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Chapter 11 announced - Part 3 - BSA's Toggle Plan


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1 minute ago, ThenNow said:

Line up in terms of numbers or subject to defenses and, thus, attempts to reduce awards due to the running of the statute(s)? Or, line up in terms of face value?

 

To clarify, will they likely reduce awards to victims who were abused in States with expired SOL's?  Somewhere I saw that when claims receive point value, that is a factor.  Is there a case to remove claims that are time-barred?

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22 minutes ago, Eagle1970 said:

To clarify, will they likely reduce awards to victims who were abused in States with expired SOL's?  Somewhere I saw that when claims receive point value, that is a factor.  Is there a case to remove claims that are time-barred?

The insurers have mentioned time-bar defenses and this chart from the BSA says something, too. As they have said publicly, the TCC is deeply committed to seeking awards for all survivors and I have confidence they will fight for that. As to the application of time-bars, we shall see. I have legal arguments against the application in my case...I will keep battling. 

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1 hour ago, MattR said:

How is that possible?

If you look at National Only ... proceeds from liquidation would be $497M.

  • Then liquidation fees (lawyers, wind down costs, etc.) would be $48M
  • Secured claims (JPM + Pension Termination Claim) would be $337M
  • Employee and professional claims would be $69M
  • That results in $42M for everyone.  BSA predicts Abuse claims would be $36.5M best case.

If you look at Councils ... proceeds would be $1.8B (that assumes 0 sales of restricted land and a 60% return on unrestricted) ... essentially, that in a flash sale, you won't get much value.  Asset Value is actually $4.0B for LCs.

  • Then liquidation fees (lawyers, wind down costs, etc.) would be $210M
  • Secured claims (JPM + Pension Termination Claim) would be $1.14B
  • Employee and professional claims would be $11M
  • That results in $445M for everyone.  BSA predicts Abuse claims would be $405M best case.  

 

So, National is offering over $100M >> $36.5M if it were liquidated.  Councils are offering $450M > $405M if they were liquidated.

This is per BSA numbers.  This also assumes >$1B goes to the Pension Fund ... which I know is being debated.

 

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6 minutes ago, Eagle1993 said:

This is per BSA numbers.  This also assumes >$1B goes to the Pension Fund ... which I know is being debated.

"Debated" is certainly correct.  But all good debates should rely upon facts.  The TCC in its most recent objection below addressed the whole threat of the Pension being taken over by the PBGC and shed some light on its actual state.  It also hired its own professionals who focus on pension plan administration in bankruptcies.  If victims suspect that the BSA is using its "pension plan" as a place to place assets that should be used to address victim compensation they have good reason to feel that way.  See below:

vii. The Disclosure Statement Does Not Contain
Adequate Information Regarding the Pension Plans
79. The Disclosure Statement does not provide any meaningful information
regarding the Boy Scouts’ pension obligations other than describing a standard separation of the
Settlement Trust from the Pension Plan: “The Settlement Trust shall not have any liability to any
Person on account of the Pension Plan, including liability as a member of a “Controlled Group”
as defined in 29 U.S.C. § 1301(a)(14)(A) or on any other basis whatsoever.”
80. The Disclosure Statement should disclose that the Boy Scouts’ Retirement Plan
(the “Retirement Plan”) is currently overfunded – about $86 million overfunded as of February
1, 2021, according to Willis Towers Watson (the Retirement Plan’s Enrolled Actuary). The
primary drivers of the overfunded position are:
 Better than expected historical investment returns.
 Conservative funding of the Retirement Plan, including a voluntary $60 million
contribution made by the Boy Scouts in two instalments (April and May of
2019).
 The full freezing of the Retirement Plan effective August of 2020, which
eliminated any future accruals of benefits under the Retirement Plan.

81. The Retirement Plan liabilities are currently discounted at the gross expected rate
of return on assets (6.5%). Based on the Enrolled Actuary’s best estimate of future plan
experience (as certified annually in the Schedule SB of Form 5500, filed with the IRS), no
future contributions are expected to be required. If, in the aggregate, actuarial assumptions are
met going forward, the plan’s overfunding is expected to grow modestly over time from the
current level of ~$86 million.

