Chapter 11 Announced - Part 5 - RSA Ruling

[CynicalScouter]

Insurers respond: https://casedocs.omniagentsolutions.com/cmsvol2/pub_47373/3fdc76c3-5f0c-4ad2-ac36-cd7232f0f3e0_6174.pdf

1. AVA/Reciprocity were put on notice through briefing that the insurers wanted to look into ALL aggregators, including Reciprocity (even if it wasn't named in the original motion)
2. "Reciprocity is the claims aggregator run by Mr. Van Arsdale that generated many if not the bulk of the AIS claim associated with Mr. Kosnoff."
3. "The Court referred to Mr. Kosnoff’s admissions in his Rule 2019 statement concerning proofs of claim filed by AIS as support for granting of the claims aggregator discovery and in explaining why the discovery sought is potentially relevant to the pending objections to the solicitation motion." Remember: this was the Kosnoff Rule 2019 statement where he said someone had misused his name/signature on these proof of claims. Since "many if not the bulk" of AIS claims associated with Kosnoff came through Reciprocity, it stands to reason Reciprocity should be under the microscope here.

Therefore the insurers are offering two options to the judge

1. Sign the original request they made for depositions which includes Reciprocity.
2. Strike out any mention of Reciprocity in the original motion and sign that instead. It is implied that should the judge opt to do that, the insurers will be right back in court the next day to demand a hearing on AVA/Reciprocity depositions.

Edited September 8, 2021 by CynicalScouter

[Muttsy]

3 hours ago, CynicalScouter said:

This has come up in the past and I know it is part of Kosnoff's big plan/idea.

In short, it is NOT clear that can happen, for a host of reasons.

The BSA Charter and Bylaws theoretically require that all LCs include in their local articles of incorporation a statement that, on dissolution of the council, assets revert to national. HOWEVER, I've been made aware of at least two dozen councils that have simply refused to put that language in. Moreover, a host of state not-for-profit laws make it clear that such a move would and could be contested in state court as an unlawful transfer of charity or not-for-profit assets. Finally, even absent these two, I am sure that if BSA National make such an attempt they might get away with it with smaller councils but larger ones with bigger war chests would fight it tooth and claw.

I don’t understand why LC’s assets are off limits to BSA. In every charter I’ve read it states that BSA has the absolute right to terminate a charter. For any reason or no reason.  The transfer of assets from one charitable org to another pursuant to a contract does not appear to be an unlawful transfer. It appears to be a lawful transfer. 
 

Second, BSA owns all the IP rights. LC’s could be enjoined by a state court if they use BSA’s name, insignias, everything. 
 

Third, under the Congressional Charter the local councils existence deriveS directly from BSA. 
 

Fourth, there is overwhelming evidence that the LC’s are alter egos of BSA based on the degree of control and financial interconnectedness. 
 

it was a mistake not to have pursued substantive consolidation. If it had happened the whole problem of third party releases (the Sackler victim screw over issue) and the 2/3rd voting required could have been avoided. But BSA and the LC’s didn’t want the TCC digging that deep in to LC assets. Instead the TCC had use guesswork to come up with an approximation of LC asset values. 
 

So here we are. No releases for LC’s or CO’s and a BSA National that probably cannot meet the financial viability test to get a BSA only plan confirmed.  
 

Finally, the level of mistrust and rancor generated by BSA’s machinations throughout the case have poisoned the well that ardent supporters of BSA have become disillusioned.  

[David CO]

41 minutes ago, Muttsy said:

I don’t understand why LC’s assets are off limits to BSA.

I think the bylaw provisions are more like a will than a contract.  They can be changed at any time.

[fred8033]

57 minutes ago, Muttsy said:

I don’t understand why LC’s assets are off limits to BSA. In every charter I’ve read it states that BSA has the absolute right to terminate a charter. For any reason or no reason.  The transfer of assets from one charitable org to another pursuant to a contract does not appear to be an unlawful transfer. It appears to be a lawful transfer. 

• Not all council agreements have the exact same wording.  Some wanted that phrase removed.  
• Agreement wording has changed over time.  Was that wording always in it? 
• Absolutely not for any/no reason. 
  • The version I read says "The Boy Scouts of America may revoke or decline to renew council charters for failure to comply with the Bylaws, Rules and Regulations, or policies of the Boy Scouts of America, or in any instance where it deems such action advisable in the interests of Scouting."
  • BSA's failure is not a failure by the local council. 
  • Past YP failures are followed by many years of rechartering is evidence of waiving those possible cause for action. 
  • Advisable in the interests of scouting is extremely vague and does not mean BSA can terminate to use to pay BSA's debts.  The local council can still fulfill it's scouting objectives even if BSA is going thru bankruptcy.
• Local councils have been paying taxes independently.  Incorporated separately.  Having separate titles to land, property, etc.  Simple fact that local charter org agreements exist is an example of a contractual relationship between separate entities.  
• Charter agreement calculates a dollar amount to be paid from local council to national.  Simply accepting that payment is yet another acknowledgement of the separate existence of independent legal entities. 

This is one of the huge questions that the bankruptcy needs to finalize.  

