Chapter 11 Announced - Part 4 Revised Plan

[CynicalScouter]

Stang opening statement addressed to survivors. Survivors have been watching and emailing and asking: what does this have to do with us/me? Stang trying to explain why Hartford was dealt with and why rejecting the Hartford deal was and is important to oppose.

[CynicalScouter]

Anker now up. In short, his belief is this. Despite the FCR/TCC/Coalition saying that they will never, ever accept the Hartford deal that's fine, because then we go to the toggle plan, ONLY the BSA is released, the the victims/claimants will have to go into state courts.

"We are willing to go back to the torts system."

Valid vs. invalid claims.

Hartford is basically saying, and the judge asked if this was their "leverage", that the victims will be handed a choice:

1. Take $3500 now or
2. Spend the next several years in state court lawsuits and that the insurance companies thinks they'll do quite well in state court (the implication being the vast majority of the 82,500 victims will NOT file lawsuits or that the claims are invalid)

And here I think that Hartford has a point: we talk about "thousands" of lawsuits against BSA and the LCs, but will that really happen? There's a huge difference between "file a claim" and "file lawsuit and be subject to depositions and cross-examination"

 

Edited August 16, 2021 by CynicalScouter

[CynicalScouter]

FYI the math on this:

82500 claims * $3,500 for the expedited "nuisance" payment = $288,750,000

Hartford is betting, and BSA has said in its filings as Hartford's lawyer pointed out, the VAST majority of claimants are going to take the $3,500.

But let's say 20% don't and press forward.

That means 80% (66,000) claimants will take the $3,500 at a cost to BSA of $231,000,000

Let's assume the remaining 16,500 claims will ALL win (they won't, but let's pretend) each get paid out at $350,000 each (on average). That means $5,775,000,000. That's almost PRECISELY what BSA's projections were previously about how much the claims were really worth. (they had projected $4-$7 billion).

Edited August 16, 2021 by CynicalScouter

[ThenNow]

Oops. We completely lost the court feed. The insurance attorneys are riffing. Not a good moment for the court's tech crew or those attorneys. Stick to your day job and leave the comedy to me. Just sayin'...

[ThenNow]

Oh, my. A bearded man with a scary mask just did some sort of magic. [*Poof*] Back on.

[CynicalScouter]

One final point on Hartford: Anker is really clear. His view is that once the judge rejects BSA's efforts to try and end the Hartford deal, that claimants will start to make settlements because the judge is not issuing any "enforceable judgment."

This goes to Anker and the insurance companies larger point, noted above. They absolutely believe that if the claimants have to go back to state courts (because the BSA was released in bankruptcy, but not the LCs and COs) the claimants will either a) not file or b) will lose more than they win or c) will take settlement offers.

So, the argument goes, go and do the "toggle plan" which covers ONLY the BSA and let's fight the rest of this out later.

Judge taking 40 minute/lunch break to 3:10. Buchbinder (US Trustee's office) will start off when we get back.

 

Edited August 16, 2021 by CynicalScouter

[Eagle1993]

6 minutes ago, CynicalScouter said:

So, the argument goes, go and do the "toggle plan" which covers ONLY the BSA and let's fight the rest of this out later.

I think the US Trustee will concur with this.  I believe the US Trustee has a hard time believing you can insulate COs, LCs and pull in their insurance companies into the National BSA bankruptcy ... as they are non debtors.  Also, US Trustee objected to the Coalition payments.  

 

[Eagle1993]

Any update on the hearing?  How did Buchbinder's testimony go?

[ThenNow]

16 minutes ago, Eagle1993 said:

How did Buchbinder's testimony go?

He eviscerated the notion that BSA can ditch the Hartford deal, based on comparisons to other contractual contexts. They should have been concurrently negotiating with the other parties in light of their intentions to strike the much maligned Hartford sweetheart deal. You just don't present it out of the blue - Hey! Lookie what we did...accepted pennies on the dollar from a key insurer! - with no active participation by the other mediation parties and being aware of the plethora of likely objectors.

That said, maybe it was someone else. I'm cognitively snow blind by the "rigorous, robust discussion" on both sides. Ugh. 

Edited August 16, 2021 by ThenNow

[CynicalScouter]

36 minutes ago, Eagle1993 said:

Any update on the hearing?  How did Buchbinder's testimony go?

Buchbinder basically laid out that he felt that BSA cannot simply "bed hop" (my paraphrase) so that BSA can abandon deals when a new/better one comes along UNLESS it can be shown circumstances have changed in particular ways. BSA didn't demonstrate that happened, therefore they need to stick to the Hartford deal.

Judge took it under advisement

Issue #2 is being discussed. In brief and probably oversimplified: "business judgment rule" vs. "entire fairness" rule.

