Boy Scouts of America

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF DELAWARE

In re: ) Chapter 11

BOY SCOUTS OF AMERICA AND Case No. 20-10343 (LSS)

DELAWARE BSA, LLC )

)

)

Debtors. ) (Jointly Administered)

tt)

OPINION

Introduction

This is an extraordinary case by any measure.

This is a mass tort case. It involves sexual abuse claims. The debtor, Boy Scouts of

America (“BSA”), is a household name. It is a national, nonprofit organization. Over the

one hundred plus years of its existence, BSA delivered its Scouting mission through, and in

partnership with, tens of thousands of non-debtor entities.

This is a case about trust-——or more accurately——lack of trust. Boys and their families

put their faith in a lionized institution, which failed many of them. These boys—now

men-—~ seek and deserve compensation for the sexual abuse they suffered years ago. Abuse

which has had a profound effect on their lives and for which no compensation will ever be

enough. They also seek to ensure that to the extent BSA survives, there is an environment

where sexual abuse can never again thrive or be hidden from view.

This is a case that has been emotionally charged. 82,209 claimants filed proofs of

claim asserting sexual abuse. Claimants have actively participated in this case through an

official creditors committee, an ad hoc committee and pro se. The court has received over

1000 letters from claimants who each have their own story to tell, many for the first time.

Given what is at stake, it is not surprising that claimants hold strongly different views

regarding how this case should conclude, even whether this debtor should continue to exist.

This is also a case about an institution that seeks to continue with its mission. BSA

currently serves over one million boys and girls across the country, providing them with

opportunities to learn self-sufficiency and leadership skills that can contribute to the

betterment of society.

TABLE OF CONTENTS

1 PHEPEtHION 2.00... □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ L

A. The Delivery of Scouting and the Relationship Between and Among BSA, Local

Councils and Chartered Organizations □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□

1. Boy Scouts of AMELiICA oo. eee □

2. Local Councdls oo. □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□

3. Chartered Orgamizations □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□

4, Related Non-Debtor Entities 200.000 cette O

B. Sexual Abuse Lawsuits □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□

C. Overview of the Boy Scouts Insurance □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ LO

1, Coverage Under BSA Insurance □□□□□□□□□□□□□□□□□□□□□□ cesses LO

a. Coverage for BSA as the Insured... □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ LO

b. Coverage for Local Councils as Additional Insureds................. 12

c. Coverage for Chartered Organizations as Additional Insureds .. 13

2, Overview of Local Council Insurance 0.0.0... □□□ □□

3. Chartered Organization Insurance Policies 00.0.0 terete L4

4, Combined Single Limits ........0... □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ LA

D. Prepetition Coverage □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ LG

E, Prepetition Resolutions and Attempts to Resolve Abuse Claims ........0......... 19

Il. Postpetition Events □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ □□

A. The Bar Date □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ DL

B. □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ DE

C. The Plan Process and Voting... □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ DA

1. Solicitation... cece □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ DA

2. The Initial Voting Results 0.0.0... □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ 29

3. Continued Mediation and Further Insurance Settlements .................... 30

4. Additional Settiements with Chartered Organizations ........0.00....00. 34

5. The Resolution with the TCC... □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ OO

6. The Settlement Trust Agreement and the Trust Distribution Procedures, as

Amended oo... □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ OO)

a. The Settlement Trust Agreement. □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ GO

b. The Trust Distribution Procedures □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ OO

7. Chartered Organizations □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ 4A

a. Contributing Chartered Organizations □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ AD

b. Participating Chartered Organizations ............cceeeeee teeters £6

c. Opt-Out Chartered Organizations □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ AF

8. Youth □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ 48

9. Plan Modifications, Supplemental Disclosure and Voting...................52

10. The Confirmation Hearing 20.00.00... □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ OG

&. The ObJectors □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ OD

b, Plan Supporters ......... □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ JQ

C. The Hearing □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ DO

L Additional Findings Related to Direct Abuse Claims... ceeceereereteee □□

A. The Aggregate Value of the Direct Abuse Claims □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ OF

B. The Potential Available Coverage of Non-Settling Insurance Companies for

Allocated and Unallocated Claims □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ OG

C, The Plan is a 100% Plan with Respect to Direct Abuse Claims ........ eee, 69

I. The Settlements □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ D2

A. The Settling Insurer Settlements 20.0... □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ □□

B. The Settling Insurer Settlements Meet the Martin Standard... TA

TL. Hartford 00... □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ LO

2, CONMUIY. 0... □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ EE

4, Clarendon □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ OU

C. The Buyback of the Abuse Insurance Policies 00.0... □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ OO

1. The Abuse Insurance Policies Issued by Hartford and Century as well as the

Proceeds of Those Policies are Property of the Estate oo... ee BF

2. The Automatic Stay Prevents a Sale Free and Clear of the Archbishop’s

Trnterest □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ OO

a. The Buyback of the Abuse Insurance Policies is Not Part of the

Claims Resolution Process □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ DA

b. A Violation of the Automatic Stay Does Not Depend on Whether

the Prohibited Action May be Favorable to the Estate .............. 97

c. The “Dueling Debtor” Argument Favors the Archbishop ......... 99

ti

3. The Abuse Insurance Policies Can be Sold Free and Clear of the Lujan

Claimants’ Direct Action Rights □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ LOZ

a. The McCarran-Ferguson Act Does Not Reverse Preempt Any Code

Section or Plan Provision that Permits the Channeling of Direct

Abuse Claims to the Settlement □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ LOZ

b. Section 363(d)(1) Does Not Apply to the Lujan Claimants’ Direct

Action Rights □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ LIQ

c. The Abuse Insurance Policies Can be Sold Free and Clear of the Lujan

Claimants’ Direct Action Rights Under § □□□□□□□□□□□□□□□□□□□□□□□□ 211

D. The Releases □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ LLG

1. The Scouting-Related Releases □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ LIA

A. Definitions 200.0... cece □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ LIA

b. The Third Circuit’s Decision in In re Continental Airlines Holding, Inc.

c. Subject Matter Jurisdiction □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ □□□

i. Bankruptcy Jurisdiction Exists Over Direct Abuse Claims

Asserted Against Local Councils and Chartered Organizations

ii. Bankruptcy Jurisdiction Exists Over the Direct Abuse Claims

Asserted Against the Related Non-Debtor Entities......... 125

iii. Bankruptcy Jurisdiction Exists Over Direct Abuse Claims

Asserted Against Debtors’ Officers and Directors and Other

Representatives... □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□

d. Statutory AUtHOTILY «0.0.0.0... □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□

e, The Scouting-Related Releases (Except with Respect to TCJC) Meet

the Continental Standard... □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ L2G

i. The Parties’ General Positions 0.0.0.0... cceeeeeeeeee LOT

ii. The Master Mortgage Factors □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ 133

(a) Identity of Interest □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ LOD

(b) Contribution of Substantial Assets to the Reorganization

(1) Settling Insurers 2.0.0... □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ LAT

(2) Local Councils 00.0... eeeeeeeeee LAT

(3) The Chartered Organizations □□□□□□□□□□□□□□□□□□□□□□□□□ L45

(i) United Methodist Entities... 145

(ii) The Participating Chartered Organizations.... 146

iii

(iii) The Opt-Out Chartered Organizations ......... 148

(iv) Related Non-Debtor Entities and Representatives

(c) A Substantial Majority of the Impacted Creditors Agree

(d) The Plan Provides a Mechanism for the Payment of All,

or Substantially All, of the Claims of the Class or Classes

Affected by the □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ LAD

(e) The Injunction is Essential to Reorganization Such that

Without it There is Little Likelihood of Success.....

iti. The Continental Hallmarks □□□□□□□□□□□□□□□□□□□□□□□□□□□□□ □□□□

E. The TCIC □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ LO8

TH. The Findings □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ LAL

A. Finding x: The “Fair and Equitable” Finding... eeeeeerseeeeres L76

B. Finding aa: The Historical Consistency □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ □□□

C. Finding w: The Binding Finding........0... center LOS

D. Finding y: The Allowed Claim Finding ......0cc ccc □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ 187

E. Finding z: The Good Faith Finding... ce □□□□□□□□□□□□□□□□□□□□□□□□□ 188

IV. The Confirmation Standards — Section 1129.0... □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ □□□

A. Section 1129(a)(1) □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ LOD

L. Section 1122 □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ LID

2. Section 1123 (a) oo... □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ □□□

a. Section □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ LOS

i. Girl SCOUTS ooo. □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ LOS

ii. The Lujan Claimants and 1.G. eeeeteeeeeetsreree □□□

b. Section 1123(a)(5)...... □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ 2OQ

