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Chapter 11 - A Game of Torts


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The Game of Torts

You are invited to play along and respond to the question at the end with this fictional account based on real world events. 

 

You shift restlessly in your seat as the judge stops her tirade and looks at you, waiting for your response.

As a member of the court appointed mediation team, during the past year and a half, you have had a unique vantage point to witness one of the most complex and emotional cases that has ever unfolded in federal court. 

Now in the early fall, it seems that the events are poised to soon reach a climactic moment – although the exact form is still to be determined.

Even though she does not show it in the courtroom, the judge is clearly exasperated today.  A twitter post by a highly vocal attorney for the abuse claimants has irritated her, proclaiming that the process is tantamount to a second round of assault upon the victims  She unconsciously taps the manicured fingers of her left hand onto the tabletop in the small conference room adjacent to the judge’s chambers. All of the while, a portrait of President Biden has been staring down upon you. Is that a smile or a bit of a smirk on his face, you try to decide?

You glance at the notes on your legal pad.

Mediation has reached a stalemate with the parties still far apart on any agreements including not only issues of settlement dollars but also feasible actions to root out and prevent future abuse. It did not go well during mediation in late winter held in Miami with some key parties leaving feeling slighted and the mood has not improved since.  The gap in proposed settlement amounts is not in the millions but the billions of dollars.

It is very clear that neither the proposed global settlement nor the toggle plan despite a series of tweaks will be acceptable to anywhere near 2/3 ‘s of the claimants.

Insurers which looked to be the major payors in any settlement are now stating that the amounts being proposed by the representative of the abuse claimants will force them into their own bankruptcy.

 The federal agencies ensuring the protection of employee pension funds as well as the secured creditors and others have quietly but persistently reminded the court of the priority of their claims.

 For the past several weeks, the national BSA organization has been adamant that it is in a critical cash flow position with professional fees exceeding ten million dollars a month draining it of reserves and a threatened freeze on its line of credit. In addition, the impact of the pandemic and its resulting membership losses has thrown their future in question. Their financial statements appear to be support that they are rapidly nearing a crisis point.

The TCC and legal representatives of the claimants have essentially given the claimants the go ahead to proceed with lawsuits against the local councils and chartered organizations where the statute of limitations is not a prohibiting factor. This is likely to trigger legal actions which will last perhaps for years in overwhelmed state and local courts. And they are pledging to work with victim’s advocate groups to extend the SOL’s in the states which have not yet done so, citing this case as the prime example of why it is needed.

A number of Scout councils are working on their own bankruptcy plans or mergers. A record number of Scout camps are going on the market due as much to the impact of the pandemic as well as the bankruptcy and the looming lawsuits.

The judge acknowledged that this is likely to be the most impactful case that she will ever deal with in her professional career. And probably the most challenging. Her desire is to craft an agreement that would be responsible and respectful to the abuse victims whose stories have touched her but also would allow the mission of Boy Scout organization to continue whose role she respects.

You glance at her folder and notice a brightly colored brochure promoting the small resort town of Sorenburg in Switzerland. She is eagerly looking forward to some time away once this case is settled and the pandemic subsides.  Ironically, you mentally note that the resort is not that far from a major world Scout camp in the inter-lake region of Switzerland.

Despite the frustrations, there has been some progress over the spring and summer.  The local councils for the purpose of this bankruptcy are seen as affiliated but independent entities. The national BSA essentially resolved this question in the mind of the judge when they proposed the toggle plan separating themselves from the local councils as a viable option.

The other issue regarding the liability of the insurers was also resolved – at least in a basic sense. There was a ruling that they do have a legal obligation under the terms of the policy with the BSA. However, the specific amounts remains very much a question to be determined.

 Options have seemed to narrow and some of them feel more like options of last resort.

 An unprecedented cramdown on abuse claimants to force a settlement?

 Pressuring the national BSA toward a Chapter 7 liquidation?

 She interrupts your thoughts as she repeats her question to you again –

 

What would you advise me to do? 

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35 minutes ago, gpurlee said:

What would you advise me to do? 

Fire everyone at national.  Executives and volunteers.  

Order an election to replace national officers.  

Give the new national council a little time to come up with a better plan.

 

Edited by David CO
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Posted (edited)

Lol - not sure firing everyone is within the Judge's domain. However, I suppose a liquidation achieves almost the same result.

Seriously, there will be a lot of questioning and second guessing for years to come of what could and should have been done differently at the national level from sixty years ago to today. 

 

Edited by gpurlee
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33 minutes ago, David CO said:

Fire everyone at national. 

1) The judge cannot order that.

2) Under the terms of the BSA charter as approved by Congress, BSA leadership selects its own successors. There is no "election". You don't get to vote on who is on the executive board or for any position.
 

Quote

 36 U.S. Code § 30903. Governing body

(a) Executive Board.—

An executive board composed of citizens of the United States is the governing body of the corporation. The number, qualifications, and term of office of members of the board are as provided in the bylaws. A vacancy on the board shall be filled by a majority vote of the remaining members of the board.

 

Edited by CynicalScouter
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35 minutes ago, CynicalScouter said:

1) The judge cannot order that.

2) Under the terms of the BSA charter as approved by Congress, BSA leadership selects its own successors. There is no "election". You don't get to vote on who is on the executive board or for any position.

Interesting.  It says BSA was incorporated in the District of Colombia.  If DC becomes a state, does BSA cease to be a corporation?  It would almost be worth giving DC statehood if it would wipe out the national council.  Almost.

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10 minutes ago, David CO said:

If DC becomes a state, does BSA cease to be a corporation? 

Why would it?

