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Chapter 11 Announced - Part 6 - Plan 5.0/TCC Plan TBD


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FYI: Interesting article I read about retroactive extension of statutes of limitations in civil matters. While the U.S. Supreme Court has said since Calder v. Bull (1798) that such things do not violate the U.S. Constitution's prohibition on states passing ex post facto laws (holding, in part, that the provision applies only to CRIMINAL law) state constitutions have been read in such a way that such an attempt to extend civil statutes of limitations would be a violation of the defendants under the state constitution's due process and ex post facto provisions. 24 states have a per se rule against such statutes and two others (New York and Wisconsin) only allow it for "exceptional" circumstances.

https://digitalcommons.law.villanova.edu/cgi/viewcontent.cgi?article=3446&context=vlr

"Departing from the federal approach, twenty-four states have held that a retroactive extension to a statute of limitations that revives an otherwise time-barred claim is per se impermissible, meaning that it is absolutely invalid in any context.

  • Seven of the per se states depart from the federal approach because of specific prohibitions against retroactive legislation in their own state constitutions. (Alabama, Colorado, Missouri, New Hampshire, Oklahoma, Tennessee, and Texas)
  • Eleven per se states (Arkansas, Florida, Illinois, Louisiana, Nebraska, North Carolina, Rhode Island, South Carolina, South Dakota, Utah, and Virginia) depart from the federal approach even further by holding that retroactive extensions of the statute of limitations are a direct infringement on a vested property right that is created under their state constitutions. In these states, once a claim has time-lapsed, the potential defendant enjoys a vested property right and no longer needs to defend against a particular claim. Under this type of constitutional interpretation, unlike the federal approach, any infringement on that right to be free from suit is considered a violation of substantive due process and invalid legislation.
  • Six states hold retroactive extensions of the statute of limitations to be invalid per se without relying on their state constitutions to support this position.
    • Five states embrace the per se invalid approach but do not cite any source in their constitution or general statutes that create a protected vested right. In these five states—Indiana, Kentucky, Maine, Oregon, and Pennsylvania—the complete prohibition against revival of time barred claims is a rule of construction as opposed to a statutory or constitutional restriction.
    • Vermont’s prohibition on retroactive legislation is rooted in a state statutory provision, rather than any limitation imposed by the Vermont constitution."
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11 minutes ago, fred8033 said:

I'm still trying to understand why LCs would kick in the money if there is a strong question whether they will really be protected or honored. 

Technically, they didn't. What they did was sign "letters of intent": IF the BSA plan goes into effect and IF the LCs are covered by such a plan THEN the LCs will pay out.

No plan that covers LCs, no money from the LCs.

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15 minutes ago, CynicalScouter said:

Technically, they didn't. What they did was sign "letters of intent": IF the BSA plan goes into effect and IF the LCs are covered by such a plan THEN the LCs will pay out.

No plan that covers LCs, no money from the LCs.

... BUT ... Say a year from now a victim sues a LC in state court ... Suit asserts that LC is not legally protected because it was in bankruptcy.  Finds in favor of victim ... a believable finding.   Gets appealed.  Goes up.  Eventually, the whole protection could be found illegal per US trustee current position.  

At this point, the money is gone.  It's in the trust and a good amount is probably spent.  

I doubt the LC could retract the money in a timely way.

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9 minutes ago, fred8033 said:

Say a year from now a victim sues a LC in state court ... Suit asserts that LC is not legally protected because it was in bankruptcy.

There is always a risk that down the line an appeal in the context of this bankruptcy to overturn the plan in FEDERAL COURT via a FEDERAL appeal could happen. That's why there's no chance of disbursements until after the appeals are exhausted.

As for a suit against the LCs in STATE court, the idea is that under the bankruptcy plan ALL claims against the LC shift to the settlement trust. If someone walked into STATE court, the LC would point to the bankruptcy court's decision and order and say, under res judicata, that the LC's liability was terminated as determined by another court of competent jurisdiction. If the victim wants to sue the settlement trustee/settlement trustee in order to get money, they are free to do so. But a state court is NOT and cannot strike down the decision of a federal court. Supremacy clause plus res judicata will kill that suit.

EDIT: To be clear, res judicata holds that if a court enters a judgment, another court can NOT re-adjudicate the case. If the bankruptcy court rules that that LCs liability is over/has been shifted to the settlement trustee, NO other court (except a federal appellate court) can rule differently.