C. Section □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ 2OQ

B. Section 1129(a)(3) □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□

1. The Certain Insurers’ ObjeCtiON ...........sceeeesee tenses ieee: 213

a. The Drafting of the TDP..........0cc: □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ □□□

b. The TCC Term Sheet □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□

c. Quantum of Liability .0..0....... □□□ □□□ □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ DOD

d. The Trust Distribution Procedures □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ 224

iv

e. Statute of Limitations/Negligence □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ □□□

2. The TDP Fees □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ DOO

3. The Lujan Claimants’ Objection ............cc cece □□□□□□□□□□□□□□□□□□□□□□□□□□□ 2O8

4, Mr. Schwindler’s Objection □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ DOO

C. Section 1129(a)(7) □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□

1. Section 1129(a)(7) Applies to □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ 24D

2. All Other Objections are Overruled .......... eereee cece reteteeteereersns 24D

V. Remaining Insurance □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ 248

A. Assignment of Insurance Rights 20.0... □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ 248

B. Assignment of Non-Debtor Insurance Rights ........ cect seceeeteteeerersees DOE

C. Indirect Abuse Claims/Setoff and Recoupment/Reinsurance/Self-Insured

Retentions □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ □□□

VI. The United States Trustee’s Remaining □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ 2OL

A. The Consensual Third-Party Releases □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ DOL

B. Exculpation/Exculpation Injunction 2000.00... □□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ □□□

VII. Remaining Objections of Pro Se Claimants 0.0.00... eetesereeeer reese, 208

□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□□ □□□

Vv

BACKGROUND

I. Prepetition

A. The Delivery of Scouting and the Relationship Between and Among BSA, Local Councils

and Chartered Organizations

1, Boy Scouts of America

BSA was created as a body corporate and politic of the District of Columbia by An

Act of the Seventy-Fourth Congress of the United States on December 6, 1915 and signed

into law by President Woodrow Wilson on June 15, 1916.’ It is a nonprofit entity.’ BSA’s

mission is to “promote, through organization, and cooperation with other agencies, the

ability of boys to do things for themselves and others, to train them in Scoutcraft, and to

teach them patriotism, courage, self-reliance, and kindred virtues, using the methods which

are now in common use by Boy Scouts.”* BSA’s Charter calls for an executive board

comprised of United States citizens with the number, qualifications and term of office to be

set forth in bylaws.’

' This Opinion constitutes findings of fact and conclusions of law in accordance with Federal Rule

of Civil Procedure 52, made applicable in contested matters by Federal Rules of Bankruptcy

Procedure 7052 and 9014(c). These findings of fact draw on the trial testimony and the admitted

exhibits. Further, while Iam making findings, much of the facts were uncontroverted. The import

of the facts, however, is very much in dispute. I thank the parties for supplying a joint set of

exhibits. Individual exhibits are referred to as “JTX ___.” Transcripts of hearings [ECF 9341 (Day

1), 9354 (Day 2), 9389 (Day 3), 9406 (Day 4), 9407 (Day 5), 9454 (Day 6), 9455 (Day 7), 9482 (Day

8), 9490 (Day 9), 9497 (Day 10), 9517 (Day 11), 9530 (Day 12), 9562 (Day 13), 9563 (Day 14), 9564

(Day 15), 9578 (Day 16), 9616 (Day 17), 9638 (Day 18), 9639 (Day 19), 9646 (Day 20), 9648 (Day

21), and 9656 (Day 22)] are referred to by day of the trial, e.g. “Day 1 Hr’g Tr.” Capitalized terms

not defined herein have the meaning ascribed to them in the Third Modified Fifth Amended Chapter

11 Plan of Reorganization for Boy Scouts of America and Delaware BSA, LLC [ECF 8813].

2 JTX 468; see also FTX 1-1 at 1.

3 JTX L-lLat L.

4 JTX 1-1 at 1.

5 JTX 468 Sec. 5.

Today, BSA is governed by a National Executive Board comprised of 72 volunteer

members elected yearly at an annual May meeting.® The members of the National

Executive Board are selected by the voting members of the National Council, who are 1200

volunteers, including the president and council commissioner of each Local Council.’ Each

Local Council also elects one additional Board member per every 5000 members of such

Local Council.*

The National Executive Board created a 12-person National Executive Committee to

catry out the Board’s directives and manage BSA’s day-to-day affairs.’ Some of the

National Executive Committee members chair various standing committees (e.g. audit,

human resources, finance, mission, reputation and strategy committee)."

2. Local Councils

While BSA sets the content and structure of the Scouting program, to accomplish its

mission, BSA relies on its 250 Local Councils.!' A Local Council has jurisdiction over a set

6 Day 1 Hr’g Tr. 19:20-25-20:1-3.

7 Declaration of Devang Desai in Support of Confirmation of Third Modified Fifth Amended

Chapter 11 Plan of Reorganization for Boy Scouts of America and Delaware BSA, LLC [ECF 9279;

admitted into evidence Day 1 Hr’g Tr. 75:12-19] (“Desai Decl.”) { 6.

§ Desai Decl. ¥ 6.

9 Day 1 Hr’g Tr. 20:4-25-21:1.

Day 1 Hr’g Tr. 20:4-25-21:1. Six of its members comprise the Bankruptcy Task Force, which was

formed in July 2020 as a working group to interface with BSA’s professional advisors on a regular

basis to understand the bankruptcy restructuring process and advise the National Executive

Committee and the National Executive Board on the process. Day | Hr’g Tr. 21:6-21.

| Declaration of Brian Whittman in Support of Confirmation of The Third Modified Fifth

Amended Plan of Reorganization for Boy Scouts of America and Delaware BSA, LLC [ECF 9280;

admitted into evidence Day 2 Hr’g Tr. 38:6] (“Whittman Decl.”) { 14; Declaration of William S.

Sugden in Support of Confirmation of The Third Modified Fifth Amended Plan of Reorganization

for Boy Scouts of America and Delaware BSA, LLC [ECF 9316; admitted into evidence Day 5 H1’g

Tr. 127:22-24] (“Sugden Decl.”) 4 10.

geographical area within the United States.'? Each Local Council is a separate, independent

non-profit entity organized under the laws of its respective state, but consistent with BSA’s

Bylaws and Rules and Regulations."

BSA has an annual chartering process for all Local Councils and BSA can refuse to

renew or revoke a charter at any time in its sole discretion in the best interest of Scouting.”

The annual Local Council Charter sets out the relationship between the national

organization and Local Councils.” Each Local Council is charged with ensuring that

BSA’s Scouting program is available to all scout units (e.g. troops, dens, packs) in the Local

Council’s area.’® This is accomplished by, among other things, “maintaining standards in

policies, protecting official badges and insignia and reviewing and making

recommendations regarding unit leadership and finances.”!”

Each Local Council is responsible for its own operations, including programming,

fund raising and recruiting membership into the Scouting program." Local Councils own

and operate their own camps and provide educational programs and leadership training.”

Local Councils collect membership fees and support the sale of Scouting merchandise.”

468 Art. Vi Sec. 1.

3 Day 1 Hr’g Tr. 17:9-13; Whittman Decl. { 14; Sugden Decl. {| 10; Desai Decl. 13, JTX 468 Art.

VI Sec. 6.

4 JTX 468 Art. VI Sec. 4; Day 1 Hr’g Tr. 17:14-15; see e.g., JTX 7-3 (BSA-PLAN_00438595),

® Day 1 Hr’g Tr. 17:14-17; seeeg., STX 7-3.

Desai Decl. ¥ 13.

17 TTX 468 Art. VI Sec. 5; Day 1 Hr’g Tr. 17:18-18:2

Day 1 Hr’g Tr. 17:18-21; see Sugden Decl. § 11; Whittman Decl. { 15.

