Chapter 11 announced - Part 12 - District Court

[MYCVAStory]

43 minutes ago, Eagle1970 said:

I agree this could drag out.  Though I hope (for the sake of survivors who are aging by the day) I am proven wrong.

Agreed 100%.  But, Survivors still need to be thinking in year(s) unfortunately.  For some that means their Estates will receive awards instead of them.  That's tragedy heaped upon tragedy and yet another reason why Bankruptcy court is the WORST place for so many Survivors.  There will be reason for some optimism at some point but history will not judge this whole episode as a good one for Survivors.

[swilliams]

Four and a half months without checking in, and was hoping for some positive news.  I guess the news from the District Court hearings isn't negative, so there is that.  Didn't realize insurers could be likely to receive a stay and could drag this out another year.  😒

Our Council, and therefore some of the adults in our Troop, are pushing for Jamboree, but we have a contingent going to Philmont this year, we're already signed up for our regular summer camp, and with the $1,100+ price tag, it doesn't look like there are more than one or two scouts interested in going. 

[Eagle1993]

I see a few milestones to watch for ..

1. Purdue Pharma appeals outcome.  I believe the district court ruling in Purdue Pharma did cause a bit of a quake through the bankruptcy courts.  An appeals ruling against the plan could perhaps be used to either reject BSA's plan or justification for a stay if the BSA district court approves the plan.  Prof Jacoby has mentioned this in the past.
2. BSA District Court ruling ... per Prof Jacoby, now it is more and more likely we will see Purdue appeals ruling first as we wait while for the District Court ruling.  One good thing ... the BSA District Court judge has already told Biden he is retiring this year, so it likely won't take all year. 
3. Appeals of District Court ruling ... from various articles and messages here, it seems clear that either side will appeal the District Court ruling, regardless of outcome.
4. Appeals court stay ... will the appeals court in BSA stay the effective date of the plan?  
5. BSA's actions ... what will BSA do?  As mentioned, if there is a stay, we could be looking at 1 year more of limbo.  Will BSA continue to limp until mid 2024?
6. Will any insurance company settle and drop appeals?  
7. Will the judge allow payment of the fees from the Coalition & other law firms?

Time will tell...

 

 

[Eagle1970]

So if the appeals drag this out for a couple of years and if that causes BSA to file Chapter 7 liquidation, what is the bottom line on survivor's recovery?

[mrjohns2]

1 hour ago, Eagle1993 said:

Purdue Pharma appeals outcome.  I believe the district court ruling in Purdue Pharma did cause a bit of a quake through the bankruptcy courts.  An appeals ruling against the plan could perhaps be used to either reject BSA's plan or justification for a stay if the BSA district court approves the plan.  Prof Jacoby has mentioned this in the past.

At first I was ready to type "but, but, but that family has so much money..." The counter to that is the councils have so much money in assets. 

[ScouterDavid]

18 hours ago, Eagle1970 said:

So if the appeals drag this out for a couple of years and if that causes BSA to file Chapter 7 liquidation, what is the bottom line on survivor's recovery?

My understanding is that if BSA files Chapter 7, it is essentially over for survivors, meaning no payouts for anyone.

The pension plan would be taken over by the PBGC and hundreds of millions of dollars would be sought by the government. It is also my understnading that the government is first in line for any assets. Finally, since the plan is a single employer plan, every LC could be held liable for the pension underfunded shortfall. A complete disaster for scouting in general if BSA has to file Chapter 7. 

I'm not an attorney so if someone has better informaiton, please correct me.

Edited February 15, 2023 by ScouterDavid

[fred8033]

26 minutes ago, ScouterDavid said:

My understanding is that if BSA files Chapter 7, it is essentially over for survivors, meaning no payouts for anyone.

The pension plan would be taken over by the PBGC and hundreds of millions of dollars would be sought by the government. It is also my understanding that the government is first in line for any assets. Finally, since the plan is a single employer plan, every LC could be held liable for the pension underfunded shortfall. A complete disaster for scouting in general if BSA has to file Chapter 7. 

I'm not an attorney so if someone has better information, please correct me.

I am not sure it's that cut and clear.  I agree on PBGC priority over lawsuits.  To what extent LCs are pulled in, I'm not sure.  To what extent that forces LC finances, I'm not sure.  It is clear, Chapter 7 would be a massive shift / delay / new cost / etc.  

[Eagle1993]

BSA will not go Ch 7.  Based on their most recent cash burn they can last over a year without looking at Ch7.  Even after that year they could get more money from councils, etc.  Ch 7 is utter disaster.  BSA trademarks and program materials would be sold.  All properties sold. There are legal arguments that would be pursued to pull in all council assets.  Then CO and LCs would be sued.  BSA would likely not survive.  Ch 7 was a threat to get approval of a plan. 

If it does happen, who knows the outcome for claimants financially.  I think it would be bad for everyone excluding those who simply want BSA to die as they would likely get their wish. 

[fred8033]

25 minutes ago, Eagle1993 said:

Ch 7.   ... I think it would be bad for everyone excluding those who simply want BSA to die as they would likely get their wish. 

Don't be that sure that chapter 7 would kill BSA. 

LCs could form an alliance to purchase the BSA national trademarks, property, etc and re-open BSA.  LC's have a business relationship with BSA national; not a suicide pact.  Very similar to a franchise.  If the franchise corporation bankrupts, that does not automatically doom the franchise members or transfer franchise corporation debts to the individual franchise members.  