82. The Boy Scouts have implemented a new Retirement Contribution Policy for
itself and the Local Councils, set at 12% of payroll effective February 1, 2021. After paying for
administrative expenses and the matching contribution in the 401(k) plan, the Boy Scouts intend
to contribute the residual amount into the Retirement Plan, which is estimated be more than $25
million annually from the Boy Scouts and Local Councils. If this approach is followed, the
Retirement Plan overfunding is expected to grow to $264 million by 2026 and $500 million by
2031, per Willis Towers Watson, the Boy Scouts’ own Enrolled Actuary. The overfunding
cannot be used for any purpose other than paying retirement benefits, PBGC premiums and
certain Plan-related administrative expenses.

83. The liquidation analysis further provides that “[u]nder a chapter 7 liquidation,
moreover, it is likely that the BSA’s defined benefit pension plan would be terminated and the
Pension Benefit Guarantee Corporation (the “PBGC”) would pursue its Claim of approximately
$1.1 billion against all members of the controlled group, which are jointly and severally liable
for such amounts and include the Related Non-Debtor Entities. The Boy Scouts expect that
under section 4068(a) of ERISA, the PBGC would successfully assert a lien arising as of the
termination date against each member of the controlled group in an amount not to exceed 30%
of the “collective net worth” of all members of the controlled group combined.
84. However, for any member of the controlled group that has filed for bankruptcy
prior to the termination, the automatic stay will generally prevent perfection of any lien under
ERISA. The PBGC’s claim could therefore be asserted jointly and severally against each
member of the controlled group in the full amount of the approximately $1.1 billion claim,
provided that the PBGC’s claim, to the extent not secured by a lien under ERISA, would likely
be treated as a general unsecured claim. The Liquidation Analysis assumes that the lien on
Related Non-Debtor Entity assets would represent 30% of Liquidation Proceeds remaining for
the Boy Scouts and Related Non-Debtor Entities combined after wind down costs and secured
debt, if any.
85. Under a chapter 7 liquidation, it is extremely unlikely that the Boy Scouts’
Retirement Plan would be terminated because there is no reason to do so.
As described above,
the Retirement Plan is fully funded on an ongoing basis, it has no current contribution
requirements, and there is potentially a large body of sponsors (the Local Councils) who could
assume the Retirement Plan in the Boy Scouts’ absence. The Tort Claimants’ Committee is not
aware of any precedent for the PBGC involuntarily terminating a plan under such
circumstances.
86. In sum, the Boy Scouts are attempting to use the pension as a way to shield cash
that can otherwise be used to pay the claims of childhood sexual abuse survivors. Over the next
five years, the Boy Scouts project that more than $25 million will be contributed each year for
the next five years towards the Retirement Plan when any such contribution is wholly
unnecessary. The Disclosure Statement and the Liquidation analysis fail to adequately disclose
the foregoing.

 

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1 hour ago, Eagle1970 said:

To clarify, will they likely reduce awards to victims who were abused in States with expired SOL's?  Somewhere I saw that when claims receive point value, that is a factor.  Is there a case to remove claims that are time-barred?

I don't think anyone can confidently say "likely" or not, yet.

The BSA plan (either the "Global" or the "Toggle" version) does say that a time-bar is a factor, but that the Trustee may still allow and pay such claims.  One reference would be starting at page 181 of the document (page 187 of the PDF). Under heading "Invalid Abuse Claims", the TDP says

Quote

Except as otherwise provided herein, if the Settlement Trustee finds that the evidence submitted by the Abuse Claimant in a Trust Claim Submission does not support a viable claim against a Protected Party in the tort system, the Settlement Trustee shall make a determination that the Submitted Abuse Claim is invalid [...].

