Local Councils and The Reversionary Rights of Their Property

[CynicalScouter]

8 hours ago, fred8033 said:

Further, doesn't it create evidence that BSA doesn't control the council leadership?

On the contrary, it demonstrates it pretty clearly.

Remember, there are two claims here. The first is that BSA controls the LCs OPERATIONS. The second is that BSA controls LCs PROPERTY.

The property argument is incredibly strong and is why this meeting happened. In short:

1) BSA charters each LC annually and can revoke those charters at any time. In other words, LCs exist at the will and the whim of BSA National.

2) Immediately upon terminating a LC charter, ALL LC assets get turned over to National. This is in both the Bylaws of BSA National as well as the LCs.

Quote

Upon termination of a local council charter or dissolution of a council, all rights of management and ownership of local council property shall become vested in the National Council for use in accordance with the Rules and Regulations of the Corporation. Local council articles of incorporation and bylaws shall include or be revised to incorporate this provision at the time of chartering or the next charter renewal.

3) Therefore, while for day to day operations the LCs exist/are independent, ULTIMATELY their assets belong to National.

So, the threat (or message) to LCs is this:

A) Cooperate now with TCC and hand over the properties.

B) Don't, have the court order BSA to terminate all LC charters, the LC assets are turned over to BSA, and the BSA will be forced to turn them over to the Settlement Fun.

Or, as was put in a recent court filing.

Quote

Under the Debtors’ [BSA's] governance documents, a local council’s property reverts to the Debtors if the local council’s charter is not renewed. In a Chapter 7 liquidation of the Debtors, the Chapter 7 trustee presumably would not renew any local council charters. Since the properties revert to the Debtors, the liquidation analysis must include the liquidation value of all local council real and personal property.

Now, the point is NOT that people are looking for Chapter 7. But that threat is out there and they want to make it clear to the LCs: turn it over now

[ThenNow]

9 minutes ago, fred8033 said:

But then the reality of the efforts between the LCs and TCC recently show the opposite.  I've been reading comments about last TCC mtg and other TCC activities.  About last meeting, attendance was huge and suggested that hat people should ask their scout exec or council president attended.  Further, the TCC inviting (the invite itself) shows a direct communication approach.  Another comment in this thread said that TCC was open to direct communication with any LC.

I'm not following how any of that reinforces or establishes the LCs as separate and distinct. The BSA wants the LCs to have a release at the end of the process. The LCs want to have a release, too, I'm thinkin. The TCC is saying, "We can show you what you have to do to achieve that, if you'd like. Might be a lot more efficient and less painful if we go direct, rather than through the BSA and intermediaries." 

[elitts]

23 hours ago, CynicalScouter said:

Yes, this was the line pushed in February 2020. And in some councils as late as summer 2020.

Since then, I will note that LCs are not singing that tune anymore because they know:

BSA lied to them.

 

Generally, it's accepted that if someone makes a statement they believe to be true, it's not a lie, even if they are later proved to be incorrect.  So has some documentation been discovered that the BSA knew LCs would be stuck on the hook but wanted to lie to them for some reason, or are you just assuming they must have known?

22 hours ago, tnmule20 said:

Here is a newsflash for you.

God is in control of everything.  If you don't think so I'm sure He will be happy to discuss this with you when you meet Him.

Not a conversation I would like to have.

I'd be happy to have that conversation.  I'm interested to find out why God feels children need to be raped and murdered.

11 hours ago, T2Eagle said:

I don't think I understand what this is about.  What would be the value added by TCC or BRG?  What would they be telling councils that councils don't already know?

Assuming a median level of competence, each council knows what its assets are worth.  I suppose maybe a different metric on the real estate value of a camp might produce a significantly different valuation, but that seems like it would be an outlier.  My council has a few decent size endowment funds, their value can be known to the penny at any given time.  We also own two camps; any competent real estate appraiser is going to give you a valuation on them that's going to be no more than 5-10% different any from any other appraiser. 

So what was the purpose of this?

