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Chapter 11 Announced - Part 7 - Plan 5.0 - Voting/Confirmation


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BSA only plan was alluded to at the last hearing. Century’s lawyer stated to the court-in response to Pachulski’s suggestion of a BSA only plan that such a plan would not be feasible because BSA, the LCs and charters are too “integrated.” I quickly glanced  at Lauria’s, Andolina’s and the Ad Hoc LC lawyer’s faces and I saw nods in agreement. Moreover those Hollywood square faces expressed zero disagreement with Schiovoni’s assertion that BSA is essentially a single organization for operational purposes at least. So unless there is an immediate stipulated substantive consolidation of the LC’s assets in to the debtor’s estate, a BSA only plan has already been rejected as a viable possibility. 
 

I add that the TCC has greatly diminished itself as a to be trusted advocate for survivors especially because it capitulated when it supported the RSA. It does not enjoy the same credibility any longer among many survivors and law firms. TCC looks pretty only in comparison to the Coalition. And that’s not exactly a beauty contest. 
Any “deal” the TCC negotiates with BSA will be viewed with a jaundiced eye .

 

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As the time that a vote total approaches, I encourage everyone to repeat the Scout Oath and Law several times to remind us how to treat one another.  There are victims here who wish for the plan

I just finished reading Bates' report.  Now I have a headache.  It's well-written, but a bunch of spin.  So we're too old to deserve a decent settlement?  While I get the sol issue, if a suit is valid

66% is the threshold for a bankruptcy.  However, WSJ was reporting even BSA admitted they needed 75% which they didn't reach.  There are two issues that the 73% causes. One will be with Silverste

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For those who are knowledgeable:  Is the TCC attorneys paid only by the BSA while the case is tried?   In other words, do they get a percentage of any settlement?

If they do not get part of a settlement, then there is no incentive for them to end the case.  Driving the BSA into chapter 7 would maximize their profit.

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TCC counsel is paid out of the debtor’s assets. In that sense, all the bankruptcy lawyers have a shared perverse incentive to keep the fee carousel going until the well is dry. Then those same lawyers throw what’s left of the carcass to the victims. 
A Ch 7 stops the carousel. All the bankruptcy professional s are terminated; a liquidation trustee is appointed and becomes the Czar. His job is to go after all the assets, pursue other assets like LC’s assets, charter assets and all the insurance insurance. This was and is inevitable. 

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The TCC is only paid while the TCC "exists." Each attorney is paid their usual hourly rate and the firm has stated that they will give 10% of their earnings to the trust for the survivors.

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10 minutes ago, vol_scouter said:

For those who are knowledgeable:  Is the TCC attorneys paid only by the BSA while the case is tried?   In other words, do they get a percentage of any settlement?

If they do not get part of a settlement, then there is no incentive for them to end the case.  Driving the BSA into chapter 7 would maximize their profit.

They are only paid by the BSA, they do not get a percent of any settlement.  Chapter 7 would end their payments, in addition, would likely end with less money for claimants so not a good for a company that works so many bankrupcies.

The TCC law firm,  PSZJ Law, has been used as the law firm for the official creditor committee in many sex abuse bankruptcy cases (including most recently USA Gymnastics and many 16 different arch dioceses bankruptcies).  

I'll give you one example.  In Milwaukee, PSZJ and others took a $4M offer, sued the arch diocese over their cemetery fund and eventually ended up with $21M for claimants.  You saw what they did with USA Gymnastics ... taking initial offers and driving it up by hundreds of millions.

So, if the TCC committee hires a law firm, pays them ... let's say $20M for the BSA case ... that that law firm is able to drive up settlement offers hundreds of millions of dollars over what other attorneys could do, then they are probably worth their money.  If instead, the law firm fails and the case goes Chapter 7, then they are definitely not worth their money.  The TCC law firm has 1 job ... maximize the return for the parties they represent.  To be fair, PSZJ has done that well in similar cases, so I understand why the TCC hired them.

I do think there is an argument that all bankruptcy firms are paid too much (PSZJ, Omni and White & Case) especially for the non-profit world.  I'm not sure what can be done to change that (other than possibly reduce the complexity of bankruptcy law).

 

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4 hours ago, RememberSchiff said:

by Randall Chase , AP

https://www.theintelligencer.com/news/article/BSA-bankruptcy-plan-misses-mark-in-vote-by-abuse-16751195.php

Debtors in bankruptcy typically need two-thirds approval from creditors for a reorganization plan, but cases involving mass tort liabilities, whether stemming from asbestos or child sexual claims, generally need a greater level of support...

A final voting report is due Jan. 17 ...Meanwhile, attorneys continue to gather information and take depositions from opposing parties in advance of a hearing to begin Feb. 22 to determine whether Judge Laura Selber Silverstein should confirm the plan.

“We are encouraged by these preliminary results and are actively engaging key parties in our case with the hope of reaching additional agreements, which could potentially garner further support for the plan before confirmation,” the Boy Scouts said in a statement.

More in above  link.

Another reason for this is in bankruptcy it’s approved by 2/3 in dollar AMOUNT.  Not all claims are equal in value, so approving a plan without overwhelming support is similar to approving a plan that misses that dollar amount.  Especially in this case.  Something to keep in mind.

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Attempting to guess where this may go from here, I took a deeper look at another case under Judge Silverstein (Imerys Talc America).  

1) Their plan went out for vote with a target of confirmation hearings in June 2021.  When the vote came back as passing, there were a lot of questions about how law firms obtained votes.  They found one firm had 15,000 votes and did not have sufficient evidence they vetted the claims.  Judge Silverstein threw out their votes which then resulted in the remaining votes not sufficient to pass the plan.  