9 Whittman Decl. 7 15.

20 Sugden Decl. ¥ il.

Local Councils also recruit Scouts and volunteer leaders, provide opportunities for rank

advancement and enforce BSA rules and regulations.”!

In exchange for shared services, other fees and reimbursements and for their

assistance in delivering the Scouting mission, BSA provides to Local Councils certain back-

office functions, such as IT services and HR services and also permits Local Councils to use

BSA’s intellectual property, trademarks, logos and badges.” BSA also maintains the Boy

Scouts of America Retirement Plan for Employees Pension Plan, which covers Local

Council employees.”? The Pension Pian has filed tax returns as a “single employer pension

plan” with BSA and all Local Councils defined as a “single controlled group of participating

employers under common control.”

BSA also has a residual interest in all Local Council property.”

21 Whittman Decl. 15.

2 Day | Hr’g Tr. 17:21-24; Sugden Decl. § 11; Whittman Decl. 417.

233 Whittman Decl. § 252 n.46.

7 Whitman Decl. § 252 n.46.

25 JTX 468 Art. VI Sec. 1. Article VI, Section 1, Clause 2 of the Boy Scouts of America National

Council Bylaws provides:

Constructive Trust on Council Properties. All funds raised and property owned by local

councils in the name of Scouting shall be subject to and in accordance with the principles of

a construction trust for the benefit of Scouting as set forth in the Rules and Regulations of

[BSA]. The National [Executive] Council may request councils to provide information

regarding assets, funds, properties, and indebtedness, and councils shail supply such

information in a timely manner. Upon termination of a local council charter or dissolution

of a council, all rights of management and ownership of local council property shall become

vested in the National [Executive] Council for use in accordance with the Rules and

Regulations of [BSA]. Local council articles of incorporation and bylaws shall include or be

revised to incorporate this provision at the time of chartering or the next charter renewal.

See also JTX 147 Art. X Sec. 2. Article X Section 2 of Local Council Bylaws (October 2017) which,

in pertinent part, provides:

The corporation may hold title to real property in its own name provided it is stated in the

deed that in the event of the dissolution of the council or the revocation or lapse of its charter

said trustee or trustees will, after satisfying any claims against such unit or council to which

3. Chartered Organizations

To accomplish its mission, BSA also relies on tens of thousands of Chartered

Organizations which work directly with Local Councils to heip deliver Scouting in their

respective local communities.” Chartered Organizations can be religious, civic or

community institutions.”” In general, Chartered Organizations provide facilities for Scout

meetings and other infrastructure at the local level; they can also provide assistance with

selection of troop leaders and volunteers.”

The relationship between a Local Council and a Chartered Organization Is

memorialized in an Annual Unit Charter Agreement which spells out their respective

obligations.” Among other things, the Local Council is to provide camping opportunities,

administrative support and professional staff to assist the Chartered Organization.*” The

exact role of the Chartered Organization can vary. Sometimes a Chartered Organization

such real estate may be subject, convey said property or, if sold, pay the net proceeds of such

sale in accordance with the Bylaws and Rules and Regulations of the Boy Scouts of

America.

‘The corporation may hold title to real property and maintain accounts wherein securities or

funds are deposited in the corporation’s name provided, however, in accordance with the

Bylaws and Rules and Regulations of the Boy Scouts of America, such assets are deemed to

have been raised or obtained for the benefit of Scouting of America and are subject to a

constructive trust for the benefit of Scouting. Either the Articles of Incorporation or the

Bylaws shail be filed with the applicable state agency maintaining corporate records to

provide public notice of such constructive trust and notice that the assets, real property or net

proceeds from the conveyance of real property are subject to such a restriction in the event of

the dissolution of the local council or the revocation or lapse or its charter.

* Sugden Decl. 455; Whittman Decl. { 16. A complete list of Chartered Organizations can be

found at Boy Scouts of America Restructuring Website, http://ommniagentsolutions.com/bsa/ (last visited

July 21, 2022),

27 Day 1 Hr’g Tr. 18:9-10; Sugden Decl. {| 10; Whittman Decl. { 16.

Day | Hr’g Tr. 18:12-18; Sugden Decl. □ 10; Whittman Decl. { 16.

2? Whittman Decl. § 16; FTX 264; JTX 358.

3° Day 1 Hr’g Tr. 17:18-18:2; Desai Decl. 4 13; FTX 264.

merely provides use of a building, sometimes members of the organization are volunteers

and sometimes members of the organization (or their children) are Scouts.’ In any event,

for its part, the Chartered Organization utilizes the Scouting program to further the specific

goals of the Chartered Organization related to youth character development, career skill

development, community service, patriotism and military and veteran recognition or faith-

based youth ministry.”

The Chartered Organization also participates in Local Council leadership. The BSA

Charter provides that the membership of each Local Council shall consist of a Chartered

Organization representative from each Chartered Organization as well as members at

large.”

4. Related Non-Debtor Entities

BSA receives services from six non-debtor affiliates which are directly or indirectly

wholly-owned by, or subject to the control of, BSA. BSA Asset Management, LLC is a

Delaware limited liability company providing investment management and advisory

services to BSA.** It also manages BSA’s and certain Local Councils’ investments through

the BSA Commingled Endowment Fund, LP (“Endowment Fund”).* BSA Endowment

Master Trust is a nonprofit trust established for investing funds contributed by BSA and

certain Local Councils in the Endowment Fund.*° The National Boy Scout Foundation is a

Day 5 Hr’g Tr. 97:1-18.

% Day 5 Hr’g Tr. 97:1-18.; JTX 264.

33 JTX 468 Art. VI Sec. 7.

34 Whittman Decl. 7 19.

35 Whittman Decl. 7 19.

% Whittman Decl. { 20.

nonprofit corporation that partners with certain Local Councils to provide support for

major-gift fundraising efforts.*’ Learning for Life is a nonprofit corporation providing career

education and mentorship programs.** Arrow WY, Inc. is a nonprofit corporation that

owns, develops and leases the Summit High Adventure Base in West Virginia to BSA.”

Atikaki Youth Ventures Inc. and Atikokan Youth Ventures Inc. are nonshare capital

corporations formed under the laws of Canada owning and operating portions of the

Northern Tier High Adventure Base.”

B. Sexual Abuse Lawsuits

Notwithstanding BSA’s laudable mission, prepetition, BSA, Local Councils and.

Chartered Organizations were named as defendants in hundreds of lawsuits in which

plaintiffs alleged sexual abuse (““Abuse”).*1 The complaints detail horrific allegations

ranging from harassment to inappropriate touching to penetration.” Some complaints

37 Whittman Decl. { 21.

3 Whittman Decl. { 22.

Whittman Decl. § 23.

4 Whittman Decl. § 24.

41 See e.g, JTX 2232, JTX 2910 through 2923, JTX 2926 through 2930, JTX 2940 through 2942, and

JTX 2945. “Abuse” is defined in the Plan as:

sexual conduct or misconduct, sexual abuse or molestation, sexual exploitation, indecent assault

or battery, rape, pedophilia, ephebophilia, sexually related psychological or emotional harm,

humiliation, anguish, shock, sickness, disease, disability, dysfunction, or intimidation, any other

sexual misconduct or injury, contacts or interactions of a sexual nature, including the use of

photography, video, or digital media, or other physical abuse or bullying or harassment without

regard to whether such physical abuse or bullying is of a sexual nature, between a child and an

adult, between a child and another child, or between a non-consenting adult and another adult,

in each instance without regard to whether such activity involved explicit force, whether such

activity involved genital or other physical contact, and whether there is or was any associated

physical, psychological, or emotional harm to the child or non-consenting adult.

Plan Ast. 1.17.

2 Seeeg., JTX 2911, 2921.

detail one event of Abuse while others detail a protracted “grooming” process.” Some

complaints contain lengthy and detailed allegations of rampant child Abuse within Scouting

ranks since at least 1920 and further allege that BSA kept secret records of volunteers who

were alleged to have molested Scouts (the so-called ineligible volunteer files or perversion

files).™

Plaintiffs allege that BSA, Local Councils and Chartered Organizations comprise a

“tightly integrated, hierarchal organizational” under BSA’s “control at the top.”*” Some

complaints allege this relationship places BSA in direct control over Local Councils and

Chartered Organizations” while others assert Local Councils and Chartered Organizations

4 See eg., JTX 2919, 2920, 2921.

4 See eg, JTX 2913, 2916, 2921.

See eg., JTX 2912, 2920, 2921.