I've been a Tax Assessor for about 20 years now and I can tell you with absolute certainty that this isn't the case.  When you are talking about homes or smaller properties where there are a couple dozen fairly similar properties sold within a mile or two each year, yes, you can get that level of accuracy.  But with special use properties with limited sales comparables?  No way do you get that accurate.  I regularly deal with tax appeals where my licensed appraiser's result is different from the petitioner's licenced appraiser by 20, 30 or even 40%.  

1 hour ago, CynicalScouter said:

On the contrary, it demonstrates it pretty clearly.

Remember, there are two claims here. The first is that BSA controls the LCs OPERATIONS. The second is that BSA controls LCs PROPERTY.

The property argument is incredibly strong and is why this meeting happened. In short:

1) BSA charters each LC annually and can revoke those charters at any time. In other words, LCs exist at the will and the whim of BSA National.

2) Immediately upon terminating a LC charter, ALL LC assets get turned over to National. This is in both the Bylaws of BSA National as well as the LCs.

3) Therefore, while for day to day operations the LCs exist/are independent, ULTIMATELY their assets belong to National.

 

That whole argument is just nonsense.  It may sound logical, but actually holds zero water when it comes to property rights.  Non-profits are required to include in their bylaws a statement of who gets their assets in the case of dissolution, but this isn't binding and it can be changed at will.  I'm a part of a 501c3 that has a clause saying the City of Grand Rapids gets all of our assets if the organization folds up or moves out of state; that doesn't in any way mean Grand Rapids controls the organization or actually has an ownership claim on our assets.  And while the BSA may have required LCs to include a bylaw to that effect in order to be chartered, since the BSA can't stop the LC from changing that component of their bylaws, the BSA similarly has no current ownership claim on LC property.

[fred8033]

1 hour ago, CynicalScouter said:

Yes, because TCC would RATHER have the LCs turn over the assets directly vs. do this the "hard way" in which BSA National revokes all the LC charters (either voluntarily or as directed by the court), seizes all LC assets (per the BSA Bylaws, as I noted above), and BSA turns over the assets.

#1  legally separate ... That then is TCC treating LCs as legally separate ... OR ... TCC is extracting value from a BSA during bankruptcy and running amok the priority of other debtors and the judge overseeing the case.  So are LCs separate legally such that TCC can extract funds directly?  Or if liable for BSA national, then the funds are subject to bankruptcy distribution and TCC needs to wait for the bankruptcy proceedings.  

#2  revoking charter ... Not clear cut at all.  The by-laws include the words of "constructive trust" and for the purposes of scouting.  And, address the case where a (business partner) council is not doing it's job or a council that is not viable.  Councils that are financially healthy and doing a good job can argue that the bylaws do not address this case where BSA goes out of business but the councils can still execute on the purposes of scouting as many councils will be able to do.  ... This seems to fall into case law on business partnerships or business franchise rights.  ... I'm not sure, but I am sure that it's just not that clear cut at all.

Edited May 6, 2021 by fred8033

[CynicalScouter]

11 minutes ago, elitts said:

 Non-profits are required to include in their bylaws a statement of who gets their assets in the case of dissolution, but this isn't binding and it can be changed at will. 

This isn't DISSOLUTION of the LC. This is failure to recharter. The LC, as a separately incorporated entity, can live long after BSA is dust. But the minute the BSA charter gets revoked, they forfeit all property to BSA National.

This is in both the Bylaws of BSA National as well as the LCs.

Quote

Upon termination of a local council charter or dissolution of a council, all rights of management and ownership of local council property shall become vested in the National Council for use in accordance with the Rules and Regulations of the Corporation. Local council articles of incorporation and bylaws shall include or be revised to incorporate this provision at the time of chartering or the next charter renewal.

As for this

Quote

And while the BSA may have required LCs to include a bylaw to that effect in order to be chartered, since the BSA can't stop the LC from changing that component of their bylaws, the BSA similarly has no current ownership claim on LC property.