First, the plan for DC statehood would still leave a District of Columbia. The residential portions of what is now the District of Columbia would become Washington, District of Douglass. There will still be a District of Columbia.

Second, even if the entirely of the District of Columbia was eliminated, the successor state would be the place of incorporation.

As I think I've explained to you before: the only way to get the kind of complete and total elimination of the entire BSA National Executive Board and every BSA executive employee you want it for Congress to rescind the charter.

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7 hours ago, gpurlee said:

The Game of Torts

You are invited to play along and respond to the question at the end with this fictional account based on real world events.

What would you advise me to do? 

Back to OP,

Simplify.

A Chapter 11 bankruptcy is filed by one corporation. If that corporation wishes to add its independent affiliates for whatever mutual benefit to that bankruptcy, that corporation must find the means to do so. Within the BSA Charter and By-laws, the means is to revoke the charter of independent affiliates (local councils).

Affiliates (Local Councils) who remain independent along with their representatives are removed from these proceedings. Stays ordered by this bench for those independent councils are hereby released.

All property assets are unrestricted. Any seeking restrictions should apply as creditors. There is no requirement of property assets for the purpose of the Boy Scouts of America in the Congressional Charter of the BSA.

Intellectual property is restricted by the Congressional Charter.

Regarding victim compensation, it is not about arbitrary allocations of money rather the best help to heal and defense against future abuse. Show the court what that best help is and what additional safety measures need to be taken.

My $0.01,

Edited by RememberSchiff
grammar...again
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Agree with simplify.   LCs and COs are pushed out of the court room and settlement.  National insurance policies are given to the settlement trust.  The trust can either settle with the insurance companies or sue them in District Court.   BSA HA bases including Arrow are added to the pot and the Philmont mortgage is determined to be unsecured (Arrow is secured).  Done.  

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8 hours ago, RememberSchiff said:

A Chapter 11 bankruptcy is filed by one corporation. If that corporation wishes to add its independent affiliates for whatever mutual benefit to that bankruptcy, that corporation must find the means to do so. Within the BSA Charter and By-laws, the means is to revoke the charter of independent affiliates (local councils).

We were asked to give advice to the judge.  What should the judge do?  Are you saying the judge should revoke the council charters?

Edited by David CO
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13 hours ago, CynicalScouter said:

First, the plan for DC statehood would still leave a District of Columbia.

Under the current house legislation, that's true.  I don't think the house plan has a chance of passing the senate.

 

13 hours ago, CynicalScouter said:

Second, even if the entirely of the District of Columbia was eliminated, the successor state would be the place of incorporation.

Possibly, but the federal charter would cease to exist.  It would be a state corporation, subject to the laws of that state.  A state corporation can be liquidated in bankruptcy court.

 

13 hours ago, CynicalScouter said:

the only way to get the kind of complete and total elimination of the entire BSA National Executive Board and every BSA executive employee you want it for Congress to rescind the charter.

By eliminating the District of Columbia, congress would be rescinding the charter.  The charter specifies the District of Columbia.   Eliminate DC, and the charter disappears.

 

Edited by David CO
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Personally, I would favor returning the District of Columbia to Maryland.  This should be a bipartisan decision, with a constitutional amendment supported by both political parties.  The District of Columbia is an anachronism from an earlier era, which no longer serves any good purpose.  We should fix it without politicizing the issue.

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3 hours ago, David CO said:

Possibly, but the federal charter would cease to exist.  It would be a state corporation, subject to the laws of that state.  A state corporation can be liquidated in bankruptcy court.

Again, that is simply not true. Where on earth are you getting this idea?

1) As I've said before and I'll say again, the end result of this is that there will STILL BE a (much smaller) District of Columbia. The charter isn't going away David. Get that through your head.

2) Let's play out your delusion that suddenly the District of Columbia will cease to exist. The charter specifies District of Columbia, however there is a understanding in law that the successor entity remains as valid. The District of Douglass AS SUCCESSOR STATE TO THE DISTRICT OF COLUMBIA would be the place of incorporation. This has happened over and over and over the centuries. If, for example, you were incorporated in the Territory of Arizona, the fact that it is now the State of Arizona does NOT void all charters, articles of incorporation, acts of Congress (like a congressional charter), etc. that use the term "Territory of Arizona" because "State of Arizona" was considered the direct successor.

In other words, that charter does not suddenly "disappear".

3) But let's play through your delusion for a second. There are over 100+ organizations with Congressional charters under Title 36, all of which specify that the place of incorporation is the District of Columbia. Do you really think the creation of a state suddenly voids them? Seriously? Is your knowledge of law that poor

4) State or federal corporations don't matter for liquidation purposes. What does matter is not-for-profit: a not-for-profit cannot be FORCED to liquidate/Chapter 7. It can voluntarily Chapter 7 if it requests, however.

So no, DC statehood will have precisely ZERO impact on the BSA charter.

If you want it revoked/rescinded because you want to fire literally every BSA staffer and BSA Board member, you'll need Congress to repeal the charter (36 USC Code, Chapter 309).

Edited by CynicalScouter
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13 hours ago, Eagle1993 said:

Agree with simplify.   LCs and COs are pushed out of the court room and settlement.  National insurance policies are given to the settlement trust.  The trust can either settle with the insurance companies or sue them in District Court.   BSA HA bases including Arrow are added to the pot and the Philmont mortgage is determined to be unsecured (Arrow is secured).  Done.  

Agree, Arrow WV is a "subordinate company to BSA" so they are part of Debtor in Chapter 11. 

Concerns have been expressed that Arrow WV is being used to hide assets ...act as a shell company. If true, the Judge should dismiss this Chapter 11 case due to bad faith by the Debtor (the Good Faith Principle in the Bankruptcy Code).

Another $0.01,

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