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Sidley Austin Beats Hiring Challenge in Boy Scouts Bankruptcy

May 29, 2020, 8:51 PM

Sidley Austin LLP was approved to serve as bankruptcy counsel for the Boy Scouts of America after overcoming a conflict of interest objection raised by an insurance provider the law firm previously represented.

The firm has shown it’s a disinterested adviser and has established appropriate firewalls in the Boy Scouts’ Chapter 11 case, Judge Laurie Selber Silverstein of the U.S. Bankruptcy Court for the District of Delaware said in an oral ruling issued Friday.

Sidley’s retention by the Boy Scouts, which filed for bankruptcy in February to deal with the fallout from hundreds of child sexual abuse claims, came under fire because of the firm’s prior engagements with Century Indemnity Company, one of the organization’s insurers.

Century, a subsidiary of the Chubb Group, said Sidley has provided legal counsel to Chubb in over a dozen matters, including reinsurance disputes involving underlying policies that Century issued to the Boy Scouts. The firm gained privileged information about Chubb as a result, which should disqualify it from representing the Boy Scouts, Century said.

Sidley withdrew from representing Century in the weeks leading up to the Boy Scouts’ filing for bankruptcy. The firm says its work for the parties isn’t substantially related and doesn’t affect its disinterestedness. It defended its retention application during a hearing held earlier this month.

Convinced that any sensitive information Sidley learned during the course of its work for Century “has not and will not be passed on to BSA’s restructuring team,” Silverstein said in her ruling Friday that disqualification isn’t necessary.

The Boy Scouts have hired separate attorneys from Haynes and Boone to deal specifically with insurance issues, and that should also prevent any conflicts, she said.

The case is In re Boy Scouts of America, Bankr. D. Del., No. 1:20-bk-10343, Hearing 5/29/20.

To contact the reporter on this story: Alex Wolf in New York at awolf@bloomberglaw.com

To contact the editors responsible for this story: Laura Francis at lfrancis@bloomberglaw.com, Seth Stern at sstern@bloomberglaw.com