The moment they did so, BSA National and/or the sexual abuse claimants will be in court demanding either a) any such change be voided or b) declaring a BSA charter breach, in which case BSA claims the property "upon termination of a local council."

The LCs are going to have to pay. There is no getting around it. I really, really which BSA had been more honest about that from the start.

[ThenNow]

13 minutes ago, elitts said:

I'm a part of a 501c3 that has a clause saying the City of Grand Rapids gets all of our assets if the organization folds up or moves out of state; that doesn't in any way mean Grand Rapids controls the organization or actually has an ownership claim on our assets.

Does Grand Rapids issue you an annual charter or some other such right to continue operations? Do they have any intellectual or other property you utilize that they can retract or withhold? Do they have the unilateral right to withhold that annual renewal or a right to revoke? I'm asking because I don't know, not because I'm taking potshots. I also don't know the inner workings and details of the BSA annual charter and all that rot. Trying to understand your comparison of the two contexts. Thanks.

[CynicalScouter]

3 minutes ago, fred8033 said:

So are LCs separate legally such that TCC can extract funds directly?  Or if liable for BSA national, then the funds are subject to bankruptcy distribution and TCC needs to wait for the bankruptcy proceedings.  

THAT is an interesting question that a judge is going to have to crack open at some point.

[fred8033]

4 minutes ago, CynicalScouter said:

THAT is an interesting question that a judge is going to have to crack open at some point.

Exactly.  Playing both sides of an argument only creates a mess and does not help.  I learned a long time ago that at some point you need to find a path thru the mess.  But playing two contradicting sides is not viable.

[vol_scouter]

1 hour ago, CynicalScouter said:

 

The LCs are going to have to pay. There is no getting around it. I really, really which BSA had been more honest about that from the start.

The BSA was honest.  It conveyed to the councils that the goal was to due a channeling motion and to keep them out of the bankruptcy itself.  Their advisers indicated that was a likely scenario.  The BSA always said that there was no assurances that would work.  From the beginning, local councils have known that they would likely have to contribute.  The amount of contribution is likely much more than anyone contemplated. 

[elitts]

35 minutes ago, ThenNow said:

Does Grand Rapids issue you an annual charter or some other such right to continue operations? Do they have any intellectual or other property you utilize that they can retract or withhold? Do they have the unilateral right to withhold that annual renewal or a right to revoke? I'm asking because I don't know, not because I'm taking potshots. I also don't know the inner workings and details of the BSA annual charter and all that rot. Trying to understand your comparison of the two contexts. Thanks.

Yes and no.  Each year we get an authorizing ordinance passed stating that the city is partnering with us to present an annual festival.  That authorization also gets us 50% pricing on all city services.  But getting the ordinance isn't directly contingent upon that clause in the bylaws and in fact it used to give all property to the Grand Rapids Arts Council instead.  And while we could technically still function without the city ordinance, effectively we could not because doubling the cost of police, streets and other services would make it impossible to afford.  So admittedly it isn't a perfect example

35 minutes ago, CynicalScouter said:

This isn't DISSOLUTION of the LC. This is failure to recharter. The LC, as a separately incorporated entity, can live long after BSA is dust. But the minute the BSA charter gets revoked, they forfeit all property to BSA National.

This is in both the Bylaws of BSA National as well as the LCs.

As for this

The moment they did so, BSA National and/or the sexual abuse claimants will be in court demanding either a) any such change be voided or b) declaring a BSA charter breach, in which case BSA claims the property "upon termination of a local council."

The LCs are going to have to pay. There is no getting around it. I really, really which BSA had been more honest about that from the start.

People can go to court over anything, so the fact that claimants will sue isn't particularly informative. 

The only way for this concept to hold any water would be for the LC assets to already technically belong to National or for the LCs to be found to be functionally extensions of the BSA national (in which case this argument is moot).  Because while bankruptcy courts have wide latitude in reversing property and monetary transactions retroactively, their overall authority isn't unlimited with regard to business decisions in general.  