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2 minutes ago, CynicalScouter said:

There is always a risk that down the line an appeal in the context of this bankruptcy to overturn the plan. That's why there's no chance of disbursements until after the appeals are exhausted.

As for a suit against the LCs, the idea is that under the bankruptcy plan ALL claims against the LC shift to the settlement trust. If someone walked into court, the LC would point to the bankruptcy court's decision and order and say, under res judicata, that the LC's liability was terminated as determined by another court of competent jurisdiction. If the victim wants to sue the settlement trustee/settlement trustee in order to get money, they are free to do so. But a state court is NOT and cannot strike down the decision of a federal court. Supremacy clause plus res judicata will kill that suit.

I just don't see that working.  Too much ugliness in the combination of things that could happen.

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8 minutes ago, fred8033 said:

I just don't see that working.  Too much ugliness in the combination of things that could happen.

It does. It has happened all the time. That's the point of a federal bankruptcy court: you can NOT lose there and then go running to state court to have a state court judge overturn the decision of a bankruptcy court.

1) Because of res judicata: this matter has been decided by another court of competent jurisdiction. If the party is unhappy with that court's decision, the solution is to file an appeal, NOT to forum shop to find some other trial court to overturn the decision.

2) Because of the supremacy clause: federal court decisions trump state court decisions

And so on.

Again, lot of things to worry about here. The idea some state court judge is going to "overturn" a federal bankruptcy court judge isn't something to worry about. And even if some state judge did, I can assure you that the solution would be for the LC to have the matter transferred as a related action right back to Silverstein, who will absolutely NOT allow her decisions to be "overturned" by a state court judge.

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44 minutes ago, CynicalScouter said:

FYI: Interesting article I read about retroactive extension of statutes of limitations in civil matters. While the U.S. Supreme Court has said since Calder v. Bull (1798) that such things do not violate the U.S. Constitution's prohibition on states passing ex post facto laws (holding, in part, that the provision applies only to CRIMINAL law) state constitutions have been read in such a way that such an attempt to extend civil statutes of limitations would be a violation of the defendants under the state constitution's due process and ex post facto provisions. 24 states have a per se rule against such statutes and two others (New York and Wisconsin) only allow it for "exceptional" circumstances.

https://digitalcommons.law.villanova.edu/cgi/viewcontent.cgi?article=3446&context=vlr

"Departing from the federal approach, twenty-four states have held that a retroactive extension to a statute of limitations that revives an otherwise time-barred claim is per se impermissible, meaning that it is absolutely invalid in any context.

  • Seven of the per se states depart from the federal approach because of specific prohibitions against retroactive legislation in their own state constitutions. (Alabama, Colorado, Missouri, New Hampshire, Oklahoma, Tennessee, and Texas)
  • Eleven per se states (Arkansas, Florida, Illinois, Louisiana, Nebraska, North Carolina, Rhode Island, South Carolina, South Dakota, Utah, and Virginia) depart from the federal approach even further by holding that retroactive extensions of the statute of limitations are a direct infringement on a vested property right that is created under their state constitutions. In these states, once a claim has time-lapsed, the potential defendant enjoys a vested property right and no longer needs to defend against a particular claim. Under this type of constitutional interpretation, unlike the federal approach, any infringement on that right to be free from suit is considered a violation of substantive due process and invalid legislation.
  • Six states hold retroactive extensions of the statute of limitations to be invalid per se without relying on their state constitutions to support this position.
    • Five states embrace the per se invalid approach but do not cite any source in their constitution or general statutes that create a protected vested right. In these five states—Indiana, Kentucky, Maine, Oregon, and Pennsylvania—the complete prohibition against revival of time barred claims is a rule of construction as opposed to a statutory or constitutional restriction.
    • Vermont’s prohibition on retroactive legislation is rooted in a state statutory provision, rather than any limitation imposed by the Vermont constitution."

How would those 24 absolute and 1 only in extreme (WI, NY already done) affect the claims?  Would the LCs and COs in those states be protected by SOL?  

I'm assuming BSA is not protected because of jurisdiction shopping and BSA's location and federal court.

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7 minutes ago, CynicalScouter said:

It does. It has happened all the time. That's the point of a federal bankruptcy court: you can NOT lose there and then go running to state court to have a state court judge overturn the decision of a bankruptcy court.

1) Because of res judicata: this matter has been decided by another court of competent jurisdiction. If the party is unhappy with that court's decision, the solution is to file an appeal, NOT to forum shop to find some other trial court to overturn the decision.

