On January 22, 2024, the U.S. Supreme Court denied a request from a group of sexual abuse victims of the Boy Scouts of America (BSA) to temporarily stay a $2.46 billion bankruptcy settlement contained in their plan wherein they argued that the settlement unlawfully bars them from suing groups that ran local scouting programs. These victims are 144 people out of more than 82,000 who filed claims against the BSA and argued that the Court should halt the settlement while it considers a similar legal dispute in the Perdue Pharma case in which the issue was argued before the U.S. Supreme Court in December 2023. The BSA filed for Chapter 11 bankruptcy in 2020 after they spent more than $150 million to settle lawsuits arising from claims of sexual abuse. In 2022, the bankruptcy court approved BSA’s Chapter 11 plan of reorganization which provided, inter alia, for the re-emergence of the BSA and created a fund to pay the victims.

At the crux of the argument in both the Perdue Pharma and BSAmatters are provisions of the settlements that prohibit victims from suing third parties for damages. In the case of Purdue Pharma, the Sackler family who ran the pharmaceutical firm that manufactured the opioid Oxycontin agreed to pay $6 billion in exchange for being shielded from future civil lawsuits. Some victims of the opioid crisis say the Sacklers shouldn’t be able to avoid those costly lawsuits for damages.

Under the BSA Plan, these victims do not want to be precluded from suing independent councils that ran local scouting programs and third-party organizations (i.e., churches and civic groups) that supported those programs. Those third-party groups contributed more than $2.4 billion to a BSA settlement trust for victims and under the agreement are shielded from future civil lawsuits. As you can see from the above, the argument is akin to the Perdue Pharma matter where victims there argue that the Sackler family should not be shielded from independent lawsuits against them despite the settlements in the bankruptcy.

Opponents of such Chapter 11 Plans argue that courts are generally not authorized to block such lawsuits. Advocates of such Plans argue that without the protections for third-party groups, major bankruptcy deals like the ones for Purdue and the BSA would never take effect. It is believed that the U.S. Supreme Court will decide the Perdue Pharmacase in late spring or early summer 2024. Stay tuned for this important decision.

To discuss the issues raised here or any other issues involving creditors rights and bankruptcy, please contact Leslie Beth Baskin, Esquire at 215-241-8926 or at lbaskin@sgrvlaw.com.