Finding that National has an active claim on LC assets would be a very tough road to hoe.  What matters for evaluating property ownership is whether or not you have effective control over any of the bundle of rights that accompanies real property.  Namely the rights of possession, control, exclusion, enjoyment, and disposition.  As things stand, BSA doesn't control or hold any of those rights.  If BSA had influence over even just the disposition of assets in the normal course of business, you may have an argument, but from what I can tell, LCs can do with their property what they wish.  The fact that there is a potential triggering event that might change those ownership rights has nothing to do with ownership today.  Just like the fact that a mortgage lender has the right to foreclose if you don't pay doesn't mean they possess any ownership rights as long as you do pay.

So if BSA national doesn't own or control any current interest in the properties titled to LCs, then changing their own bylaws wouldn't be a financial transaction that might be subject to a bankruptcy unwinding.

Or if they didn't want to change that bylaw, they could simply grant every current LC and CO a one time 5 year charter extension that is only revocable "for cause". 

[ThenNow]

6 minutes ago, elitts said:

The fact that there is a potential triggering event that might change those ownership rights has nothing to do with ownership today. 

What are the details of the "triggering event(s)," including the breadth of language that can flip that switch? The broader the language the easier to flip it and the more inherent control is imbedded in it. If revocation or failure to recharter are the "event(s)" - can't operate without the charter - what are the BSA's bases for revoking or refusing?

[fred8033]

16 minutes ago, ThenNow said:

What are the details of the "triggering event(s)," including the breadth of language that can flip that switch? The broader the language the easier to flip it and the more inherent control is imbedded in it. If revocation or failure to recharter are the "event(s)" - can't operate without the charter - what are the BSA's bases for revoking or refusing?

Simple fact is local charters can function without BSA.  They can keep using the same program.  Slightly change.  Or offer a more general youth oriented, outdoor leadership experience program.  Councils can keep serving the "scouting purpose" relatively easily without BSA national.  

 

[ThenNow]

2 minutes ago, fred8033 said:

Simple fact is local charters can function without BSA.  They can keep using the same program.  Slightly change.  Or offer a more general youth oriented, outdoor leadership experience program.  Councils can keep serving the "scouting purpose" relatively easily without BSA national.  

Yeah. This is where the tracks run into the ditch for me, in terms of following along. Local charters or Local Councils? Why don't LCs just do that now and be done with it? "We're separate, are fine without you and will deal with our own business as we see fit. Keep your Chapter 11, intellectual property, HABs and settlement trust contribution suggestions to yourself. See ya if we see ya. Don't if we don't." From what I've read here, which has been fairly detailed, it doesn't seem what you're saying is accurate, unless I've misunderstood you and them, mainly CS on the charter discussion.

[yknot]

32 minutes ago, vol_scouter said:

The BSA was honest.  It conveyed to the councils that the goal was to due a channeling motion and to keep them out of the bankruptcy itself.  Their advisers indicated that was a likely scenario.  The BSA always said that there was no assurances that would work.  From the beginning, local councils have known that they would likely have to contribute.  The amount of contribution is likely much more than anyone contemplated. 

I'm not so sure. The reassurances were pretty emphatic to my council. 

[fred8033]

55 minutes ago, ThenNow said:

Yeah. This is where the tracks run into the ditch for me, in terms of following along. Local charters or Local Councils? Why don't LCs just do that now and be done with it? "We're separate, are fine without you and will deal with our own business as we see fit. Keep your Chapter 11, intellectual property, HABs and settlement trust contribution suggestions to yourself. See ya if we see ya. Don't if we don't." From what I've read here, which has been fairly detailed, it doesn't seem what you're saying is accurate, unless I've misunderstood you and them, mainly CS on the charter discussion.

It's a partnership.  A&B in business together.  A can't ditch B without recompense, but if B fails, that does not mean A is forced to go down with the ship.  A can find ways to survive and continue.  If anything, A has a claim against B for impact to A's business.  

Perhaps the LCs should counter sue in bankruptcy for business impact due to BSA's legal issues.  If BSA goes out of business, LCs should sue for legal rights to the intellectual property they have depended on.  That seems fair.