Chapter 11 announced - Part 2 (after the big slow)

[T2Eagle]

It's hard to decide where and how to jump back in to the discussion after the big slow.

I think it's still better for everyone, especially the majority of claimants if some universal settlement is achieved.  If settlement talks collapse, that really shuts out claimants from any state other than the current states with revival or extended SOL periods, which I believe is somewhere between six and twelves states depending on how you count things.

Within those states, filing suits against the LCs will probably lead to bankruptcy proceedings for just about every council.  It's true that fully litigating an individual case is still really difficult, but as Eagle 1993 noted the verdicts of a few or even one case are probably more than any council can cover.  But these bankruptcies will be less complex than what BSA is trying to do. Each council will have assets that are either restricted or unrestricted.  That is assets that can be gotten at by creditors and assets that cannot be gotten by creditors --- no matter how worthy their claim.  Lots of camps will be lost, and lots of endowments defunded. But not all camps will be lost, because some of them simply are beyond the reach of any creditor.  There will be some painful and difficult challenges with reorganizing councils within those states because the losses will be arbitrary, some of the best operating camps in the councils with high membership will be gone, while some of the smaller less developed camps far away from population centers will remain.  

COs will be all over the place in terms of what happens to them.  As I mentioned in an earlier post, neither of the COs that sponsored my units as a kid even exist today.  For COs like the Catholic dioceses, suits from their scouting program are probably just a subset of suits they'll face because of the SOL changes, so they'll be pursuing their own strategy.  For some other COs, I think about the other units in my hometown and they were sponsored by the local Elks club.  The Elks are still there, but much smaller than they once were.  They own a clubhouse, which may or may not be available to a creditor, and are probably lucky if they have three months cash in the bank.  Any suit against them is going to settle pretty quickly because there's just not enough there for it to be worth fully litigating.

And all of this is again only for those claimants who live in these states.  For all the talk of pending legislative changes, I looked at the list, and most have failed or are failing.  I can't speak to all the jurisdictions, but I do know both OH and MI politics very well.  In both those states the bills have been introduced by members of the minority party without any cosponsors from the majority.  Those bills have zero chance of passage absent a sea change in the control of both houses of the respective legislatures.  If the current BSA settlement charges collapse, it would almost be a breach of fiduciary duty if councils in non revival states don't act aggressively to shield their assets from any potential future claims.

I'm dismayed by the time and especially money that's been spent without some agreement on basic facts, like how much of national's assets are restricted vs. non restricted, but I think that too many claimants may end up shut out of any compensation if a settlement isn't reached.

[ThenNow]

18 minutes ago, T2Eagle said:

I think it's still better for everyone, especially the majority of claimants if some universal settlement is achieved.  If settlement talks collapse, that really shuts out claimants from any state other than the current states with revival or extended SOL periods, which I believe is somewhere between six and twelves states depending on how you count things.

I don't disagree at all. The process so far has been hopeful in moments and more often terrible, at least for me.

19 minutes ago, T2Eagle said:

I'm dismayed by the time and especially money that's been spent without some agreement on basic facts, like how much of national's assets are restricted vs. non restricted, but I think that too many claimants may end up shut out of any compensation if a settlement isn't reached.

Also, agree. I guess National is beyond any reach of accountability, but it's mind numbing to watch them spend money and spin the wheels on the bus. Fee requests (volume and dollar signs) from their experts and professionals far exceed those from the claimants'. I assumed the judge was chastising both parties when she gasped at the $100M nut, but it would've been more accurately directed at the BSA. They didn't expect all these claims, true, but they sure could've had their ducks in a row on assets and representation of the LCs. My take, anyway.

The TCC has a very difficult task. A group of 85,000ish child sexual abuse survivors is technically and psychologically daunting. From all I've heard and read, I'm confident they are trying to move the ball and have been since the outset. Everyone I've spoken to since March of last year says there's no way LCs are getting a release without contributing. I am daily flabbergasted to hear you guys say you were and are told the opposite. Doesn't sound like the BSA is dealing in either good faith or reality.

 

[Eagle1993]

39 minutes ago, T2Eagle said:

I think it's still better for everyone, especially the majority of claimants if some universal settlement is achieved.  If settlement talks collapse, that really shuts out claimants from any state other than the current states with revival or extended SOL periods, which I believe is somewhere between six and twelves states depending on how you count things.