46 See e.g., SUX 2910 15 (BSA and the Aloha Council Cahmorro District “have power to appomt,

supervise, monitor, restrict and fire each person working with children within the Defendants’

Scouting program.”); {6 (at all times the perpetrator “was under the supervision” of BSA and the

Aloha Council Cahmorro District.”).

are acting within their scope of authority as BSA’s agents.*” Other complaints similarly

allege that adult volunteers are BSA’s agents and are approved only with BSA’s blessing.*

Plaintiffs assert various legal theories for holding some or all defendants liable for the

harm suffered, including negligence, gross negligence, negligent retention, negligent

supervision, fraudulent conceaiment, willful and wanton misconduct, constructive fraud

and breach of fiduciary duty.” Some complaints contain separate allegations and/or counts

See e.g., JTX 8; 2919. See also FTX 2921:

30. A local scouting troop cannot exist without the support of a chartering organization that

has received a charter from the BSA authorizing the chartering organization to implement and.

run the BSA’s scouting program.

35. This chartering system reveals the BSA’s consent to allow local chartering organization

to operate the scouting program on its behalf and the chartering organizations’ consent to

operate the local troops subject to the BSA’s control or right to control. Accordingly, the

chartering organizations, such as SILVER SPRINGS SHORES, are the agents of the BSA.

36. ‘The BSA uses a similar structure in relation to its local Councils, such as the NORTH.

FLORIDA COUNCIL. The BSA issues a charter to an approved local Council authorizing the

local Council to administer the scouting program to the local scout troops within the region on

behalf of the BSA.

40. The Chartering system shows the BSA’s consent to allow local Councils to operate the

scouting program on its behalf within a specific geographic region, and the local Councils

consent to operate the scouting program subject to the BSA’s control or right to control. Thus,

the local Councils are agents of the BSA.

Al. The BSA cannot operate its scouting program without the consent and cooperation of

the local Councils and chartering organizations. Conversely, the chartering organizations and

local Councils cannot operate and supervise local scouting troops with the consent of the BSA.

4?. At all relevant times, Defendant NORTH FLORIDA COUNCIL and/or Defendant

SILVER SPRINGS SHORES were serving as Defendant the BSA’s agents by implementing and

maintaining the BSA’s scouting program on a local level.

48 See e.g., JTX 8 (BSA-PLAN_01088771) { 42 (“Collectively, BSA, the Local Councils, and the

local organizations would select the leaders of the Boy Scout Troops. . . although BSA retained and

exercised the ultimate authority to decide who could be a Troop Leader. BSA also had the right to

control the means and manner of staffing, operation, and. oversight of any Boy Scout Troop[.]”),

JTX 2912, 2913, 2919, 2921.

9 See eg., JTX 2910, 2911, 2913, 2921.

against each named defendant.” Other complaints lump defendants together, or define

“Defendants” as all named defendants, attributing all conduct to all defendants.’ Plaintiffs

seek both economic and non-economic damages, punitive damages and non-monetary relief

such as posting the names of known abusers, establishing a toll free number to report abuse

and sending letters of apology.”

C. Overview of the Boy Scouts Insurance Program

I. Coverage Under BSA Insurance Policies

a. Coverage for BSA as the Insured

BSA has had some form of primary and/or excess comprehensive general liability

insurance in place covering Abuse claims since at least 1935.°° The terms of BSA’s policies

vary over time and include policies that have a per occurrence limit, an aggregate limit or

both.

For the years 1935 through most of 1971, and 1979 through approximately 1996,

Insurance Company of North America (Century)” issued primary insurance policies to BSA

See JTX 2920, 2921.

See eg, JTX 2917, 2918.

2 Seee.g., JTX 2910 through 2912.

53 Day 9 Hr’g Tr. 12:10-11; Declaration of Nany Gutzler [ECF 9398; admitted into evidence Day 9

Hr’g Tr. 8:14] (“Gutzler Decl.”) 4 9. Consistent with the agreement reached by the parties to resolve

various motions in limine, Ms. Gutzier’s testimony (and thus my findings that rely on it) is not being

admitted for the purpose of determining insurance coverage issues. See Agreed Order Regarding

Certain Insurers’ Motion in Limine to Exclude Opinion Testimony of Nancy Gutzler, Katheryn

McNally and Mark Kolman and Denying Certain Insurers’ Motion in Limine to Exclude Testimony

of Michael Burnett [ECF 9411].

4 Gutzler Decl. ff 7, 8.

Century Indemnity Company (“Century”), is the successor to CCI Insurance Company, the

suecessor to Insurance Company of North America and Indemnity Insurance Company of North

America (“INA”). Century Indemnity Company’s Memorandum of Law in Support of Approval of

the Century and Chubb Companies’ Settlements Incorporated into the Debtors’ Chapter 11 Plan

[ECF 9111].

10

with varying per occurrence limits, but no aggregate limits for Abuse claims.*° From

September 1971 to 1978, Hartford*’ issued primary policies to BSA that also contained per

occurrence limits, but no aggregate limits for Abuse claims.”

Beginning in 1969 and through 1982, in addition to primary coverage, BSA began to

purchase excess insurance policies.*’ The vast majority of the excess policies provided per

occurrence limits, but no aggregate limit.” Accordingly, once the underlying primary

insurance is exhausted, the excess policies may need to pay the per occurrence limits

numerous times without exhausting.*’ Certain of the excess policies in these years have

settled, but others are available to provide coverage.”

Beginning in 1983, BSA insurance policies generally provide for aggregate limits

applicable to Abuse claims.* BSA also began procuring significantly more excess insurance

with higher aggregate limits.

From 1986 through 2018, BSA purchased primary and first-layer excess “matching

deductible policies” that require BSA to pay or reimburse deductibles before excess coverage

56 Gutzler Decl. 4 9; € 79.

57 Hartford means Hartford Accident and Indemnity Company, First State Insurance Company,

Twin City Fire Insurance Company and Navigators Specialty Insurance Company (“Hartford”).

8 Gutzler Decl. | 9; § 64.

Gutzler Decl. { 10.

6 Gutzler Decl. q 10.

6 Gutzler Decl. □ 10; Day 9 Or’g Tr. 13-14.

Day 9 Hr’g Tr. 13-14.

6 Gutzler Decl. 11; Day 9 Hr’g Tr. 14:21-25.

Gutzler Decl. q 11.

11

attaches over and above either a primary policy or a first-layer excess policy.” Also, from

1986 through 2018, BSA purchased multiple layers of excess insurance that, in most years,

provide over $140 million in excess insurance coverage.”

From 1983 forward, certain policies are exhausted, and certain insurers are insolvent,

but there is $3.6 billion worth of available aggregated coverage, the actual value of which

will not be known until all claims have hit the policies and been paid.’

b. Coverage for Local Counctls as Additional Insureds

Prior to 1971, Local Councils were not covered under BSA insurance policies.”

Beginning in 1971 through 1974, BSA gave Local Councils the ability to pay a premium to

become an additional insured under BSA’s general commercial liability policies.’ Many

Local Councils availed themselves of this opportunity and by 1975 a substantial number of

Local Councils were additional insureds under BSA policies.”

From 1975 through the end of 1977, all Local Councils were additional insureds

under Hartford’s insurance policies issued to BSA.” Beginning in 1978 through the present,

BSA implemented a General Liability Insurance Program by which all Local Councils were

added as named insureds under insurance policies issued to BSA.”

6 Gutzler Decl. 12; Day 9 Hr’g Tr. 15:15-19.

6 Gutzler Decl. { 13.

87 Gutzler Decl. 11; Day 9 Hr’g Tr. 18:7-12.

6 Gutzler Decl. { 16.

6 Gutzler Decl. { 17.

” Gutzler Decl. ¥ 17.