- What I see here is that Judge Silverstein will want to make sure those who voted for the plan are claimants with legitimate claims.  I'm sure she will be open to questions of voting irregularities.  Note that the votes were due March 25, 2021.  The fight over the vote took until October 13, 2021 when Judge Silverstein decided to throw out 15,000 votes which killed the deal.  

So ... if there is a fight over the BSA vote, you can expect discovery, depositions, discovery, depositions, then hearings upon hearings.  Perhaps it will be faster than 7 months ... but this will not be a few weeks of time.  Silverstein will ensure nothing is rushed without allowing appropriate legal review. There are a ton of questions about the eBallots, claims vetting, master ballots, etc.  I expect both sides to fight the vote as long as BSA puts forward the current plan.

2) What has happened after Oct 13 ... that was a hard stop on the current plan.  No confirmation hearing.  Back in mediation.  So, the judge holds to the vote.  Now, in this case, it is over 66%, but as mentioned apparently in CSA cases they expect 75% ... and probably higher for non debtor releases.

In the Talc case, Silverstein appointed a new mediator to join the team Kenneth R. Feinberg (the lawyer that oversaw the Sept 11 terrorist attacks fund).  However, before mediation started, she is working with the sides to set strict rules (to prevent discovery fights later).  

- So, in the BSA case, if this plan fails, I would expect Silverstein to appoint new mediators ... personally, Feinberg may be a great choice.  In any case, she may even get involved to set rules of engagement to prevent failures out of the first mediation.

 

Overall, the Talc case vote was due March 25.  It is now over 9 months later and they are back in mediation.  My concern is that BSA may be headed down a similar path.  Hopefully, they are having open/honest conversations.  I just found the Talc case an interesting study.

4 minutes ago, 100thEagleScout said:

Another reason for this is in bankruptcy it’s approved by 2/3 in dollar AMOUNT.  Not all claims are equal in value, so approving a plan without overwhelming support is similar to approving a plan that misses that dollar amount.  Especially in this case.  Something to keep in mind.

Each direct abuse claim vote is worth $1.  That was debated and they didn't change it.

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2 hours ago, Muttsy said:

I add that the TCC has greatly diminished itself as a to be trusted advocate for survivors especially because it capitulated when it supported the RSA.

It only supported the first RSA and only if the Hartford deal was not part of the settlement.  They did not sign on to the last RSA.

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1 hour ago, Zebra132 said:

he TCC is only paid while the TCC "exists." Each attorney is paid their usual hourly rate and the firm has stated that they will give 10% of their earnings to the trust for the survivors.

The actual TCC is the nine members and just like they hired them they could fire them also.  

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Boy Scouts $2.7 Billion Settlement Plan at Risk of Failing

https://www.nytimes.com/2022/01/05/us/boy-scouts-settlement.html

Mr. Stang said the committee wanted to see changes to the plan to bring better compensation, an improved plan for youth protection going forward and an independent governance of the settlement trust.

With negotiations continuing, changes to the proposal could bring opportunities for claimants to change their votes.   (interesting idea, could the Debtor make incremental changes and then see if a net 2% of voters would change their vote to AGREE. Technically more feasible with e-Ballot voters. Hmmm, which side would that favor?)

More at above link.

Edited by RememberSchiff
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19 minutes ago, RememberSchiff said:

(interesting idea, could the Debtor make incremental changes and then see if a net 2% of the vote would change their vote to AGREE.

My understanding is that 2% more accept voters will not make a difference.  Maybe 22% but even then it may not get it thru the court system

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22 minutes ago, RememberSchiff said:

Boy Scouts $2.7 Billion Settlement Plan at Risk of Failing

https://www.nytimes.com/2022/01/05/us/boy-scouts-settlement.html

Mr. Stang said the committee wanted to see changes to the plan to bring better compensation, an improved plan for youth protection going forward and an independent governance of the settlement trust.

With negotiations continuing, changes to the proposal could bring opportunities for claimants to change their votes.   (interesting idea, could the Debtor make incremental changes and then see if a net 2% of the vote would change their vote to AGREE. Technically more feasible with e-Ballot voters. Hmmm, which side would that favor?)

More at above link.

I wonder if there is an example of only allowing reject going to accept?   The recent example I saw (USA Gymnastics) is that they went through another full vote.  They used Omni and had the option to submit votes online (and only had 500 or so claimants).  Given that DOJ already wasn't happy, I expect if there are changes, BSA will need to go to a full vote again.

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3 minutes ago, johnsch322 said:

My understanding is that 2% more accept voters will not make a difference.  Maybe 22% but even then it may not get it thru the court system

I hope the judge clarifies what she is looking for in terms of %.  If its 66%, we are likely done.  If 75% ... then probably some minor changes to the plan, perhaps, may be enough to get it there.  If it is 95% .... well then, major plan changes will be required.  I know she is deliberate but I hope she signals where she is leaning.  (Also, it would be good to know where she is at overall in terms of non consensual non debtor releases).  

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2 hours ago, Muttsy said:

A Ch 7 stops the carousel. All the bankruptcy professional s are terminated; a liquidation trustee is appointed and becomes the Czar. His job is to go after all the assets, pursue other assets like LC’s assets, charter assets and all the insurance insurance. This was and is inevitable. 

Sounds like a legal mad tweeter ad.  :)

#1  It is far from inevitable this will become a chapter 7.  The only driving force I see is few interested in true mediation.  It really seems many want to drive failure of the bankruptcy proceedings.  

#2  A BSA bankruptcy czar would not automatically be able to go after LC assets as they are separate companies.  A court would need to rule that all these "franchised"  You are looking at years of legal cases to make that happen and it is far, far from guaranteed. 

#3  It is very conceivable that a chapter 7 would result in less money for victims because of the order of debt that is paid.  

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