Third Circuit Panel Examines Survivor Rights vs. Settlement Stability

A federal appeals court panel in Philadelphia indicated on November 6, 2024, that it would maintain the Boy Scouts of America’s $2.46 billion settlement addressing sexual abuse claims. During oral arguments, the three-judge panel of the 3rd U.S. Circuit Court of Appeals tackled whether non-bankrupt entities can receive lawsuit immunity through the bankruptcy process. The deal shields local councils and churches that ran scouting programs from future lawsuits despite these organizations not declaring bankruptcy themselves. Judge Marjorie Rendell stated that overturning the settlement would cause it to “implode,” disrupting compensation already flowing to survivors.

5 Key Points

  • The settlement addresses 82,500 individual claims of childhood sexual abuse by Boy Scout troop leaders.
  • A group of 144 survivors seeks to preserve lawsuit rights against local scouting organizations.
  • The Boy Scouts entered bankruptcy in February 2020 as states eliminated time limits on abuse claims.
  • Dismantling the deal would require survivors to return compensation payments already received.
  • Local councils contributed property and assets in exchange for legal protection.

Purdue Pharma Ruling Sets Stage for Challenge

Attorney Delia Lujan Wolff, representing 75 abuse survivors, cited the Supreme Court’s Purdue Pharma decision as precedent against shielding non-bankrupt entities. Wolff highlighted organizations like the Catholic Archdiocese of Agana in Guam that would receive immunity without declaring bankruptcy. “Nobody can bargain away my clients’ claims without their consent, not even other survivors,” Wolff stated, underlining survivors’ rights to pursue individual legal action.

Bankruptcy Process Forces Survivors to Relive Trauma

Attorney Evan Smola, representing survivors backing the agreement, revealed the personal cost of seeking compensation. Survivors faced hours of questioning about their abuse experiences, with bankruptcy professionals scrutinizing each claim. “These survivors tore away the scar tissue and faced their abuse head on,” Smola told the court. The Boy Scouts organization noted that local councils sold real estate and assets to fund the settlement trust.

State Law Changes Triggered BSA Bankruptcy

The Boy Scouts filed for Chapter 11 protection in February 2020 after multiple states removed statutes of limitations on abuse claims. The 2022 bankruptcy court created a $2.46 billion trust, combining cash, property, and insurance settlements. The Third Circuit appeal, case number 23-1664, now tests whether non-bankrupt entities can shield themselves through another organization’s bankruptcy.

Settlement Distribution Creates Legal Hurdles

The appeals court faces a concrete problem: compensation payments have started flowing to survivors. Attorneys defending the deal point to the “equitable mootness” doctrine, which blocks courts from undoing bankruptcy settlements when reversal would harm beneficiaries. The Boy Scouts have begun liquidating assets and distributing funds, making any attempt to unwind the deal legally complex.

Mass Tort Bankruptcy Precedent Hangs in Balance

The Third Circuit’s ruling will shape how courts handle third-party releases in large-scale abuse cases. The similarities to Purdue Pharma raise questions about using bankruptcy to resolve institutional abuse claims. This settlement structure could affect future instances in which multiple organizations share responsibility for past misconduct.