Plaintiffs Counsel in Abuse Litigation Gears Up as Boy Scouts of America Files for Bankruptcy
A key battle in the bankruptcy will likely be over abuse claimants' access to billions of dollars in assets controlled by local Boy Scouts chapters.
February 18, 2020 at 03:17 PM
4 minute read
The original version of this story was published on The American Lawyer
After more than a year of speculation, Boy Scouts of America filed for bankruptcy protection Tuesday morning, saddled with debt, a flood of sexual abuse claims and declining membership numbers.
Sidley Austin is debtor's counsel to the youth organization, which filed Chapter 11 paperwork in Delaware. The Boy Scouts estimated owing between $500 million to $1 billion to as many as 5,000 creditors.
With the bankruptcy, the hundreds of lawsuits that have been filed against the Boy Scouts will be stayed, and the move also all but ensures that the cases will now be resolved through a mediation process.
The Sidley Austin team is led by New York-based partner Jessica Boelter and Chicago partner James Conlan. Boelter was the lead restructuring counsel for Takata, the auto industry manufacturer that went bankrupt due to litigation surrounding faulty airbags. Thomas Labuda and Michael Andolina, partners in the firm's Chicago office, are also providing counsel. Morris, Nichols, Arsht & Tunnell is local debtor's counsel.
The Boy Scouts made headlines nearly a decade ago after a Portland, Oregon, man was awarded nearly $20 million in punitive damages for sexual abuse he said he endured as a scout. The case triggered the release of internal documents showing that nearly 8,000 organization leaders have been accused of sexual abuse since the 1940s.
Tuesday's petition includes a list of the 25 law firms with the largest number of holders of abuse claims against the Boy Scouts, among them Robins Kaplan and Bondurant Mixson & Elmore. Potential abuse liabilities aside, no law firms are among the organization's 30 largest unsecured creditors.
Kenneth Rothweiler of Philadelphia plaintiffs firm Eisenberg, Rothweiler, Winkler, Eisenberg & Jeck—another of the 25 law firms identified in the filing—said his firm is representing nearly 2,000 clients looking to sue the Boy Scouts over alleged sex abuse. According to Rothweiler, the court's next move will likely be imposing a deadline for when new abuse claims can be brought against the organization. Courts often make the ultimate deadline either six months or a year after the bankruptcy filing, and the parties will likely provide little input on what the deadline will be, Rothweiler said, adding that firms will continue pushing to identify potential claimants before that time period passes.
Rothweiler said he expects the court will eventually establish a mediation process for the parties to begin negotiating compensation for the allegedly abused claimants. In a statement, Boy Scouts of America said Chapter 11 protection would allow the organization to "equitably compensate victims" by creating a victim compensation trust.
But before that process begins, the big fight in the litigation will likely hinge on what assets can be made available to the claimants, with both sides focusing on whether the bankruptcy should only cover the national organization—which estimated its assets to be between $1 billion to $10 billion—or if the local chapters should be made to pool their assets as well.
Rothweiler said his firm's research indicates that the national organization has more than a billion in assets, and the local organizations combined have more than double.
"What the Boy Scouts want to do is, they want to shield the locals," he said. "Our position is that those locals should be part of the bankruptcy and their assets should be part of the bankruptcy."
The Church of Jesus Christ of Latter-day Saints on Tuesday afternoon entered a notice of appearance in the case. The church, represented by Latham & Watkins, announced in 2018 it was ending its century-old partnership with the organization, a few years after the Boy Scouts began admitting LGBTQ scouts and ended its ban on openly gay adult leaders. The partnership officially ended in December 2019, when the church pulled 400,000 youths from the program.
Girl Scouts of the United States of America, represented by Dorsey & Whitney, also entered a notice of appearance Tuesday. The Girl Scouts sued the Boy Scouts in 2018, accusing the latter organization of damaging the Girl Scouts' brand by welcoming girls into the organization.
Although the Boy Scouts has been exploring a bankruptcy filing with Sidley Austin at least since December 2018, as of Tuesday morning the firm has not applied for any pre-filing legal fees.
Representatives with Sidley did not immediately respond to request for comment.
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