begins key hearing in Boy Scouts bankruptcy case | Delaware News


By RANDALL CHASE, Associated Press

DOVER, Del. (AP) — A Boy Scouts of America attorney told a Delaware judge Thursday that the group’s national board of directors never passed a resolution approving an $850 million deal that is the linchpin of the plan. of bankruptcy proposed by the Boy Scouts.

Despite this acknowledgment, the Boy Scouts are asking the judge to rule that the organization properly exercised business judgment in entering into the agreement and should be allowed to pursue it as the basis of a final bankruptcy plan.

The deal involves the national Scout organization, the roughly 250 local Scout councils and law firms representing some 70,000 men who say they were molested as youth by Scout leaders and others. It also includes the official Victims Committee appointed by the US Bankruptcy Trustee.

The deal is opposed by insurers who have issued policies to local scouts and councils, other law firms representing thousands of abuse victims and various religious denominations who have sponsored local scout troops.

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The Boy Scouts, based in Irving, Texas, filed for bankruptcy protection in February 2020 amid a wave of lawsuits from men who said they were sexually abused as children. The filing was part of an attempt to achieve a comprehensive resolution of abuse complaints and create a compensation fund for victims.

Under the agreement presented to U.S. Bankruptcy Judge Laura Selber Silverstein, the Boy Scouts offered to contribute up to $250 million in cash and property to a fund for victims of abuse. Local councils, which manage the day-to-day operations of scout troops, would contribute $600 million.

The National Organization and Councils would also transfer their rights to Scouts’ insurance policies to the Victims Fund. In return, they would be released from any further liability for abuse claims.

If approved, the deal could lead to one of the nation’s largest settlements in a sexual abuse case.

Silverstein expressed surprise Thursday when Glenn Kurtz, a Boy Scouts attorney, said during discussions of board documents provided to insurers that the board never approved a formal resolution approving the deal. .

“Isn’t it a little unusual that a board of directors doesn’t authorize the actual deal? asked the judge.

Kurtz responded that the board authorized the “terms of the deal,” but delegated the documentation to the professionals.

“I don’t know it was the most formal procedure in the world in terms of documenting approvals, but you got a yes vote from all 72 board members on those terms of the agreement,” Kurtz said. .

Silverstein suggested the lack of board clearance for the deal was particularly surprising given that several board members are lawyers.

“We will see if the debtor is able, without authorization, to satisfy me that he has met the standard of business judgment or that he is entitled to the standard of business judgment and that he has made informed decisions” , she said.

Under Delaware’s business judgment rule, courts generally give great deference to the decision-making of a board of directors unless there is evidence that the directors shied away from their duties, had conflicts or acted in bad faith.

As part of the proposed settlement, the Boy Scouts are asking Silverstein for permission to opt out of a settlement reached in April with one of their insurers, The Hartford. The Hartford agreed to pay $650 million to the victims’ fund in exchange for being released from any further obligations, but lawyers for the victims said their clients would not support a reorganization plan that included him.

The hearing, which is due to resume on Friday, is to allow the judge to consider whether the settlement agreement provides a basis for the Boy Scouts to move forward with a proposed reorganization plan.

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