The complex ruling by US Bankruptcy Court Judge Laurie Silverstein forces the Boy Scouts to return to the bargaining table with some of the groups funding the $2.7 billion fund, including the Mormon church.
Silverstein gave the Boy Scouts a partial victory on Friday when she rejected claims that a settlement with abuse survivors was not reached in good faith. The judge did not approve the proposed trust fund plan in its entirety, instead rejecting a number of key provisions. One example is Silverstein's refusal to grant the church a "third party release," which would have provided the church with broad legal protections from all sex abuse claims, not just those involving the Boy Scouts.
"The TCJC settlement goes too far in extending third-party releases," Silverstein wrote. Members of the US Congress and advocates for sex abuse victims and people harmed by addictive prescription drugs have criticized such releases.
A church representative declined to comment immediately.
Because of Silverstein's decision, the Boy Scouts will also need to change the complicated rules governing how much each abuse victim would receive under the plan. When she refused to declare that the rules, known as trust distribution procedures, are "fair and equitable," the judge sided with holdout insurance companies led by American International Group Inc.
Silverstein wrote that the Boy Scouts "have decisions to make regarding the plan and require sufficient time to determine how to proceed."
Among these choices is whether to seek a new agreement with the Mormon church.
"We remain optimistic about securing approval of a final Plan as soon as possible," the Boy Scouts said in an emailed statement.
The decision came after a weeks-long trial in Wilmington, Delaware, earlier this year. Silverstein heard testimony from abuse experts, financial advisers, and insurance specialists about whether it would be fair – and legal – for the Boy Scouts to direct those abuse claims to the compensation fund rather than allowing them to go to court. The fund would compensate 82,000 people who claim to have been sexually abused while working for the 112-year-old organization.
Her complex ruling was nearly 300 pages long and included over 750 footnotes.
For the Boy Scouts to be released from bankruptcy protection, Silverstein must approve their proposed reorganization. The plan is based on the trust fund and the time-consuming procedures that will be used to determine how much each victim is entitled to receive.
After the Boy Scouts have reviewed her detailed ruling, Silverstein said she will hold a court hearing on the status of the reorganization.
The Boy Scouts eventually settled with the main victims' groups, several wealthy local scouting councils, and some insurance companies after a rocky start to the bankruptcy case in 2020. These organizations contributed $2.7 billion and overwhelmingly supported the proposal.
The dissenting insurers, which included AIG, Liberty Mutual Holding Co., and Travelers Cos., attempted to persuade Silverstein to reject the compensation fund by claiming that the agreements underlying it were negotiated in bad faith. They also claimed that the rules governing who should be paid and how much are unjust.