Theoretically ... if BSA liquidates ... can a local council re-align with Trail's Life or BP association and thus fulfill it's scouting objectives?

Edited September 8, 2021 by fred8033

[fred8033]

16 minutes ago, David CO said:

I think the bylaw provisions are more like a will than a contract.  They can be changed at any time.

"Will" ... definition : a legal declaration of a person's wishes regarding the disposal of his or her property or estate after death 

Sadly apropos.  

[CynicalScouter]

1 hour ago, Muttsy said:

I don’t understand why LC’s assets are off limits to BSA. In every charter I’ve read it states that BSA has the absolute right to terminate a charter.

Yeo. But the council is an independent LLC. And I know for a fact numerous councils have NOT put into this bylaws the “mandatory” BSA language that once a council charter dissolves assets of the council go to national.

And it not true councils are mere alter egos of BSA.  Fred laid it out well. If BSA pulled their charter tomorrow the Circle Ten Council LLC would remained an incorporated entity and could, indeed would, refuse to transfer one dime to BSA.

[CynicalScouter]

24 minutes ago, fred8033 said:

• Local councils have been paying taxes independently.  Incorporated separately.  Having separate titles to land, property, etc.  Simple fact that local charter org agreements exist is an example of a contractual relationship between separate entities.  
• Charter agreement calculates a dollar amount to be paid from local council to national.  Simply accepting that payment is yet another acknowledgement of the separate existence of independent legal entities. 

This times 1000. BSA cannot “order” councils to turn over cash and property and if they did there are numerous councils who made it clear to they would tell BSA to go away.

[CynicalScouter]

To be clear, this is the supposed language that makes all LC assets = BSAs (the Kosnoff Theory).

https://filestore.scouting.org/filestore/pdf/Charter_and_Bylaws_June_2019.pdf

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.

However, a few big problems:

1) Not all local councils "included or incorporated" those provisions and told BSA National to pound sand. Remember this next time someone tells you that the LCs are mere appendages/alter egos of the National Council.

2) State laws would or could prohibit such a transfer. As the Ad Hoc Committee of Local Councils put it (in the context of a TCC proposal that would hypothetically have a Chapter 7 Trustee order the dissolution of all councils, which is EXACTLY the Kosnoff plan)

https://casedocs.omniagentsolutions.com/cmsvol2/pub_47373/60803144-4f8b-4d9d-98fd-e93ae9818079_4103.pdf

"An effort by a hypothetical chapter 7 trustee to rely on these reversionary interests to seize Local Council assets to satisfy claims against the Debtors would inevitably spawn fierce Local Council opposition and litigation, and face insurmountable obstacles, including:

• The contractual defense that attempted use of charter revocation or non-renewal to grab Local Council assets would constitute a lack of good faith and fair dealing.
• State franchise law that would bar a chapter 7 trustee of the Debtors from unilateral revocation or non-renewal of a Local Council charter to seize Local Council assets.
• The mandate under the terms of the very documents cited by the TCC that all obligations owed by a Local Council must be satisfied, or provision must be made for their satisfaction (including reserves for contingent claims against the Local Council), before any assets could even possibly revert to the Debtors
• The prohibition under state charitable organization laws on use of assets that are “donor restricted” or otherwise “institutional funds” under applicable law to satisfy general obligations of either a Local Council or the Debtors; such assets may only be used for the donor-restricted purposes or other charitable purposes.
• The legal limitation under the terms of the relevant documents that assets that might revert could be used only to advance the Scouting movement in the geographic area where a particular Local Council is incorporated, and are not available to satisfy general claims against the Debtors. On this basis, it is questionable whether any Local Council assets at all could ever revert to a chapter 7 trustee liquidating the Debtors, who by definition would not use such assets to advance the Scouting movement.7

As described further below, the net effect of these obstacles would be to severely limit – if not entirely preclude – any recoveries for holders of Abuse Claims against the National BSA as a result of a hypothetical chapter 7 trustee’s attempts to revoke Local Council charters. The Disclosure Statement must not contain statements that would erroneously suggest otherwise to holders of Abuse Claims."

 

Edited September 8, 2021 by CynicalScouter

[MYCVAStory]

Friendly reminder below.  I suspect that if the BSA releases its next plan soon it will produce a TCC Town Hall right after:

NOTICE OF VIRTUAL TOWN HALL MEETINGS HOSTED BY THE OFFICIAL COMMITTEE OF BOY SCOUT ABUSE SURVIVORS

The next TCC Town Hall will be held on Thursday September 9, 2021, at 5pm PDT/8pm EDT. 

Zoom link: https://pszjlaw.zoom.us/j/87520804555 (no registration required)

or

Join by phone: 888-788-0099, meeting id 875 2080 4555

[CynicalScouter]

On 9/8/2021 at 12:15 PM, CynicalScouter said:

Therefore the insurers are offering two options to the judge

1. Sign the original request they made for depositions which includes Reciprocity.
2. Strike out any mention of Reciprocity in the original motion and sign that instead. It is implied that should the judge opt to do that, the insurers will be right back in court the next day to demand a hearing on AVA/Reciprocity depositions.