Shouldn't this be as easy as a table that states:

Entity        Total Assets     Total Unrestricted assets       Amount provided to Trust

 

Then fill in for BSA and every council.  The TCC could then review and argue if they believe the asset amounts listed are incorrect or if the amount provided to the trust is not a sufficient percentage of the unrestricted assets.

I agree its complex, but it sounds like TCC has already assessed 500 properties and could probably verify that table.

Given TCC's response, it seems like either BSA isn't providing sufficient information or are not providing an offer sufficient to settle.

While I agree councils in SOL states will be at high risk, given 11,000 claims since 2000, even non liberal SOL state councils could be at risk. There is a ton of variety with SOL ... this site shows details state by state.  

https://childusa.org/law/

(FYI, I feel creepy searching for statue of limitations sex abuse ... I'm sure I'll be added to a FBI watch list at some point.)

[elitts]

24 minutes ago, T2Eagle said:

I  If the current BSA settlement charges collapse, it would almost be a breach of fiduciary duty if councils in non revival states don't act aggressively to shield their assets from any potential future claims.

 

I'm dismayed by the time and especially money that's been spent without some agreement on basic facts, like how much of national's assets are restricted vs. non restricted, but I think that too many claimants may end up shut out of any compensation if a settlement isn't reached.

Personally, I really hope the local councils mostly took the hint a couple years ago and started protecting their assets back then.  If, in 2018, councils started putting conservation easements and deed restrictions in place on their properties, or transferred them to trusts, they should be pretty well protected come 2021-2022 if they start having to file bankruptcy.  Obviously some did not because there are a bunch of councils selling their camps now, but I'm hoping that's a minority.  Realistically, I suspect that most of those LCs selling camps now are doing it because they couldn't afford to keep them anyway, no matter if they say "it's to fund the settlement".  Because selling them in advance of an agreement being reached is just foolish if creating a pot of money is the only purpose.

 

Sadly, I never thought there would be much hope in finding an actual agreement without knowing what the insurance contributions would be.  Perhaps a cramdown might still be possible, but I know I'd be reluctant to agree to a settlement with the BSA if there wasn't something clear including the insurance payoff.  And of course, it's entirely against the interests of the insurance companies to offer up numbers at this point because if they can get some claimants to go away with just contributions by the BSA they save a boat-load of cash.

[Eagle1993]

3 minutes ago, elitts said:

Personally, I really hope the local councils mostly took the hint a couple years ago and started protecting their assets back then.  If, in 2018, councils started putting conservation easements and deed restrictions in place on their properties, or transferred them to trusts, they should be pretty well protected come 2021-2022 if they start having to file bankruptcy. 

I would be careful assuming those will be deemed valid.  Take a look at the Milwaukee Archdiocese cemetery trust fund.  You'll see some familiar names.  3 years before going into bankruptcy, the Milwaukee Archdiocese moved a large amount of $ into a trust fund to maintain cemeteries (and marked it as restricted assets).  The OCC (think TCC) said it was an fraudulent  transfer.  So, expect the TCC or lawyers to sue to say those easements/deed restricts are not valid....

Note below that this case was headed to the Supreme Court (possibly) but a settlement occurred so the case was moot.  Perhaps we are simply headed to a slugfest for the next 4 more years ... we will see...

https://mediatbankry.com/2016/05/05/dont-let-this-happen-to-you-milwaukee-archdiocese-bankruptcy-part-three-the-in-court-slugfest/

[5thGenTexan]

28 minutes ago, elitts said:

Personally, I really hope the local councils mostly took the hint a couple years ago and started protecting their assets back then.  If, in 2018, councils started putting conservation easements and deed restrictions in place on their properties, or transferred them to trusts, they should be pretty well protected come 2021-2022 if they start having to file bankruptcy.  Obviously some did not because there are a bunch of councils selling their camps now, but I'm hoping that's a minority.  Realistically, I suspect that most of those LCs selling camps now are doing it because they couldn't afford to keep them anyway, no matter if they say "it's to fund the settlement".  Because selling them in advance of an agreement being reached is just foolish if creating a pot of money is the only purpose.