The BSA National Executive Board (72 directors) includes people with ties to local councils (currently serving/previously served as local councils). This creates a conflict of interest (supposedly). We are getting deep in the depths of issues related to conflict of interest, board and fiduciary responsibilities, etc.

The argument, I guess here (I am a little out of my depth here), is that the BSA board members with local council ties will vote to throw BSA under a bus in order to save the LCs. The NEB members are nominated by local councils that are part of the National Council.

That is being countered by a) the directors with LC ties either resigned those ties or b) recusals. Plus while the National Executive Board (NEB) is "above" the National Executive Committee (NEC), that it was the NEC that really conducted these negotiations and that NONE of the NEC have any Local Council ties. The NEB's sole role has been to a) authorize Mosby to negotiate and b) approve the debt note that the NEC ultimately agreed to as part of the RSA.

Edited August 16, 2021 by CynicalScouter

[ThenNow]

Here is the giant wasp that keeps threatening to sting my hope on this all going well, even if the judge spanks the RSA on the tuchus and allows it to breath fresh air. As Eagle1993 briefly summarized several pages ago, Fuller-Austin is an incredible threat to the "big dollars" most of us perceive as coming from the insurers through the Settlement Trustee process. Dunno.

[CynicalScouter]

Richard Mason for the Local Councils: in short, if the court doesn't accept the RSA, then the BSA's screwed and it becomes very hard to see how the BSA can go forward in the bankruptcy.

I wanted to clarify what the debate is

The insurers want to have the RSA reviewed in the context of the total fairness rule or doctrine. This is the highest standard. The BSA wants to be under the "business judgment" rule.

Again, in absurdly oversimplified.

Business judgement rule: Can BSA show that its directors operated (1) in good faith, (2) with the care that a reasonably prudent person would use, and (3) with the reasonable belief that the director is acting in the best interests of the corporation. Under THIS standard, the BSA's actions are PRESUMED VALID and the insurers have to prove otherwise.

Entire fairness rule: IF it is shown that BSA or its directors violated good faith, had some kind of conflict of interest, did some kind of self-dealing, etc. THEN the presumption reverses. BSA's actions are PRESUMED INVALID and the BSA has to prove otherwise that both the PROCESS and the PRICE BSA is paying is fair.

In other words, even if the BSA board of directors had massive, massive conflicts of interest, it might have STILL come up with a good deal, but due to those conflicts it has to show that there was some firewall.

An example might be this. You have a 7 member board of directors in a bankruptcy. 3 of the members have conflicts of interest in terms of the sale of the assets (the plan calls for selling the assets to a company where those 3 directors are also directors), HOWEVER the remaining 4 non-conflicted members are given 100% authority to negotiate this as part of a "special committee of independent directors". The 4 come up with a plan, vote, and all 7 directors approve the plan AND the plan is properly valued (no "sweetheart" deals, etc.).

EVEN IF for whatever reason the sale is challenged as violating the business judgment rule (those 3 board members who had conflicts of interest should not have voted) it can still be saved if it is show that the entire process was fair. The 4 independent directors did the deal. The 4 independent directors (representing a 4/7 majority of the board) approved the deal. Sure there was a conflict of interest, but it resulted in a fair deal anyway.

Again, this is way, way oversimplified version of this.

https://www.natlawreview.com/article/financially-distressed-businesses-revisiting-business-judgment-rule-and-entire

Edited August 16, 2021 by CynicalScouter

[CynicalScouter]

38 minutes ago, ThenNow said:

He eviscerated the notion that BSA can ditch the Hartford deal, based on comparisons to other contractual contexts.

Right, and we haven't even GOTTEN to the Coalitions fees portion of today's event. There are plenty of ways this completely goes off the rails.

[ThenNow]

Well, dang it. We had gone almost 24 hours of court time without one blasted "wood to chop" reference. David Molten had to blow it. I just lost a ton of money betting against the house. So very, very close. 

[CynicalScouter]

Jeremy Ryan (represents the Catholic Churches and Methodist Churches): The idea that there has been negotiations with the COs isn't true; we are barely at square one. The BSA did not even bother to consider how the COs would react to the RSA. No, it is grossly negligent. It is clear that the COs are the lifeblood of scouting. And yet the COs, the revenue source for BSA, were cut out of this process. Any questions about the COs, Mosby was told not to answer due to privilege. Mosby did admit he did NOT even know that COs were asserting claims against BSA for defense and indemnity.

Mosby admitted he's never even reviewed a charter agreement.

Nowhere in BSA's financial proposals/plans did they consider there is anything about COs simply refusing to recharter. BSA just simply never even considered this a possibility. Mosby even admitted there was never a discussion that maybe the COs would object to the RSA.

Edited August 16, 2021 by CynicalScouter