1 Gutzler Decl. | 18; Day 9 Hr’g Tr. 19:6-7.

2 Gutzler Decl. 4 18.

12

c. Coverage for Chartered Organizations as Additional Insureds

Prior to 1976, BSA’s insurance policies did not include language that referenced

Chartered Organizations.” Beginning in 1976, BSA policies issued by Hartford included an

endorsement referencing “sponsors” as additional insureds.” Then, in 1978, BSA began to

include Chartered Organizations as insureds under BSA insurance policies, with some

variation in coverage provided by primary and excess layers.”

2. Overview of Local Council Insurance Policies

KCIC (Debtors’ retained insurance consultant) undertook significant efforts to locate

evidence of insurance purchased separately by Local Councils that may be available to

respond to claims of Abuse.” KCIC’s efforts brought forth primary and secondary evidence

that: (i) from 1965 to 1972, the Insurance Company of North America administered a Scout

Blanket Liability Program under which Local Councils could apply for msurance with limits

of $250,000, $500,000 or $1,000,000.” Approximately 300 Local Councils participated in

this program.” Policies issued under the Scout Blanket Liability Program also insured.

Chartered Organizations.”

Evidence also exists that Hartford, New Hampshire Insurance Company, Travelers

Insurance Companies, Maryland Casualty Company and CNA subsidiaries issued policies

Gutzler Decl. 19.

4 Gutzler Decl. 4 19.

% Gutzler Decl. ¥ 19.

% Gutzler Decl. 20; Day 9 Hr’g Tr. 19:21-22:11.

7 Gutzler Decl. 22.

® Gutzler Decl. { 22.

Day 9 Hr’g Tr. 103:22-104:2.

13

to Local Councils.® Certain of these policies may have included Chartered Organizations

as additional insureds, but others had no reference to Chartered Organizations or sponsors.*’

3. Chartered Organization Insurance Policies

KCIC did not undertake to do any analysis of insurance that Chartered

Organizations may have obtained on their own.

4. Combined Single Limits”

Separate and apart from any aggregate limits, the primary BSA insurance policies,

while again, varying in terms, generally provide for a Combined Single Limit. For example,

the INA policy in place for the period 1/1/78 to 1/1/81 provides:

Regardless of the number of (1) Insureds under this policy, (2) persons or

organizations who sustain personal injury, property damage or malpractice or (3)

claims made or suits brought on account of personal injury, property damage or

malpractice, the Company’s liability is limited as follows:

Personal Injury Liability, Property Damage Liability and Malpractice Liability, the

limit of the company’s liability for all damages, including damages for care and loss

of services, arising out of personal injury, including death at any time resulting there

from, sustained by one or more persons and for all damages, including damages for

loss of use, arising out of injury to or destruction of property, shall not exceed the

amount stated in the declarations as a single limit as the result of any one

occurrence.

For the purposes of determining the limit of the Company’s Liability, all personal

injury, properly damage and malpractice arising out of continuous or repeated

exposure to substantially the same general conditions shall be considered as arising

out of one occurrence.

80 Gutzler Decl. $f 23, 24.

8! Gutzler Decl. 25, 26; Day 9 Hr’g Tr. 22:7-19, 104:3-103:17.

82 Because of the voluminous nature of the imsurance policies, I asked the parties to submit an

agreed upon representative set of insurance policies for the record. Day 8 Hr’g Tr. 202:14-23, Day 9

Hr’g Tr. 202:3-11. This directive resulted in three stipulations: (4) Joint Stipulation Between

Debtors, Century, Hartford, Zurich and Clarendon Regarding Admission of Insurance Policies

[ECF 9508] and (ii) Stipulation Among Debtors and Debtors in Possession, and Munich

Reinsurance America, Inc., formerly known as American Re-Insurance Company, Regarding Policy

NO. M-1027493 [ECF 9510} and (iii) Jomt Stipulation Between Debtors and Certain Insurers

Regarding Admission of Insurance Policies [ECF 9529].

14

The inclusion in this policy of more than one insured shall not operate to increase the

limits of the company’s total liability to all insureds covered by this policy beyond

the limits set forth in the declarations. *

Similarly, the Hartford policy for the period for 1/1/72 to 1/1/73 provides:

Ul. Limits of Liability

Regardless of the number of (1) insureds under the policy, (2) persons or

organizations who sustain bodily injury or property damage, or (3) claims made or

suits brought on account of bodily injury or property damage, the company’s liability

is limited as follows:

Coverage A — The limit of bodily injury liability stated in the schedule as

applicable to “each person” is the limit of the company’s liability for all damages

because of bodily injury sustained by one person as the result of any one occurrence;

but subject to the above provision respecting “each person”, the total liability of the

company for all damages because of bodily injury liability stated in the schedule as

applicable to each occurrence. *

83 JT 4000-2 at BSA-PLAN_00485363 (INA policy for period 1/1/78-1/1/81 issued to BSA); see

also JTX 4000-4 at BSA-PLAN_00486961 (INA policy for period 3/1/90 to 3/1/91 issued to BSA)

(same); JTX 4000-6 at ABC000056262 (INA policy for period October 20, 1967 to October 20, 1970

issued to Keystone Area Council Boy Scouts of America) (“Regardless of the number of (1) Insureds

under this policy .. . INA’s liability is limited as follows: With respect to Bodily Injury Liability, the

limit of liability stated I the declarations as applicable to ‘each person’ is the limit of INA’s liability

for all damages because of bodily injury sustained by one person as the result of any one occurrence .

JTX 4000-8 at HFBKPLANO16202 (Hartford policy for period 1/1/72-1/1/73 issued to BSA);

JTX 4000-9 at HFBKPLANO15060, HFBKPLANO15184 (Hartford policy for period 1/1/75-

1/1/76 issued to BSA) (substantially the same); JTX 4000-10 at BSA-PLAN_00251757 (Hartford

policy for period 1/1/77-1/1/78 issued to BSA)(“Regardless of the number of (i) insureds under this

policy . ..Coverage A — The total liability of the company for all damages, including damages for

care and loss of services, because of bodily injury sustained by one or more persons as the result of

any one occurrence shall not exceed the limit of bodily injury liability stated in the schedule as

applicable to ‘each occurrence’.”); JTX 4000-11 at HART-BK001457, HART-BK001458 (Hartford

policy for period 10/29/70 to 10/29/73 issued to Hawk Mountain Council Boy Scouts)

(substantially the same); JTX 4000-12 at HFBKPLANO11755 (Hartford policy for period 7/1/72-

8/31/73 issued to Golden Empire Council) (substantially the same); JTX 4000-13 at

HFBKPLANO12410 (Hartford umbrella policy effective date 3/10/75 issued to Lewiston Trail

Council) (“Limits of Liability: Regardless of the number of persons and organizations who are

insureds under this policy and regardless of the number of claims made and suits brought against any

or all insureds, the total limit of the company’s liability for ultimate net loss resulting from any one

occurrence shall be the occurrence limit stated in the declarations; provided, however, that the

company’s liability shall be further limited to the amount stated as the aggregate limit in the

declarations with respect to all ultimate net loss caused by one or more occurrences during each annual

period while this policy is in force commencing from its effective date and arising out of either (1)

products-completed operations liability, or (2) occupational diseases of employees of insureds, such limit

applying separately to (1) and (2).”) .

15

Century argues that provisions like the above establish that the single limit (e.g. $500,000

per occurrence) is the limit of the policy regardless of the number of insureds.” If BSA, a

Local Council and a Chartered Organization are all insureds under a BSA purchased policy

and the per occurrence limit is $500,000, the insurer must pay, at most, $500,000 for an

occurrence of Abuse and not $1,500,000.

D. Prepetition Coverage Litigation

Pre-bankruptcy, BSA, certain Local Councils and multiple insurance companies

were litigating insurance coverage issues in two jurisdictions.