2) Because of the supremacy clause: federal court decisions trump state court decisions

And so on.

Again, lot of things to worry about here. The idea some state court judge is going to "overturn" a federal bankruptcy court judge isn't something to worry about. And even if some state judge did, I can assure you that the solution would be for the LC to have the matter transferred as a related action right back to Silverstein, who will absolutely NOT allow her decisions to be "overturned" by a state court judge.

So you are saying that a failed suit by victim against an LC can't be escalated to the Supreme Court where the SC could agree with the US trustee that says the LCs (who were not in bankruptcy) can't get protection from the bankruptcy of their business partner? 

Perhaps there is an easier way to agree.  Are there case law examples of business partners (separate companies) or franchise relationships where the bankruptcy of one discharges the debt of the other?

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2 minutes ago, fred8033 said:

So you are saying that a failed suit by victim against an LC can't be escalated to the Supreme Court where the SC could agree with the US trustee that says the LCs (who were not in bankruptcy) can't get protection from the bankruptcy of their business partner? 

There's no such thing as "impossible" in the law when it comes to appeals. But are you asking "what are the odds"? Near zero. Again, if the victim disagreed with the bankruptcy court's determination, the solution is to file an appeal. NOT to run to a state court and have the state court try to overturn the bankruptcy court judge which, for the third time, they can NOT do.

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11 minutes ago, fred8033 said:

So you are saying that a failed suit by victim against an LC can't be escalated to the Supreme Court where the SC could agree with the US trustee that says the LCs (who were not in bankruptcy) can't get protection from the bankruptcy of their business partner? 

To further elaborate. Victim disagrees with Silverstein's ruling that the LCs are covered by the BSA plan 5.0 (or whatever gets approved). Victim has three choices:

1) Lump it

2) File an appeal to the U.S. District Court or directly to the Third Circuit Court of Appeals (my federal appellate procedure is a bit murky here) and eventually the U.S. Supreme Court. That's fine. That's permitted. No problem.

3) Go run to state court in a year and sue the LC. The LC will walk into to court, present the state court judge a copy of the bankruptcy discharge order showing this claim/dispute was already ruled on by another court, LC's liability is over, and move to dismiss the case on that basis (res judicata: the victim LOST this claim already, he/she cannot run to another court to revive it). If by some insane chance a state court judge declares the federal bankruptcy court judge is wrong and denies the LC's motion to dismiss, a) LC goes back to bankruptcy court for a newly minted order directed to the state court judge: stand down and back off OR b) the LC goes and appeals and the state appellate judges will smack the state trial court judge around.

https://www.law.cornell.edu/wex/res_judicata
 

Quote

Generally, res judicata is the principle that a cause of action may not be relitigated once it has been judged on the merits. "Finality" is the term which refers to when a court renders a final judgment on the merits.

Res judicata is also frequently referred to as "claim preclusion," and the two are used interchangeably throughout this article.

 

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31 minutes ago, fred8033 said:

How would those 24 absolute and 1 only in extreme (WI, NY already done) affect the claims?  Would the LCs and COs in those states be protected by SOL?  

Tomorrow, Alabama's legislature meets in special session and, in direct defiance of the state's constitution, passes a law allowing retroactive claims in civil matters involving child sexual abuse. The day after the law's effective date, a victim sues the BSA and LC in an Alabama court, citing that extension. BSA and the LC move to dismiss the case, citing the clear language of the state constitution and the host of cases from the Alabama Supreme Court say "no, can't do it".

Case is dismissed.

EDIT: This is Alabama's provision

Article IV, § 95, of the Alabama Constitution states:

"There can be no law of this state impairing the obligation of contracts by destroying or impairing the remedy for their enforcement; and the legislature shall have no power to revive any right or remedy which may have become barred by lapse of time, or by any statute of this state. After suit has been commenced on any cause of action, the legislature shall have no power to take away such cause of action, or destroy any existing defense to such suit."

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The Zalkin Law Firm, P.C. and Pfau Cochran Vertetis Amala PLLC (“Zalkin and Pfau”) join in asking for a delay of the September 21 hearing.

https://casedocs.omniagentsolutions.com/cmsvol2/pub_47373/cb8b9947-d177-4f08-ac9b-b2bbbab5b378_6241.pdf

Note Zalkin and Pfau are critical here as being very, very much against any plan that involves claimants that have claims barred by statutes of limitations. They are California lawfirms (no SoL) that argued in the past allowing those claimants to vote is improper.