The one thing Chapter 7 guarantees is re-starting the abuse lawsuits; new massive legal costs; and, years and years to resolve NEW legal questions.   We could be looking at a decade of new legal issues with chapter 7.

Edited February 15, 2023 by fred8033

[clbkbx]

16 minutes ago, fred8033 said:

that does not automatically doom the franchise members or transfer franchise corporation debts to the individual franchise members.  

Wouldn’t the LCs then be looking for bankruptcy protection individually as the lawsuits against them would move forward? I don’t think it’s quite like a non-culpable franchise member. 

[Eagle1993]

23 minutes ago, fred8033 said:

Don't be that sure that chapter 7 would kill BSA. 

LCs could form an alliance to purchase the BSA national trademarks, property, etc and re-open BSA.  LC's have a business relationship with BSA national; not a suicide pact.  Very similar to a franchise.  If the franchise corporation bankrupts, that does not automatically doom the franchise members or transfer franchise corporation debts to the individual franchise members.  

The one thing Chapter 7 guarantees is re-starting the abuse lawsuits; new massive legal costs; and, years and years to resolve NEW legal questions.   We could be looking at a decade of new legal issues with chapter 7.

1) The franchise agreement isn't clear. Some have argued that the BSA trustee could pull all LC charters.  If that charter is pulled, the agreement states National owns the remaining assets.  LCs could fight that but that would be a court fight.  In the meantime, they couldn't use the trademarks or program material.  Why did BSA include a full national (including LC) liquidation in their analysis... Because of this theory.

2) How much would they pay for the trademarks and program material?  $100M?  $400M?  The trustee would drive that price up as high as possible.  

3) It is estimated that 1/3 of councils would immediately face bankruptcy due to lawsuits. COs would also be directly hit and many more would flee.

4) Remaining LCs would face decades of future lawsuits.

5) Insurance companies would avoid BSA or jack up rates until the situation is resolved.

6)Donations would dry up as no one would want their money going to bankruptcy payments. National already sees this... Once their protection is gone, FOS would be hit.

BSA knows it is a disaster which is why they never even seriously considered the mini Ch7 offered by TCC (national only bankruptcy+ buyout by council).  A full CH 7 could be the end. 

[fred8033]

17 minutes ago, clbkbx said:

Wouldn’t the LCs then be looking for bankruptcy protection individually as the lawsuits against them would move forward? I don’t think it’s quite like a non-culpable franchise member. 

Agreed, but not all state laws are the same and not every LC had the same number of incidents.  A good number of LCs could survive and/or go thru chapter 11 also.  ... and then chapter 7 if needed.

[HashTagScouts]

1 hour ago, Eagle1993 said:

BSA will not go Ch 7.  Based on their most recent cash burn they can last over a year without looking at Ch7.  Even after that year they could get more money from councils, etc.  Ch 7 is utter disaster.  BSA trademarks and program materials would be sold.  All properties sold. There are legal arguments that would be pursued to pull in all council assets.  Then CO and LCs would be sued.  BSA would likely not survive.  Ch 7 was a threat to get approval of a plan. 

If it does happen, who knows the outcome for claimants financially.  I think it would be bad for everyone excluding those who simply want BSA to die as they would likely get their wish. 

Properties would become a significant issue. National properties would be a matter of their own (and with outstanding liabilities on them, can't see them being sold for anything other than a loss). Many Councils could be in real bad straits, as many properties today are not outright owned by Councils, they are held in trusts that grant managerial control/usage to Councils. If the Council has to file Ch. 7, those are not outright assets for them, and exactly what happens to some of them could be long costly legal cases trying to resolve the "ownership issue".  

[Eagle1993]

1 hour ago, fred8033 said:

Agreed, but not all state laws are the same and not every LC had the same number of incidents.  A good number of LCs could survive and/or go thru chapter 11 also.  ... and then chapter 7 if needed.

200 BSA councils going through bankruptcy over a 10 year period while National BSA goes Ch 7 is not going to lead to success.  

[fred8033]

9 minutes ago, Eagle1993 said:

1) The franchise agreement isn't clear. Some have argued that the BSA trustee could pull all LC charters.  If that charter is pulled, the agreement states National owns the remaining assets.  LCs could fight that but that would be a court fight.  In the meantime, they couldn't use the trademarks or program material.  Why did BSA include a full national (including LC) liquidation in their analysis... Because of this theory.

2) How much would they pay for the trademarks and program material?  $100M?  $400M?  The trustee would drive that price up as high as possible.  

3) It is estimated that 1/3 of councils would immediately face bankruptcy due to lawsuits. COs would also be directly hit and many more would flee.

4) Remaining LCs would face decades of future lawsuits.

5) Insurance companies would avoid BSA or jack up rates until the situation is resolved.

6)Donations would dry up as no one would want their money going to bankruptcy payments. National already sees this... Once their protection is gone, FOS would be hit.

BSA knows it is a disaster which is why they never even seriously considered the mini Ch7 offered by TCC (national only bankruptcy+ buyout by council).  A full CH 7 could be the end. 

I agree with most if not all of what you write.  Franchise agreement liability is not clear.  Legal sources have argued there is strong separation due to land ownership, taxes filing, etc that has been historically done.  But then again, courts often find a nuanced decision.  I would not be surprised on any final result.