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‘The Panel Was Pressing Both Sides Pretty Hard’

In a Nov. 6 hearing that lasted three hours, the U.S. Court of Appeals for the Third Circuit heard arguments on whether to dismantle the third-party releases in the Boy Scouts of America’s Chapter 11 reorganization plan.

Here’s the coverage from ALM’s Ellen Bardash on the hearing, which involved 10 attorneys who represented the Boy Scouts, insurance companies and sexual abuse claimants who supported the plan. But some insurance firms and abuse claimants want changes, citing the U.S. Supreme Court’s June 27 decision in Harrington v. Purdue Pharma, which found non-consensual third-party releases in opioid manufacturer Purdue Pharma’s $6 billion bankruptcy plan to be unlawful under the U.S. Bankruptcy Code.

Purdue isn’t only impacting the Boy Scouts case. At least three other bankruptcy judges have evaluated the decision in Chapter 11 plans involving Robertshaw U.S. Holding Corp., Tonawanda Coke Corp. and Smallhold Inc.

I asked Ellen what made the Boy Scouts' bankruptcy stand apart from the other cases. She told me:

“What sets this case apart most is the scope of it. The plan includes the largest sexual abuse settlement at least in the U.S. (maybe anywhere) and is set to pay out over 60,000 survivors. And there's the time element: the large majority of abuse claimants are elderly, and the longer this process is drawn out in the courts, the more are dying before getting compensation.”

So, did the Third Circuit panel give any indication of how it might rule? Ellen told me:

“The panel was pressing both sides pretty hard so I can’t say they were leaning one way or the other, but Judge [Margorie] Rendell, who used to be a bankruptcy attorney, seemed reluctant to shake up the third-party release practice without strong proof of problems in it.”