In 2017, National Surety Corporation sued BSA, Chicago Area Council, Inc,. Boy

Scouts of America and Chicago Area Council Boy Scouts of America, Inc. along with 21

other insurance companies in Illinois state court seeking declaratory relief related to excess

liability policies issued to BSA for policy years 1983 and 1984. Specifically, National

Surety Corporation alleges that no coverage exists with respect to certain underlying

lawsuits alleging Abuse by repeat abuser Thomas Hacker and thus, it had no duty to defend

or indemnify its insured.®’ The underlying lawsuits allege that BSA knew that Hacker was a

predator and permitied and/or failed to prevent the Abuse. National Surety Company

8° Through counsel’s objections to questions directed to Ms. Gutzler, the Guam Committee

suggested this is a contested insurance coverage issue. Regardless, I find and conclude for purposes

of confirmation only and the issues I must decide that Century’s reading of the policy and its

position on any coverage dispute is at least as plausible as the Guam Committee’s. As such, and as

discussed infra, any payout on the policy to a Local Council or a Chartered Organization defeats

BSA’s ability to draw on the policy for the same occurrence,

8 JTX 162 § 1, 2029 1.

8? Thomas Elacker was a notorious abuser who was convicted of sexual misconduct (unrelated to

Scouting) in 1970 and. was placed in the ineligible volunteer files at that time. He later moved,

registered with Scouting under an alias and went undetected. He abused numerous boys. After

losing defense motions based on statute of limitations, BSA ultimately settled with sixteen plaintiffs

for $89.1 million. See Day 2 Hr'g Tr. 122:3-124:7.

16

asserts multiple reasons for lack of coverage, including that: (i) the alleged conduct was not

an “accident,” (ii) the alleged conduct was “expected or intended,” (ii) punitive damages

are not insurable, (iv) the underlying insurance was not exhausted and (v) there is no

coverage for personal injury which takes place outside the coverage period.”

In this Illinois litigation, the Chubb Defendants and Century assert a counterclaim

against BSA and Chicago Area Council. These insurers allege, among other things, that the

policies issued by Century to BSA during the relevant years do not provide coverage for two

of the plaintiffs in the underlying lawsuit because the agreed-to settlement amounts were

unreasonable or attributable to punitive damages exposure.”

In 2018, BSA and certain Local Councils sued The Hartford Accident and Indemnity

Co., and First State Insurance Co. in a Texas state court seeking declaratory judgments

regarding defendants’ coverage obligations.” BSA and the Local Councils allege that they

are defendants in lawsuits alleging Abuse over multiple periods and in multiple geographic

locations on the theory that BSA and the Local Councils were negligent in failing to prevent

the Abuse. In this coverage action, BSA and the Local Councils assert that a dispute exists

because the insurance companies have denied coverage contending that: (i) claims

throughout the country against BSA asserting Abuse are the result of a single occurrence

and thus the policies are exhausted after payment of one claim; (ii) there is a lack of

evidence that certain claimed policies exist; (iii) certain policies are exhausted as aggregate

89 JTX 202 Counterclaim Count I ff 3-4.

*® JTX 181.

17

limits have been paid and (iv) for certain renewed policies, only one occurrence is permitted

for all periods.”

Separately, in 2018, BSA and certain Local Councils sued Insurance Company of

North America, Century Indemnity Company, Allianz Global Risks US Insurance

Company (“Allianz”) and National Surety Corporation in a Texas state court secking

declaratory relief that coverage is available under numerous insurance policies for several

underlying lawsuits alleging Abuse.” In the complaint, BSA and the Local Councils allege

that “the significant increase in sexual abuse claims over the last several years has resulted in

an increase in disputes with [BSA’s and plaintiff Local Councils’] insurers.” BSA seeks to

resolve various disputes with the defendant insurance companies, including application of

the First Encounter Agreement” to the underlying lawsuits, failure to pay defense costs and

JTX 181; see also JTX 182. Hartford also filed an adversary proceeding in the bankruptcy case, see

Ady. Pro. No. 20-50601.

% JTX 185,

3 JTX 185 437.

4 The First Encounter Agreement is between BSA, INA and Century:

Q: Okay. So let's just take a look at that. This is an agreement. Who ts it between?

A: The Boy Scouts, along with INA and Century Indemnity.

Q: Okay. And what did you understand this agreement to be?

A: This is the -- what -- what I've been calling it, the “first encounter agreement.” It has a

section within the agreement that says that they will consider the date of first abuse or the first

encounter as the single trigger date.

Q: Okay. And where are you looking, in terms of the application of that first encounter?

A: So Paragraph 7 reads:

“The ‘first encounter rule’ shall mean that, for purposes of determining coverage under any

policy, the date of occurrence pertaining to any sexual molestation claim shall be the date

when the first act of sexual molestation took place, even if additional acts of sexual

molestation or additional personal injuries arising therefrom also occurred in subsequent

18

failure to indemnify BSA for settlements paid to plaintiffs in the underlying lawsuits.

Further, BSA accuses Allianz of unfair or deceptive acts or practices.

E.. Prepetition Resolutions and Attempts to Resolve Abuse Claims

In August 2016, Debtors retained Ogletree Deakins Nash, Smoak & Stewart, P.C.

(“Ogletree”) as its national coordinating counsel to oversee Abuse litigation; Bruce Griggs is

the engagement partner.” At its height, Mr. Griggs oversaw a team of six attorneys and

three paralegals working on approximately 350 claims asserting Abuse against BSA, Local

Councils and/or Related Non-Debtor Entities.° He was aware of claims made against

BSA, Local Council and Chartered Organizations together; conversely, Mr. Griggs was not

aware of any claims made against a Chartered Organization that did not include claims

against either BSA or a Local Council.” A claim could consist of a lawsuit or a pre-suit

demand letter.” From its engagement through February 2020, Ogletree resolved

approximately 250 of the 350 claims it was handling.”

In preparation for his role as BSA’s national coordinating counsel, Mr. Griggs

familiarized himself with BSA’s prior defense strategy.” Prior to Ogletree’s retention, BSA

policy periods, And all damages arising out of such additional acts of sexual molestation or

additional personal injuries shall be deemed to have been occurred” — “incurred during the

policy year when the first act of sexual molestation took place.”

Day 9 Hi’g Tr. 31:24-32:21.

Declaration of Bruce Griggs in Support of Confirmation of The Third Modified Fifth Amended

Pian of Reorganization for Boy Scouts of America and Delaware BSA, LLC [ECF 9273; admitted

into evidence Day 2 Hr’g Tr. 58:9-12] (“Griggs Decl.”) 3.

% Griggs Decl. €f 3, 7.

” Griggs Decl. § 6.

Griggs Decl. 411.

Griggs Decl. | 7.

100 Griggs Decl. € 4.

19

secured releases for applicable Local Councils and Chartered Organizations when settling

cases brought against BSA." In keeping with BSA’s previous practice, Mr. Griggs also

obtained releases for Local Councils and Chartered Organizations when settling claims

against BSA'™

In October 2019, BSA invited certain attorneys representing survivors to New York

City for a mediation session to attempt an out-of-court resolution of Abuse claims."” The

lawsuits were straining BSA’s finances and BSA determined it could not continue to address

the lawsuits on a case-by-case basis.‘ At that time, BSA was named as a defendant in

approximately 275 lawsuits asserting Abuse and the pace of filings was accelerating driven

at least in part by state legislation loosening applicable statutes of limitations.” BSA was

also aware of 1400 other claims not yet the subject of lawsuits.!° The meeting was

unsuccessful.

From 2017 through 2019, BSA spent more than $150 million on settlements and

legal and related professional fees and costs in addressing Abuse claims."””

I. Postpetition Events

Debtors each filed a voluntary petition under chapter 11 of the United States

Bankruptcy Code on February 18, 2020 (the “Petition Date”). The filing was driven by the

01 Griggs Decl. { 4.

102 See e.g., TTX 8.

103 See e.g., Day 2 Hr’g Tr. 109:11-110:17; FTX 1663, 1664.

4 Whittman Decl. { 42.

5 Whittman Decl. { 42.

106 JTX 1-1 at 3.

107 JTX 1-1 at 5.

20

prepetition Abuse claims.! Since the filing, BSA and Delaware BSA, LLC have been

operating as debtors-in-possession.'”

On March 5, 2020, the Office of the United States Trustee (“UST”) formed two

committees: a Committee of Unsecured Trade Creditors (“UCC”) and a Committee of Tort

Claimants (“TCC”).!" On April 24, 2020, I appointed James L. Patton as the future claims

representative (“FCR”).'"' Additionally, an ad hoc committee of Local Councils (“Local

Council Committee”) formed in the first few days of the case. On July 24, 2020, a self-

named Coalition of Abused Scouts for Justice (“Coalition”) announced its appearance in

the case. The Coalition is a splinter group from the TCC.'”

