Boy Scouts organization defeats appeals over $2.46 bln sex abuse settlement

By Dietrich Knauth

May 13 (Reuters) - A federal appeals court on Tuesday rejected calls to overturn the Boy Scouts of America's $2.46 billion sex abuse settlement, saying the appeals came too late to upend the settlement because the youth organization had already emerged from bankruptcy two years ago.

A small minority of the over 82,000 men who alleged they had been sexually abused by troop leaders as children had appealed the settlement, arguing that the deal was illegal because it contained sweeping legal protections for several organizations, like churches and local Boy Scouts councils, that did not file for bankruptcy themselves.

The U.S. Supreme Court recently rejected similar legal protections for non-debtors in a 2024 ruling that upended the bankruptcy of Oxycontin maker Purdue Pharma. The 144 abuse survivors who filed appeals argued that the Purdue ruling meant the Boy Scouts' plan was also illegal.

In Tuesday's ruling, the Philadelphia-based 3rd U.S. Circuit Court of Appeals rejected arguments that the Boy Scouts' deal could not survive after Purdue, pointing out that the Supreme Court had explicitly declined to apply its Purdue decision to bankruptcy settlements that had been "substantially consummated."

The Boy Scouts settlement, approved in court in 2022, cannot practically be unwound, the 3rd Circuit ruled. Abuse victims have already been sent over $125 million in payments.

Gilion Dumas, an attorney for the men who appealed, said her clients were disappointed that their appeals were rejected on a "technicality."

"The BSA plan will pay sex abuse victims pennies on the dollar because there is not enough money to pay claimants in full," Dumas said on Tuesday.

The youth organization, which changed its name to Scouting America in February 2023, in a statement called the decision "a resounding victory for survivors of historical abuse in Scouting."

Adam Slater, an attorney who represented former Scouts who supported the settlement, said that the ruling would help deliver "meaningful compensation and long-overdue justice to all survivors, many of whom have been waiting for decades."

The Boy Scouts filed for bankruptcy in February 2020 after several U.S. states enacted laws allowing accusers to sue over decades-old abuse allegations. It emerged from bankruptcy in 2023.

The abuse survivors who had objected to the settlement had argued that they should be allowed to sue organizations, like local Boy Scouts councils and churches, that ran Scouting programs where abuse occurred. Those organizations received immunity from lawsuits in exchange for contributions to the Boy Scouts' bankruptcy settlement, despite not filing for bankruptcy themselves.

The court on Tuesday recognized that the Boy Scouts case was "unusual" and that the law has changed since the conclusion of its bankruptcy, saying there was "little doubt" that a similar plan would be rejected in court if it were filed today.

It said the result was a "bitter pill" for the abuse survivors who would likely have prevailed if the Boy Scouts had filed for bankruptcy a few years later.

But the current plan allows survivors to "recover for at least some fraction of the suffering they have endured. That human reality must not be lost among the legal intricacies of these appeals," the judges wrote.

Attorneys for the Boy Scouts of America, as well as insurers and abuse survivors who supported the deal, had argued that upending the settlement now would have had devastating emotional and financial consequences.

Restarting negotiations on a deal would have required the organization to take money back from claimants who had received settlement payments, and it would also force tens of thousands of men to revisit their abuse once again in the re-opened legal proceedings, according to the organization.