Boy Scouts Beat Bankruptcy Plan Appeal Over Liability Shield (3)

The Boy Scouts of America’s bankruptcy reorganization plan and $2.46 billion child sex abuse settlement has advanced too far to be unwound, a federal appeals court ruled.

A trust established to administer the largest child sex abuse settlement in US history can continue its work distributing funds to about 82,000 abuse survivors without pause, the US Court of Appeals for the Third Circuit held Tuesday.

The appeals court, in a majority opinion penned by Judge Cheryl Ann Krause, said it would decline a small group of abuse claimants’ “invitation to reverse the Confirmation Order at this late stage and will dismiss their appeals because the Bankruptcy Code precludes us from reaching the merits of their claims.”

The appeals court also rejected a challenge from a group of insurers, but reversed a lower court order with respect to separate insurer claims brought by Allianz.

“The Court’s decision is a resounding victory for survivors of historical abuse in Scouting, and it is the culmination of more than five years of tireless efforts,” the restructured youth group, now known as Scouting America, said in a statement. “By dismissing these appeals, the Court has assured survivors that the Settlement Trust established under BSA’s plan can continue its essential work of providing financial compensation to survivors.”

The plan, which went into effect in 2023, came under fresh scrutiny last year after the US Supreme Court ruled in Harrington v. Purdue Pharma that bankruptcy plans can’t force creditors to give up legal claims against nonbankrupt third parties without their consent.

A substantial majority of the abuse claimants voted in favor of the plan, but about 150 argued that it unlawfully stripped them of their right to sue the Boy Scouts’ nationwide network of local councils and organizations that traditionally sponsored scouting activities, including various church entities.

They argued that targeted relief could be granted without upsetting the bulk of the settlement trust’s work to date.

The youth organization pieced together its abuse settlement plan through thousands of hours of mediated negotiations following its decision to file for bankruptcy in 2020. The deal, which narrowly saved the Boy Scouts from complete collapse, is structured to compensate abuse survivors based on the harm they endured from scout masters and volunteers.

The plan relies on a series of heavily negotiated deals with primary insurers, local councils, and sponsor organizations that agreed to make multimillion-dollar contributions to the trust in exchange for releases from future lawsuits.

‘Bitter Pill to Swallow’

In its ruling Tuesday, the panel noted that the survivors’ trust has already distributed more than $120 million.

Allowing even a small number of claimants to opt out of the settlement now “would fundamentally undermine” the bargain struck between settling parties before the Supreme Court’s Purdue opinion last year and affect the validity of settling insurers’ agreement to buy back their policies in exchange for releases, it said.

“The Bankruptcy Code prevents us from disrupting the nonconsensual third-party releases in BSA’s Plan at this late stage,” the court said. “If proposed today, the Plan would be unconfirmable in the wake of Purdue and the Lujan and D&V Claimants could not have their claims released without their consent. And that temporal happenstance, we recognize, is a bitter pill to swallow.”

Gilion Dumas of Dumas & Vaughn LLC, an attorney who fought against the plan’s third-party releases, said she and her clients are disappointed with the “harsh result” of the court’s decision and are considering appeal options.

“This is a sad day for all victims of sexual abuse in Scouting,” Dumas said in a statement. “The court did not address the merits of our appeal, but dismissed on a statutory technicality.”

The court also rejected challenges raised by several Boy Scouts insurance providers that refused to settle their coverage liabilities in bankruptcy, saying the plan keeps intact their contractual rights and defenses to paying out claims under their applicable policies.

In its sole disagreement with the lower courts, the Third Circuit said that the Allianz insurers should be allowed to recover excess claims they incur in coverage litigation from the insurers that settled with Boy Scouts.

“The judgment reduction clause impermissibly releases contribution and indemnification claims the Allianz Insurers otherwise would be able to assert,” the opinion said.

Judge Anthony J. Scirica joined the majority. Judge Marjorie O. Rendell wrote a concurring opinion.

Boy Scouts is represented by White & Case LLP, Morris Nichols Arsht & Tunnell LLP and Perkins Coie LLP. The appealing claimants are represented by Lujan & Wolff LLP Dumas & Vaughn LLC and Gellert Seitz Busenkell & Brown LLC.

Certain appealing insurers are represented by Gibson Dunn & Crutcher LLP and Willkie Farr & Gallagher LLP, among others. The settling insurers are represented by O’Melveny & Myers LLP and Wilmer Cutler Pickering Hale & Dorr LLP, among others. The Allianz insurers are represented by McDermott Will & Emery LLP and Troutman Pepper Locke LLP, among others.

The case is In re Boy Scouts of America, 3d Cir., No. 23-1666, Opinion 5/13/25.