Such determination may be based on [...] the Abuse Claim is time-barred or procedurally deficient, or [...]. The Settlement Trustee shall have discretion to determine whether a defect in the Abuse Claimant’s Proof of Claim or Trust Claim Submission should invalidate a  Submitted Abuse Claim. For example, if the Settlement Trustee finds that a Submitted Abuse Claim (including the related Proof of Claim, if any) is strong enough to warrant distribution on the claim from the Settlement Trust, the Settlement Trustee may find that the Submitted Abuse Claim is valid despite the defect or
untimeliness of the Claim and assign points to such Claim [...]

A few pages later, after the tiers of abuse with their base point values, several aggravating factors, and a couple other mitigating factors, we find (page 188 of the document, page 194 of the PDF),

Quote

(iii) Defectiveness. If the Abuse Claimant filed a defective Proof of Claim or filed its Proof of Claim after the Bar Date, or if the evidence provided by the Abuse Claimant indicates that the Submitted Abuse Claim is time barred based on prevailing law in the jurisdictions in which the abuse occurred, the Settlement Trustee may reduce the points assigned to such Claim by assigning a Point Scaling Factor of less than one. The
Settlement Trustee should weigh the strength of the evidence supporting the Submitted Abuse Claim to determine whether such Claim should receive mitigation on account of its defectiveness or untimeliness. The Settlement Trustee may assign a mitigating factor of zero (0) in cases where the Settlement Trustee determines that the Submitted Abuse Claim is fully barred, but may, however, assign a factor of up to one (1) if [...]

So the Trustee could assign a factor of 90% to most time-barred cases, or 10% to most of them, or 99% to some and 0% to others... the Plan doesn't say.

And of course the Plan hasn't even been approved for voting yet, let alone sent out for voting.

Some of the insurers have also mentioned in pleadings that they believe they have defenses against many of the "open window" or "look-back" cases, as well, such as that the "look-back window" laws are unconstitutional.

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53 minutes ago, DavidLeeLambert said:

Some of the insurers have also mentioned in pleadings that they believe they have defenses against many of the "open window" or "look-back" cases, as well, such as that the "look-back window" laws are unconstitutional.

Thanks for all these references. I know there are others helped by your direction and I encourage them to go to the source documents, as well.

Good luck to them with that approach. They have a passel of powerful states to take on, if they try it. I don't think it will go well with them, either in open water in the smaller pond of this case. I say, "Nonstarter," but they will swing at it anyway.

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Yes, Thanks for that info.  I have an almost constant feeling on the timing of this whole thing, that it can't be done by Summer or Fall or Winter.  I'll bet it is well into 2022 with just extensions to get it there.  I don't know how long BSA can hold out or on, but legal cases (as we all know) can drag on for years upon years.

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Buried on page fifty-two of document 4108 in the court filings is a series of statements that have the potential to shake the relationship between the BSA and the chartered organizations, both past and present,  to the core.

Historically, the relationship between the BSA and the chartered partners has rested upon the assumption that each party would uphold its commitments.  For decades most  chartered organizations have had the understanding (or at least the strong belief) that the BSA would provide legal defense and BSA provided insurance coverage in the event that a lawsuit was brought against the organization while sponsoring a BSA related program. 

In the document section which is posted below, the BSA appears to assert that insurance coverage may not be available for those chartered organizations that are facing the potential of lawsuits related to abuse claims.

The document appears to state:

(1) Before 1976 chartered organizations were not covered partners

(2) For many years during the 1980's, insurance coverage limits may already be exhausted or near exhaustion depending on the specific year.

(3) Before 1984 the BSA is stating that its agreements with the chartered organizations state that it will not provide primary coverage.

(4) After 1986, the chartered organizations would be responsible for high deductibles

It is hard to imagine that the CO's will not be stunned if this is indeed the case at a time where many are facing the prospect of major lawsuits.

And it is hard to imagine that the CO's will not have serious reservations about continued sponsorship in the future if this proves to be the case.