The judge took Option #2: she struck any mention of Reciprocity in the final, signed order to allow depositions.

https://casedocs.omniagentsolutions.com/cmsvol2/pub_47373/e9c77a1e-c550-4aaa-8e1b-bde29deeb405_6184.pdf

and she added this in her own handwriting

Quote

"5. Due to notice concerns in Mr. Simon's letter [DI 6166], I have not included Reciprocity Industries, LCC in this Order. Nothing precludes Century, Hartford or any other person from separately pursuing discovery from Reciprocity Industries, LCC."

That's reaffirming what I noted above: the insurers will simply be back in court soon/tomorrow to get depositions out of Reciprocity.

This will take more time/drag things out even longer.

Edited September 9, 2021 by CynicalScouter

[CynicalScouter]

BSA just telegraphed it is planning on this taking a long, long time into 2022 at least.

In short, due to bankruptcy, civil proceedings against BSA AND "BSA related parties" (read: COs and LCs) were automatically stayed BUT those stays had to be extended past a certain point. The latest, dated July 21, stayed all state (and federal) civil proceedings against BSA until October 28, 2021.

This is the July order. https://casedocs.omniagentsolutions.com/cmsvol2/pub_47373/44cef109-6770-44d3-9f73-a16bbe1cb10c_185.pdf

The effect was that some 1000+ state civil cases were placed in stasis/paused pending the outcome of the bankruptcy, with some limited exceptions (the GSUSA vs. BSA suit is proceeding for example). That number is now up to at least 1200.

BSA has now filed for a new extension past October 28, 2021 and into at least January 10, 2022 and perhaps even longer.

https://casedocs.omniagentsolutions.com/cmsvol2/pub_47373/61073bc5-347a-4004-80c2-cac921f2fd0a_6187.pdf

And for those paying attention at home: that is just past the December 31, 2021 recharter deadlines.

Edited September 9, 2021 by CynicalScouter

[Eagle1993]

1 hour ago, CynicalScouter said:

BSA just telegraphed it is planning on this taking a long, long time into 2022 at least.

In short, due to bankruptcy, civil proceedings against BSA AND "BSA related parties" (read: COs and LCs) were automatically stayed BUT those stays had to be extended past a certain point. The latest, dated July 21, stayed all state (and federal) civil proceedings against BSA until October 28, 2021.

This is the July order. https://casedocs.omniagentsolutions.com/cmsvol2/pub_47373/44cef109-6770-44d3-9f73-a16bbe1cb10c_185.pdf

The effect was that some 1000+ state civil cases were placed in stasis/paused pending the outcome of the bankruptcy, with some limited exceptions (the GSUSA vs. BSA suit is proceeding for example). That number is now up to at least 1200.

BSA has now filed for a new extension past October 28, 2021 and into at least January 10, 2022 and perhaps even longer.

https://casedocs.omniagentsolutions.com/cmsvol2/pub_47373/61073bc5-347a-4004-80c2-cac921f2fd0a_6187.pdf

And for those paying attention at home: that is just past the December 31, 2021 recharter deadlines.

Didn't the TCC agree to the extension last time only because local councils promised to provide roster information along with CO details?  I wonder if Local Councils complied.  

[CynicalScouter]

8 minutes ago, Eagle1993 said:

Didn't the TCC agree to the extension last time only because local councils promised to provide roster information along with CO details?  I wonder if Local Councils complied.  

That was the March-to-July extention I believe.

[CynicalScouter]

1 hour ago, Eagle1993 said:

Didn't the TCC agree to the extension last time only because local councils promised to provide roster information along with CO details?  I wonder if Local Councils complied.  

Yep, the March-to-July extension. https://casedocs.omniagentsolutions.com/cmsvol2/pub_47373/881961_162.pdf

• Acknowledgment and Agreement
• Preservation of Rosters
• Roster Production Protocol - Local Council Rosters

Victims agree to extend temporary halt on Boy Scout lawsuits
 

Quote

The committee representing child sex abuse survivors in the Boy Scouts of America bankruptcy case has agreed to the extension of an injunction halting lawsuits against local Boy Scouts councils and sponsoring organizations.

In return for the extension, the BSA and local councils must provide the committee with information about local troop rosters that can help victims validate their claims, according to a court filing submitted Monday.

And then the July-to-October extension simply repeated the provision from the March-to-July: LCs needed to cooperate and produce, or keep producing, the rosters.

Edited September 9, 2021 by CynicalScouter

[RememberSchiff]

2 hours ago, CynicalScouter said:

...

BSA has now filed for a new extension past October 28, 2021 and into at least January 10, 2022 and perhaps even longer.

https://casedocs.omniagentsolutions.com/cmsvol2/pub_47373/61073bc5-347a-4004-80c2-cac921f2fd0a_6187.pdf

And for those paying attention at home: that is just past the December 31, 2021 recharter deadlines.

The judge has approved stay removals on a case by case basis.  IMHO, the judge should stand firm on the October deadline unless ...hmmm ...say a plan goes out for vote before Oct 28. If voted down then.... 

More of the same is self-perpetuating.

My $0.02,