Supreme Court Denies Request to Stop Boy Scouts’ Bankruptcy Settlement

Alleged sex-abuse victims said it would be unfair to allow the bankruptcy settlement to move forward.
Supreme Court Denies Request to Stop Boy Scouts’ Bankruptcy Settlement
The Boy Scouts of America signage at its headquarters in Irving, Texas, on Feb. 5, 2013. (Tim Sharp/Reuters)
Matthew Vadum

The U.S. Supreme Court refused on Feb. 22 to halt the Boy Scouts of America’s $2.46 billion bankruptcy settlement after a group of alleged sex-abuse victims asked the court to hold up the proceeding while they appeal the settlement.

The court’s refusal to stay the settlement came in the form of an unsigned order (pdf) in Lujan Claimants v. Boy Scouts of America.

The Boy Scouts of America (BSA) was founded in 1916. The applicants, the Lujan Claimants, are 75 individuals who claim to have suffered scouting-related childhood sexual abuse in Guam from about 1955 to 1981. The Dumas and Vaughn Claimants, also applicants, are 69 individuals who also claimed to have experienced scouting-related childhood sexual abuse across the United States.

Justice Samuel Alito had temporarily stayed the settlement in an order on Feb. 16 but days later the full court voted to lift the stay.

The case could return to the Supreme Court at some point. The claimants could ask the Supreme Court again in the future to stay the settlement.

In the case, 144 out of the 82,000-plus persons who filed sex-abuse claims against the Boy Scouts had asked the nation’s highest court to pause the settlement while the justices are considering a case known as Harrington v. Purdue Pharma.

After putting Purdue Pharma’s bankruptcy plan on hold in August 2023, on Dec. 4, 2023, the Supreme Court heard the Biden administration’s objections to the bankruptcy plan filed by opioid manufacturer Purdue Pharma, which includes a controversial settlement that would shield the company’s founding family from future opioid-related liability.

At issue in both the Boy Scouts and Purdue litigation are settlement clauses that prevent victims from suing third parties for damages.

The government argued in the Purdue case that opioid victims could be shortchanged if the Purdue settlement is allowed to stand, a claim the company denied. The Biden administration said in court papers that the settlement as currently constituted would provide “a roadmap for corporations and wealthy individuals to misuse the bankruptcy system to avoid mass-tort liability.”

Purdue Pharma, based in Stamford, Connecticut, is accused of playing a major role in fueling the ongoing opioid crisis. The company is said to have engaged in irresponsible marketing practices that contributed to the rise of opioid abuse in the United States.

The company makes oxycodone, marketed as OxyContin and under other names, which is a semi-synthetic narcotic analgesic that serves as a popular painkiller. The drug is said to cause physical dependence and addiction.

The company has also been criminally prosecuted in connection with opioids. Years ago, it promoted OxyContin as nonaddictive.

In a deal made in the company’s bankruptcy proceeding that was initiated in 2019, the Sackler family, which founded the company, agreed to kick in about $6 billion to settle future opioid-related lawsuits in exchange for a release from liability in future lawsuits. The total payout to opioid victims, hospitals, and states is expected to exceed that amount, and the reorganized company will focus on dealing with opioid abuse.

Some of the victims in the Boy Scouts case want to be allowed to sue independent organizations that operated local scouting programs, including civic groups and churches, that supported the programs. Those groups have deposited more than $2.4 billion into a trust fund for victims and as a result of immune to future lawsuits.

The Boy Scouts of America launched its bankruptcy proceeding in 2020 after shelling out more than $150 million to resolve hundreds of abuse lawsuits between 2017 and 2019, CNN reported, citing court records.

In 2022, a U.S. bankruptcy court in Delaware gave its blessing to the Boy Scouts reorganization proposal, a move that may allow the group to reinvent itself and establish a fund to pay victims.

The U.S. Court of Appeals for the 3rd Circuit turned down a motion to freeze the settlement after a lower court determined the Boy Scouts reorganization process was already at such an advanced stage that it would have been problematic to stop it.

The claimants said in their application (pdf) to the Supreme Court that the BSA “can justly take pride in its many accomplishments for this country’s youth.”

“But over the past several decades, it has had to come to grips with its history of turning a blind eye to sexual abuse. Up until BSA filed for bankruptcy in February 2020, victims of child sexual abuse filed countless civil lawsuits against BSA and other entities, including independent Local Councils, and Chartered Organizations.

“Many sexual abuse victims also asserted direct action claims against the Insurers of BSA, the Local Councils, and the Chartered Organizations. This led to BSA filing for Chapter 11 bankruptcy relief on February 18, 2020. But critically, none of the Local Councils, Chartered Organizations, or Insurers are debtors alongside BSA.”

The Lujan Claimants object to the bankruptcy plan on several grounds.

Although the U.S. district court concluded that the bankruptcy plan took effect on April 19, 2023, the claimants argue that the plan failed to take effect and may be “null and void due to failure to timely satisfy a condition precedent to occurrence of the effective date.”

The claimants “strongly contest the district court’s conclusion that they are likely to be paid in full on their claims under the plan.” They also “object to the plan’s validity on the ground that the bankruptcy court lacks statutory authority to approve non-consensual, non-debtor third-party releases under the Bankruptcy Code.”