 

Section is pasted below:

 

https://casedocs.omniagentsolutions.com/cmsvol2/pub_47373/213bd53f-b44f-45c9-97fc-246bcb7ca06b_4108.pdf

Chartered Organizations’ Rights Under the BSA Insurance Policies Starting in or around 1976, the BSA included Chartered Organizations as insureds on its Insurance Policies. Specifically, the BSA added sponsors and Chartered Organizations as insureds. It is the BSA’s position that Chartered Organizations are not an insured under any of the BSA’s pre-1976 Insurance Policies; therefore, Chartered Organizations have no right to access the proceeds of these Insurance Policies to pay Abuse Claims.37 To the extent that the Chartered Organizations have rights to the BSA’s post-1976 Insurance Policies, those rights are limited as such Insurance Policies have deductible obligations (as noted above), aggregate limits, exhausted limits, settlements, exclusions, etc. For example, the BSA’s 1978 Insurance Policy includes a deductible endorsement that requires a $250,000 deductible be met for each occurrence; therefore, Chartered Organizations access to the 1978 to 1980 Insurance Policies is limited by the required deductible obligation. The Chartered Organizations’ access to the BSA’s 1980 to 1982 Insurance Policies are likewise limited given many of these policies are either insolvent, exhausted or released through settlement. Further, the BSA’s 1983 to 1985 Insurance Policies are also subject to aggregate limits, many of which have been substantially eroded based on pre-petition settlements and payments. Additionally, in 1984, the Insurance Policies included an endorsement that provided that the Insurance Policies would be primary insurance for Chartered Organizations. However, prior to 1984, there was no such endorsement or language in the BSA policies. Therefore, for all pre1984 claims, Chartered Organizations would not have primary access to the BSA’s Insurance Policies. The Chartered Organizations would likewise be responsible for the high deductibles on all post-1986 Insurance Policies. 37 The BSA understands that some Chartered Organizations have asserted they are insured under the pre-1976 Insurance Policies. The BSA disputes this contention.

Case 20-10343-LSS Doc 4108 Filed 05/16/21 Page 52 of 357 

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I’m new here. The discussions are high level. I’ve read through everything posted. A couple of posts have stuck out. First, the toggle plan makes no logical sense. As noted by others, how does BSA go forward without the LCs and the COs? They will be buried in litigation and in their own Ch 11’s. Windows or not, there is no escape. For example, MI councils are beating their chests about the cases being defensible on SOL in MI. 1600 cases and there will be more under the toggle. How will they defend thousands of lawsuits any more than BSA could defend against 84,000?

Second, how does BSA operate without the LCs and COs? Isn’t it like cutting off a pianist’s hands and then telling him to play anyway? What is BSA without its “boots on the ground”?

Finally, why would anyone vote for the toggle for the privilege of putting BSA back in to business for no money? 

KOSNOFF has a point: Isn’t the BSA signing it’s own death warrant meaning liquidation is the inevitable logical conclusion?


 

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1 hour ago, Muttsy said:

Finally, why would anyone vote for the toggle for the privilege of putting BSA back in to business for no money? 

Welcome to Scouter.com.

The BSA would absolutely prefer the global resolution plan.  It provides protection for their LCs and COs.  The issue is that the claimants do not believe the offer is close to enough to give the liability waivers. 
 

Why would anyone vote for the toggle?  Well, technically BSA is not even looking to get the toggle approved by claimants. They are asking the judge to enforce it through a cram down if the global plan is rejected.  
 

There are a lot of moving parts.  Hopefully some come to a resolution tomorrow during the hearings.  

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Posted (edited)
1 hour ago, Muttsy said:

KOSNOFF has a point: Isn’t the BSA signing it’s own death warrant meaning liquidation is the inevitable logical conclusion?

 

Because the BSA is non profit they have the control whether they go into Chapter 7.  They cannot be forced.  Welcome to the forum.

Edited by johnsch322
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8 hours ago, Muttsy said:

Second, how does BSA operate without the LCs and COs? Isn’t it like cutting off a pianist’s hands and then telling him to play anyway? What is BSA without its “boots on the ground”?
 

Girl Scouts do not have COs. It's a choice to be organized this way, not a requirement. 

I don't think most COs understand the risk and liability they take on when agreeing to be a CO. That liability should be 100% with BSA with the exception of actions done by the CO, of course.

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