 

Sadly, I never thought there would be much hope in finding an actual agreement without knowing what the insurance contributions would be.  Perhaps a cramdown might still be possible, but I know I'd be reluctant to agree to a settlement with the BSA if there wasn't something clear including the insurance payoff.  And of course, it's entirely against the interests of the insurance companies to offer up numbers at this point because if they can get some claimants to go away with just contributions by the BSA they save a boat-load of cash.

So, if LCs started to protect assets in 2018 they knew they were going to be included in the lawsuits.  In a full 180 contradiction to the line we have all been told that they are totally separate and 100% have no danger of being part of the bankruptcy?  That would look pretty sketchy.  

[ThenNow]

44 minutes ago, 5thGenTexan said:

So, if LCs started to protect assets in 2018 they knew they were going to be included in the lawsuits.  In a full 180 contradiction to the line we have all been told that they are totally separate and 100% have no danger of being part of the bankruptcy?  That would look pretty sketchy.  

Precisely why the judge told them they can't do it and that she would look back to see if they had. I don't recall the detail or timeframe on the second component. I seem to recall something to that effect during the August 2020 to January 2021 scuttlebutt over the Tennessee shake-n-bake activities. This was the filing initiated it, as far as I know. Some stipulation was reached back in January.

https://casedocs.omniagentsolutions.com/cmsvol2/pub_47373/838822_1084.pdf

Here is the Stipulation. 

WHEREAS, on July 30, 2020, the BSA sent an update to the Responsive Letter describing the initial results of its ongoing investigation of the Properties Trust based on its discussions with counsel for MTC regarding the Properties Trust.

Among other things, BSA advised the Tort Claimants’ Committee that “MTC does not take the position that any contingent interest of BSA in MTC’s property was extinguished by the transfer of property to the Properties Trust.” WHEREAS, on August 7, 2020, the Tort Claimants’ Committee filed the Stay Enforcement Motion, which seeks entry of an order enforcing the automatic stay against MTC and voiding MTC’s transfers to the Properties Trust.

WHEREAS, the Creditors’ Committee identified additional concerns beyond those specifically addressed in the Stay Enforcement Motion with respect to the transfers to the Properties Trust, the manner in which it was formed, and the execution of the Qualified Affidavit.

WHEREAS, MTC asserts that the creation of the Properties Trust and transfer of assets thereto and the statements in the Qualified Affidavit were proper and in compliance with applicable law, and the Creditors’ Committee and the Tort Claimants’ Committee each disagree with this assertion.

WHEREAS, in connection with certain mediated discussions between the Tort Claimants’ Committee and MTC regarding the Stay Enforcement Motion, MTC appointed the Honorable John Bryant as Trust Protector and, on November 2, 2020, the Trust Protector executed that certain Amendment to the Properties Trust (the “Amendment”), which includes, among other things, an amendment to include the following in the Properties Trust:

To the extent that BSA National has an interest in the assets of the Properties Trust by way of the Articles of Incorporation and Bylaws referenced in paragraph F of Article II of the Trust Agreement or BSA National’s articles, bylaws and regulations, MTC and the Trust Protector, on behalf of the Properties Trust, agree that any such interest was not extinguished or otherwise impacted by the transfer of assets by MTC to the Properties Trust.”

                                    * * *

To the extent that BSA National has an interest in the assets of the Properties Trust, the Properties Trust shall not been amended in a way that alters and impairs such interest. Amendment ¶¶ 1(a), (d).

A copy of the Agreement as amended subsequently has been recorded with the Register of Deeds in the five Tennessee counties in which the four camps and MTC’s offices are located. The Agreement, as amended by the Amendment, and as recorded, is attached hereto as Exhibit A.

https://casedocs.omniagentsolutions.com/cmsvol2/pub_47373/869355_1948.pdf

Edited April 5, 2021 by ThenNow
Found it.

[Eagle1993]

13 minutes ago, ThenNow said:

Precisely why the judge told them they can't do it and that she would look back to see if they had. I don't recall the detail or timeframe on the second component. I seem to recall something to that effect during the August 2020 to January 2021 scuttlebutt over the Tennessee shake-n-bake activities. This was the filing initiated it, as far as I know. Some stipulation was reached back in January.

