The Boy Scouts of America fell short of winning the level of support it sought from sex-abuse victims for the nearly $2.7 billion settlement plan that would lift the organization out of bankruptcy, according to a preliminary vote count released Tuesday.
The proposed settlement of 82,200 claims of childhood sexual abuse earned the support of just over 73% of those who cast votes, falling just shy of the 75% support the Boy Scouts were targeting. The youth group has said it believes that level of acceptance would ease court...
The Boy Scouts of America fell short of winning the level of support it sought from sex-abuse victims for the nearly $2.7 billion settlement plan that would lift the organization out of bankruptcy, according to a preliminary vote count released Tuesday.
The proposed settlement of 82,200 claims of childhood sexual abuse earned the support of just over 73% of those who cast votes, falling just shy of the 75% support the Boy Scouts were targeting. The youth group has said it believes that level of acceptance would ease court approval of its chapter 11 plan, while anything less makes it more vulnerable to challenges from the minority of abuse victims who reject it.
Nearly 54,000 survivors cast ballots, according to the Tuesday court filing.
“Today, the Boy Scouts of America (BSA) announced the plan of reorganization that it has been pursuing failed to garner the required votes to proceed to a confirmation hearing in February,” Pfau Cochran Vertetis Amala PLLC, one of the law firms opposing the settlement said Tuesday.
The Boy Scouts couldn’t be immediately reached for comment on the results.
The Boy Scouts of America filed for bankruptcy in February 2020, amid a decline in membership at the century-old organization. Here’s how the largest youth organization in the country found itself filing for bankruptcy. Photo: AP/Rick Bowmer The Wall Street Journal Interactive Edition
The bankruptcy plan includes compensation from the Boy Scouts, hundreds of affiliated local councils, its biggest insurers and some troop-sponsoring churches, which struck deals with the law firms representing the bulk of the abuse claimants.
The current tally isn’t final, and marks the first of several steps along a possible path out of bankruptcy for the Boy Scouts, which has been dogged for years by allegations of widespread childhood abuse. The youth group has apologized for past failures to protect children and said bankruptcy is the fairest way to resolve its liabilities and compensate survivors.
While bankruptcy law generally requires two-thirds approval from creditors for a proposed deal, chapter 11 cases involving mass injury and tort liabilities typically have to garner greater support.
The youth group is under intense financial pressure to resolve the bankruptcy case and leave chapter 11. But there is still time for the Boy Scouts to try to flip votes to yes from no and potentially clear the 75% threshold ahead of a trial on the settlement plan scheduled for next month. The judge presiding over the chapter 11 case in the U.S. Bankruptcy Court in Wilmington, Del., is likely to view the settlement plan more favorably the more support it garners.
All parties contributing to the settlement plan will be shielded from liability for sex abuse claims connected to the Boy Scouts, including its affiliated local councils, its largest insurers and the Church of Jesus Christ of Latter-day Saints and United Methodist Church, as well as other civic and religious groups.
In recent months, the men who filed claims against the Boy Scouts were subject to intense lobbying by deal supporters and detractors through virtual meetings, social media, phone calls and letters.
Victims’ lawyers who support the proposed deal have warned that if it isn’t approved, most victims could face years of litigation for negligible compensation. Other lawyers opposing the Boy Scouts believe its councils, insurers and sponsor organizations aren’t paying enough and would offer more if the settlement were rejected.
If approved in bankruptcy court, the settlement will set up a compensation program under which claims would be valued and paid over time, based on the severity of the alleged abuse and where it occurred. Those from states that have suspended statutes of limitations on sexual abuse will recover more than those in states that haven’t.
The plan’s fate depends on how the presiding judge will view a federal court ruling in New York last month overturning a $4.5 billion settlement in Purdue Pharma LP’s bankruptcy between the drugmaker and its owners, members of the Sackler family. That decision found that bankruptcy courts have no authority to sign away creditors’ claims against third parties to a chapter 11 case, like the Sacklers.
The Boy Scouts as part of its bankruptcy plan needs to grant similar liability releases for third parties that aren’t themselves in bankruptcy, such as the local councils and churches, in exchange for commitments to compensate survivors and allow the youth group to reorganize.
Survivors who voted to reject the settlement offer may still alter votes, giving the Boy Scouts time to bring additional backers on board and boost the odds of court approval.
—Becky Yerak contributed to this article.
Write to Soma Biswas at soma.biswas@wsj.com
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