 million into the victims’ fund in exchange for being released from any future liabilities, but victims' counsel has indicated their clients would not accept a restructuring proposal that incorporates it.

The court will decide whether the settlement deal offers a foundation for the Boy Scouts to move forward with a proposed restructuring plan during the hearing, which is due to resume on Friday.

With inputs from AP

Picture Credits: The Japan Times