I would think most councils knew in 2018 of the financial peril of BSA.  It was documented in their annual report.  

https://scoutingwire.org/wp-content/uploads/2018/05/2017-Annual-Report-Combined-FINAL-App-Version.pdf

Quote

The National Council has been named as a defendant in several lawsuits alleging inappropriate conduct by local council employees or Scouting unit volunteers, including allegations of conduct that did not occur within Scouting and allegations of incidents dating back as far as the early 1960s. The National Council is also aware of threatened and expanding litigation of a similar nature. Most of the cases claim specific amounts of compensatory damages and, in a few cases, unspecified amounts of punitive damages. There continues to be additional lawsuits filed alleging sexual abuse, including claims for punitive damages. The National Council could be required to pay damages out of its own funds to the extent the claims are not covered by insurance or if the insurance carriers are unable or unwilling to honor the claims. Based upon the nature of and management’s understanding of the facts and circumstances that give rise to such actions and claims, management believes the reserves established by the General Liability Insurance Program of the National Council are sufficient to provide for the resolution of these lawsuits. However, in the event the General Liability Insurance Program or its reserves are insufficient to resolve such claims, it is the opinion of the National Council that the total amount of payments to resolve current and future claims could have a significant impact on the financial position or results of operations of the National Council in the future.

 

Edited April 5, 2021 by Eagle1993
Added quote

[DavidLeeLambert]

7 hours ago, ThenNow said:

FYI, if not already known.

https://www.mlive.com/news/kalamazoo/2021/03/kalamazoo-county-buys-former-rota-kiwan-boy-scout-camp-to-create-212-acre-nature-preserve.html

I've been to camp Rota-Kiwan exactly once.  My oldest son and I used it as a starting-point for a 13.5-mile hike (largely over roads, but we did go through the "Au Sable Land Bridge" next door) while my wife and daughter attended a Cub Scout activity at the camp.

I'm not happy that the Council was selling any of its camps, but there was some logic for this one, and I'm glad to hear about the buyer they did find and the conservation easement that will be on the property. The camp was smaller, not really big enough to run a full summer-camp program or a big event for another youth organization, and it was being encroached by suburban development. In fact, the Council has previously sold a small slice of the camp to a developer, who had built houses on that portion.

The camp has been closed since the end of the Summer 2019 season. As I recall, the Council had announced plans for its closure in spring 2018 or earlier.  They had run a deficit most years over the past decade; they took out a PPP loan to maintain some staff positions during the worst of the pandemic lockdown, last summer.  But in 2019 they had revenue less expenses of $2.3 million, out of total revenue of $19.9 million.

[Eagle1993]

10 minutes ago, DavidLeeLambert said:

I'm glad to hear about the buyer they did find and the conservation easement that will be on the property

If a camp is sold and its used for camping or conservation, it makes bitter pills easier to swallow.  I've seen a camp sold and all the trees cut for a lumber company.  Yes, I know it has to come from somewhere, but there is nothing more sad then seeing a former scout camp clear cut.

[David CO]

23 minutes ago, Eagle1993 said:

Trying to get this back to bankruptcy a bit ... it is a very valued asset.  There are articles even today as Girl Scouts have yet to amplify their Gold award in the same way BSA has its Eagle.  In terms of value ... how much would a GSUSA or even TrailLife pay for the Eagle Scout trademark?

The term Boy Scout, or even scout, would be a valuable asset.  BSA has been guarding the word "scout" for decades.  It has frequently used legal means to stop other organizations from calling its members scouts.  

I think WOSM might have something to say about a non-member organization calling themselves Boy Scouts, so I'm not sure that BSA could sell it.  But if they could, it would definitely be a valuable item.  

And, as others have pointed out, the federal charter might prohibit their sale.  I don't think any bankruptcy court would order the sale, and I don't think BSA would sell it voluntarily.  

 

Edited April 5, 2021 by David CO

[elitts]

2 hours ago, Eagle1993 said:

I would be careful assuming those will be deemed valid.  Take a look at the Milwaukee Archdiocese cemetery trust fund.  You'll see some familiar names.  3 years before going into bankruptcy, the Milwaukee Archdiocese moved a large amount of $ into a trust fund to maintain cemeteries (and marked it as restricted assets).  The OCC (think TCC) said it was an fraudulent  transfer.  So, expect the TCC or lawyers to sue to say those easements/deed restricts are not valid....