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1 hour ago, CynicalScouter said:

Departing from the federal approach, twenty-four states have held that a retroactive extension to a statute of limitations that revives an otherwise time-barred claim is per se impermissible, meaning that it is absolutely invalid in any context.

  • Seven of the per se states depart from the federal approach because of specific prohibitions against retroactive legislation in their own state constitutions. (Alabama, Colorado, Missouri, New Hampshire, Oklahoma, Tennessee, and Texas)

Colorado did an interesting work around to the prohibition against retroactive legislation. They created a whole new civil action that is not tied to the SOL sounding in negligence. It either has no SOL or it has a longer period to file a law suit. 
 

I haven’t followed what has happened nor say what a CO appellate court might do, but it’s law and it will likely be used in other states.   https://childusa.org/2021sol/

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1 hour ago, Eagledad said:

Do we know the 637 is sexual? Do we know if they are physical? I ask because the abuse situation I know of that was physical was not sexual. And the sexual abuse situation was not physical. The sexual report came from an adult who was standing outside of a scout tent listening the scouts having a sexual discussion about girls.. 

I would like to know, too. This a good point and has to factored into the equation, to be fair. I’ve appreciated the ‘correction’ about the IVF not being singularly based on sexual abuse or impropriety. Though it may seem otherwise, I don’t want to be blathering without foundation or credibility. These data points helped me balance my perspective, though in no way takes the wind out of my sails. 

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5 hours ago, CynicalScouter said:

As promised yesterday. In short, on average, most LCs are only putting up 17% of their total net assets into the fund.

Total Net Assets as claimed by LCs and posted in the BSA Plan documents. Next I'll look at Total Assets.

17.10%    Average
16.39%    Median
-165.96%    Min (deficit - Gulf Coast)
0.86%    Min (non-deficit - Rocky Mountain)
54.58%    Max (Greater Yosemite)
3    # of councils with % greater than or equal to 50%
5    # of councils with % greater than or equal to 40%
24    # of councils with % greater than or equal to 30%
83    # of councils with % greater than or equal to 20%

Well, it just might be closer to 13.8% and explain why the TCC is saying "enough is enough" and coming out swinging.  OK, for the data-geeks, a VERY deep dive on this gives additional perspective from a friendly accountant looking over my shoulder.  His comment:

The percentages in the summary appear to be mathematically correct based on the amounts reported by the BSA; however, it is important to remember that amounts reported in Exhibit 1 for “Land Buildings & Equipment” are book value. As a result, in most (if not all) cases the percentages calculated in the summary you shared are artificially high / inflated because book value is generally lower than current market value / appraised value.

 

For instance, in the case of Greater New York Council (#640) (which admittedly is likely the most extreme example), the calculated percentage of “contribution to total net assets” is 43.05% ($9,000,000 / $20,904,468). However, the balance sheet information for GNYC in Exhibit 1 reports “Land Buildings & Equipment” at $5,630,537. This amount is obviously well below the appraised values for the three primary GNYC camps and results in an artificially high percentage of 43.05%.

 

640

GREATER NEW YORK

20,904,468

43.05%

 

As a result, the summary is informative but also somewhat misleading because it gives more credit to the Local Councils than they deserve. I understand that the conclusion of whoever prepared the summary was that Local Councils were only contributing 17% of their total net assets (which is offensive), but that percentage is still too high.

 

In order to make a quick and dirty adjustment for appraised values, we can use the Local Council liquidation analysis (Disclosure Statement PDF Page 306), which uses appraised values for those properties that were valued by CBRE, JLL and Keen. If you take total assets of $4,011,716,000 reported in the Local Council liquidation analysis and back off liabilities of $234,198,591 (PDF Page 333), you get total net assets of $3,777,517,409. Using total Local Council Contributions of $519,588,542 as reported on Exhibit C, you get a total percentage of 13.8% ($519,588,542 / $3,777,517,409).

 

While the overall difference between 17% and 13.8% is not massive, certain individual local councils (e.g. GNYC) come off looking much better than they should.

 

One additional thing to keep in mind. Exhibit 1 shows total net assets of $3,303,228,450 as of February 2021 (PDF Page 333). Based on a review of June 2021 balance sheet data, total Local Council net assets have increased by approximately $80 million to $3,382,300,795. In other words, Local Councils certainly appear to be in an even better position in June 2021 than they were in February 2021.

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