Over 9500 motions, objections or other documents appear on the BSA docket.

A, The Bar Date

By Order dated May 26, 2020 (“Bar Date Order”),'” a bar date of November 16,

2020 (“Bar Date”) was set as the date by which all holders of prepetition claims, including

Abuse claims, had to file proofs of claim. Two different forms of notice and two different

proof of claim forms were approved in the Bar Date Order. The proof of claim form for

108 Whittman Decl. § 42.

1 The two bankruptcy cases are jointly administered. Delaware BSA, LLC has no real operations.

0 Notice of Appointment of Committee of Unsecured Trade Creditors [ECF 141]; Notice of

Appointment of Committee - Tort Claimants [ECF 142].

Order Appointing James L. Patton, Jr., as Legal Representative for Future Claimants, Nunc Pro

Tunc to the Petition [ECF 486].

See JTX 1-225 16.

43 Order, Pursuant to 11 U.S.C. § 502(b)(9), Bankruptcy Rules 2002 and 3003(c)(3), and Local

Rules 2002-1(e), 3001-1, and 3003-1, for Authority to (D Establish Deadlines for Filing Proofs of

Claim, (II) Establish the Form and Manner of Notice Thereof, (IID Approve Procedures for

Providing Notice of Bar Date and Other Important Information to Abuse Victims, and (IV) Approve

Confidentiality Procedures for Abuse Victims [JTX 1-25],

21

holders of claims unrelated to Abuse allegations is the Official Form 410. The proof of

claim form for survivors of Abuse, titled Sexual Abuse Survivor Proof of Claim, is in six

Parts over twelve pages and requests information in both “check the box” and narrative

form.

In addition to approving a typical notice process, the Bar Date Order also approved

an extensive supplemental noticing campaign designed by an advertising and notification

consulting firm.'* Based on a review of BSA’s historical data (including historical claims)

as well as a 2010 Gallup Survey that included a question on Scouting, the consulting firm

concluded that over 54% of former Scouts were men over 50 years old." The campaign,

therefore, was designed to reach approximately 95.9% of men age fifty and over in the

United States an average of 6.5 times.'’® The campaign also had the goal of reaching its

secondary target of men over 18 and its tertiary target of women over 18." The campaign

included television, radio, print, streaming and online spots directed at broad audiences

(readers of national magazines) and targeted audiences (such as the military, USO Centers

and BSA media).'®

The plaintiffs’ bar also played an active (some have argued aggressive) role in

targeting potential claimants by instituting a massive advertising campaign of its own. No

less than 16 separate firms/entities associated with plaintiff law firms ran at least 10,999

4 JTX 1-14. Declaration of Shannon R. Wheatman, Ph.D in Support of Procedures for Providing

Direct Notice and Supplemental Notice Plan to Provide Notice of Bar Date to Abuse Survivors

[ECF 556; admitted into evidence by Stipulation ECF 9509] (““Wheatman Decl.”).

"5 Wheatman Decl. | 32, 9 34.A.ii1.

16 Wheatman Decl. 4 93.

Wheatman Decl. {{ 38.

18 Wheatman Decl. { 46.

22

advertisements (ranging from radio spots to thirty minute infomercials) directed at Abuse

claimants from May 26, 2020 to August 24, 2020." In response, Debtors filed a motion

seeking a supplemental bar date order preventing what Debtors deemed to be false and

misleading statements.'”° Many of the plaintiff law firms named in the motion as well as the

Coalition objected on First Amendment grounds. After two hearings, supplemental briefing

and an announcement of a consensual form of order agreed to by Debtors and several

plaintiff law firms, an Order was entered memorializing the agreed-to concessions and

ruling on the remaining outstanding objection.'*! The Order provides that those law firms

subject to the Order are prohibited from continuing to make statements (i) suggesting that

Abuse claimants may remain anonymous; (ii) indicating a specific value of any potential

compensation trust and (iii) suggesting that Abuse claimants will never have to be deposed,

appear in court or otherwise prove their claims.'” Any further law firm advertisement is

required to refer Abuse claimants to the official claims agent website and to include the Bar

Date.

More than 100,000 proofs of claim were filed with Omni Agent Solutions (‘Omni’),

the claims agent, including 82,209 unique and timely claims asserting Abuse.'” Many of

the same law firms that advertised extensively were retained by thousands of clients alleging

Abuse at the hands of BSA.

FTX 1-401 § 37.

2 JTX 1-401 ¢ 42.

JTX 1-409.

22 JTX 1-409 €10.A.

23 Declaration of Makeda S. Murray in Support of Confirmation of Third Modified Fifth Amended

Chapter 11 Plan of Reorganization for Boy Scouts of America and Delaware BSA, LLC [ECF 9317;

admitted into evidence Day 6 Hr’g Tr. 29:3-6].

23

B. Mediation

On the first day of the case, Debtors filed a motion seeking to appoint a mediator and

send certain matters to mediation. After a contested hearing, by Order dated June 9, 2020, I

appointed three mediators “for the purpose of mediating the comprehensive resolution of

issues and claims in BSA’s chapter 11 case through a chapter 11 plan... , which includes,

without limitation, all matters that may be the subject of a motion seeking approval by the

court of solicitation procedures and/or forms of plan ballots, a disclosure statement, or a

confirmation of a chapter 11 plan.”’* Through the beginning of the confirmation hearing,

and even thereafter, one or more of the mediators filed twelve mediator reports reporting on

progress and attaching term sheets and/or settlement agreements reflecting resolutions

reached during the course of mediation.

C. The Plan Process and Voting

I. Solicitation

The plan presented for confirmation is the Debtors’ Third Modified Fifth Amended.

Chapter 11 Plan of Reorganization for Boy Scouts of America and Delaware BSA, LLC.

(“Plan”). As evident from its title, the Plan is not the first or even the fourth version of a

proposed plan of reorganization.

On the first day of the case, Debtors filed a placeholder plan. The Second, Third,

Fourth and Fifth Amended plans were filed between March 1, 2021 and September 15,

124 JTX 1-26 | 2. Three mediators became two, and then one, after one resigned and one was

terminated.

2 JTX 1-353.

24

2021.!° The plan that was originally solicited (“Solicitation Plan”) was filed on September

30, 2021,’ the day after the Disclosure Statement was approved on September 29, 2021.'8

The Plan classifies Debtors’ claims and equity interests into ten classes.’”” Classes 1

(Other Priority Claims) and 2 (Other Secured Claims) are unimpaired, presumed to accept

and not entitled to vote. Class 10 (Interests in Delaware BSA) is impaired, deemed to reject

and not entitled to vote. The impaired, voting classes are:

Class 3A 2010 Credit Facility Claims

Class 3B 2019 RCF Claims

Class 4A 2010 Bond Claims

Class 4B 2012 Bond Claims

Class 5 Convenience Claims

Class 6 General Unsecured Claims

Class 7 Non-Abuse Litigation Claims

Class 8 Direct Abuse Claims

Class 9 Indirect Abuse Claims

Per a resolution embodied in a Settlement Term Sheet among Debtors, JPMorgan

Chase Bank, N.A. (Debtors’ lender) (“JPM”) and the TCC, the funded indebtedness held by

the holders of claims in Classes 3 and 4 is reinstated with extended maturities to ten years

26 Chapter 11 Plan of Reorganization for Boy Scouts of America and Delaware BSA, LLC [ECF

20]; Amended Chapter 11 Plan of Reorganization for Boy Scouts of America and Delaware BSA,

LLC [ECF 2293]; Second Amended Chapter 11 Plan of Reorganization for Boy Scouts of America

and Delaware BSA, LLC [ECF 2592]; Third Amended Chapter 11 Plan of Reorganization for Boy

Scouts of America and Delaware BSA, LLC [ECF 5368]; Fourth Amended Chapter 11 Plan of

Reorganization for Boy Scouts of America and Delaware BSA, LLC [ECF. 5484]; Fifth Amended

Chapter 11 Plan of Reorganization for Boy Scouts of America and Delaware BSA, LLC [ECF

6212].

27 Modified Fifth Amended Chapter 11 Plan of Reorganization for Boy Scouts of America and

Delaware BSA, LLC [ECF 6443].