Note below that this case was headed to the Supreme Court (possibly) but a settlement occurred so the case was moot.  Perhaps we are simply headed to a slugfest for the next 4 more years ... we will see...

https://mediatbankry.com/2016/05/05/dont-let-this-happen-to-you-milwaukee-archdiocese-bankruptcy-part-three-the-in-court-slugfest/

I suspect they'd have lost that one because the Supreme Court would have denied a hearing and let the two other court rulings stand.  But your point is valid that the lookback period is a little bit murky.  However, the fact that it's murky doesn't mean the attempt isn't worth it.

2 hours ago, 5thGenTexan said:

So, if LCs started to protect assets in 2018 they knew they were going to be included in the lawsuits.  In a full 180 contradiction to the line we have all been told that they are totally separate and 100% have no danger of being part of the bankruptcy?  That would look pretty sketchy.  

Regardless of whether or not they thought they were going to be included in the lawsuits, it should have been a heads up to get their ducks in a row. 

Practically speaking, any organization that is subject to lawsuits should have all of their major assets protected from civil liability.  This is why you'll (almost) never find say, a white water rafting company that owns their own property, even if they've been in the same spot for 50 years.  Instead the business will be owned by the ACME WWR LLC and the property will be owned by the WWR Land Company LLC and the business will lease the land and building and equipment from the Land Company.  So that if someone dies and they sue, (ignoring the liability waiver) there are no assets readily available to forfeit.

[Eagle1993]

13 minutes ago, elitts said:

I suspect they'd have lost that one because the Supreme Court would have denied a hearing and let the two other court rulings stand. 

To be clear to all ... the Milwaukee Archdiocese was appealing.  They won the lower court ruling but then lost on appeal.  The courts ruled the transfer was illegal.  They appealed to the Supreme Court and likely realized they would lose so they settled.

We will likely see an example of this with Summit.  Is Arrow WV a separate organization or is it really a shell organization fully operated by the BSA.  TCC appears to be preparing to file lawsuit against JP Morgan about Arrow WV.

That may be the test case of all of the council property ones that exist.

 

[elitts]

6 minutes ago, Eagle1993 said:

To be clear to all ... the Milwaukee Archdiocese was appealing.  They won the lower court ruling but then lost on appeal.  The courts ruled the transfer was illegal.  They appealed to the Supreme Court and likely realized they would lose so they settled.

We will likely see an example of this with Summit.  Is Arrow WV a separate organization or is it really a shell organization fully operated by the BSA.  TCC appears to be preparing to file lawsuit against JP Morgan about Arrow WV.

That may be the test case of all of the council property ones that exist.

 

My mistake, that article confused me because it said the district court and the court of appeals both overturned the Bankruptcy court.

[T2Eagle]

14 minutes ago, ThenNow said:

. Everyone I've spoken to since March of last year says there's no way LCs are getting a release without contributing. I am daily flabbergasted to hear you guys say you were and are told the opposite. Doesn't sound like the BSA is dealing in either good faith or reality.

 

I think it's really important to distinguish between the two types of LCs, those in the revival states and those not.  Those in the revival states know that at a minimum their non restricted assets are gone.  A settlement that involves monies from the other LCs might save some camps and allow the downsizing to be rational.  

For those in the non revival states it's a lot more complicated.  There are several hundred claims attributable to my council (I forget the exact number), but my understanding is none of them are current, and for what may be within the current SOL we're insured and have reserves.  So any contribution we make is for the purposes of a) hedging against a future change in the law, b) a desire to do the right thing for folks who were injured, and c) a contribution to the well being of scouting nationwide because we believe scouting should be available to all American youth not just parochially.

If you look at just (a) as a business decision than how much really is that worth?  The probability of a law change is low, and the probability of the current litigation pulling in our assets is low.  If you ignore (b) and () altogether  we might be better off shielding our assets and spending some money lobbying.  But b and c matter and so I know we're planning on having to make a good size contribution.

I don't think many councils are telling people this will cost us nothing.  But the balance between a, b, and c is going to vary across the 250+ councils.  I wish councils and BSA were much more transparent in general, but the unfortunate tendency among many organizations is to be stodgy with info and accentuate positive rather than negative info.

,