28 Amended Disclosure Statement for the Modified Fifth Amended Chapter [1 Plan of

Reorganization for Boy Scouts of America and Delaware BSA, LLC [ECF 6445} (“Disclosure

Statement”).

29 The Plan and the Solicitation Plan do not differ in their classification of claims.

25

after the Effective Date, with a two year moratorium on principal payments.” Class 5

Convenience Claims, which are general unsecured claims less than $50,000 (or a claim

reduced to that amount), are paid in full. Holders of Class 6 General Unsecured Claims,

which is any claim against a Debtor that is not an administrative claim or a claim in another

class, will receive their pro rata share of $25 million. Debtors project that Class 6 will

receive recoveries between 75% and 95%.

Class 7 is comprised of approximately 55 wrongful death and personal injury claims

(non-Abuse related) and seven other litigation claims, including the claims of Girl Scouts of

the United States of America for trademark infringement. This class retains the right to

receive full payment of its claims from available insurance proceeds, including both Abuse

Insurance Policies and Non-Abuse Insurance Policies (both as defined in the Plan). Any

unsatisfied portion of such a claim may also recetve $50,000 as a Convenience Class claim.

Debtors project a 100% recovery on these claims.

Class 8 is comprised of Direct Abuse Claims. These are claims of individuals for

Abuse."! Class 9 is comprised of Indirect Abuse Claims. In general, Class 9 claims are

claims for contribution, indemnity, reimbursement, or subrogation that could be asserted by

insurance companies, Local Councils or Chartered Organizations. Both Direct Abuse

Claims and Indirect Abuse Claims are channeled to a trust (“Settlement Trust”) to be

30 The resolution with JPM is attached to the First Mediators’ Report (JTX 1-33 Ex. A) and

provides for the treatment of non-Abuse claims, treatment of JPM’s secured claims and resolves any

estate challenges to JPM’s prepetition security interests.

131 Yn the Plan, Direct Abuse Claim means “an Abuse Claim that is not an Indirect Abuse Claim.”

In turn, the definition of “Abuse Claim” is a lengthy, detailed description identifying those entities

against whom a claim of Abuse is asserted. It includes Future Abuse Claims (as defined in the

Plan), Indirect Abuse Claims and Direct Abuse Claims.

26

processed, liquidated and paid in accordance with the Settlement Trust Agreement and the

Trust Distribution Procedures (“TDP”).

As set out in the Disclosure Statement, the Solicitation Plan contemplated that

funding for the Settlement Trust would come from multiple sources. One, BSA is to make a

contribution of cash, real property and personal property valued at $219 million. ‘T'wo,

Local Councils, collectively, are to make a contribution of (x) cash and real property, in the

amount of $500 million, (y) an interest bearing variable obligation note in the amount of

$100 million (“DST Note”) and (z) the Local Council Insurance Rights.’” Three, the

Settlement Trust is to receive all of the insurance rights of BSA, Local Councils and

Contributing Chartered Organizations. Four, pursuant to a settlement among Debtors, the

Coalition, the FCR, the Local Council Committee and the Church of Jesus Christ of the

Latter-Day Saints (“TCJC”) attached to the Sixth Mediators’ Report, TCJC agrees to make

a cash contribution of $250 million plus certain insurance rights to the Settlement Trust for

132 The definition of Local Council Insurance Rights is:

Local Council Settlement Contribution. The Local Councils shall make, cause to be made, or be

deemed to have made, as applicable, the Local Council Settlement Contribution. Ifa Local

Council is unable to transfer its rights, titles, privileges, interests, claims, demands or

entitlements, as of the Effective Date, to any proceeds, payments, benefits, Causes of Action,

choses in action, defense, or indemnity, now existing or hereafter arising, accrued or unaccrued,

liquidated or unliquidated, matured or unmatured, disputed or undisputed, fixed or contingent,

arising under or attributable to (i) the Abuse Insurance Policies, the Insurance Settlement

Agreements, and claims thereunder and proceeds thereof, (ii) Insurance Actions, and (iii) the

Insurance Action Recoveries (the “Local Council Insurance Rights”), then the Local Council

shall, at the sole cost and expense of the Settlement Trust: (a) take such actions reasonably

requested by the Settlement Trustee to pursue any of the Local Council Insurance Rights for the

benefit of the Settlement Trust; and (b) promptly transfer to the Settlement Trust any amounts

recovered under or on account of any of the Local Council Insurance Rights; provided, however,

that while any such amounts are held by or under the control of any Locai Council, such

amounts shall be held for the benefit of the Settlement Trust.

Plan Art. V.S.1.a. The Local Council contribution is dependent upon an acceptable resolution of

issues related to Chartered Organizations, including as to insurance and indemnity claims. As

discussed infra, the Local Council contribution increased as a result of further negotiations.

al

payment of Direct Abuse Claims related to TCJC that arose in connection with its

sponsorship of one or more Scouting units. '** Five, pursuant to a settlement among

Debtors, the FCR, the Coalition, the Local Council Committee and Hartford, also attached

to the Sixth Mediators’ Report, Hartford agrees to make a contribution to the Settlement

Trust in the amount of $787 million in exchange for the sale of the Hartford Policies to

Hartford free and clear of the interests of all third parties, including additional insureds."

Six, there is a mechanism for additional insurance companies to become Settling Insurance

Companies by making monetary contributions to the Settlement Trust. Seven, there is a

mechanism by which Chartered Organizations can make contributions to the Settlement

Trust and become Contributing Chartered Organizations, or can choose one of two other

options. Of note, the TCC was not a party to the settlement with Hartford or TCJC.

Consistent with Dr. Bates’s valuation at the time (see infra), in the Disclosure

Statement, Debtors project recoveries for both Direct Abuse Claims and Indirect Abuse

Claims based on a range of $2.4 billion to $7.1 billion.’ The calculation (as qualified in the

Disclosure Statement) yields 10-21% on the lower range and 31 to 63% on the higher range,

in each instance with additional insurance rights expected to yield up to a 100% recovery.

133 JTK 1-292, Ex. B. As finally documented, Notice of Filing of Exhibits I-1 and J-1 to Debtors’

Third Modified Fifth Amended Chapter 11 Plan of Reorganization and Redlines Thereof Ex. 3

[ECF 8816-3], the “TCJC Settlement Agreement.”

34 JTX 1-292, Ex. A. As finally documented, Notice of Filing of Exhibits I-1 and J-1 to Debtors’

Third Modified Fifth Amended Chapter 11 Plan of Reorganization and Redlines Thereof Ex. 1

[ECF 8816-1], the “Hartford Settlement Agreement.” As set forth in the Disclosure Statement,

Hartford’s contribution was subject to Hartford’s satisfaction with the treatment of Chartered

Organizations as it impacts Hartford’s Policies. JTX 1-296 at 14-15.

In the Disclosure Statement, Debtors state the estimated amount of Indirect Abuse Claims is

unknown since they are unliquidated, contingent and subject to § 502(e), See JTX 1-296 at 30 n.44.

But, Debtors urge that Indirect Abuse Claims, to the extent viable, are included in the Bates White

estimated range because they are capped as set forth in the Trust Distribution Procedures.

28

2. The Initial Voting Results

As reflected in the Initial Nownes-Whitaker Declaration,’ with respect to Debtor

BSA, the Solicitation Plan received 100% acceptance by Classes 3A, 3B, 4A, 4B, over 98%

acceptance by Class 5 and over 99% acceptance by Class 6. With respect to Debtor

Delaware BSA, LLC, the Solicitation Plan received 100% acceptance by Classes 3A, 3B,

4A, and 4C. The remaining classes also accepted the Solicitation Plan by the requisite

amounts’’’ as reflected in the ballot tabulation:

Debtor BSA

Class # Votes Accept Reject

Class 7 6 4 = 66.67% 2 = 33.33%

Class 8 53,596 39,430 = 73.57% 14,166 = 26.43%

Class 9 6710 4,666 = 69.57% 2,042 = 30.43%

Debtor Delaware BSA, LLC

Class 9 753 599 = 79.55% 154 = 20.45%

36 Declaration of Catherine Nownes-Whitaker of Omni Agent Solutions Regarding Solicitation of

Votes and Final Tabulation of Ballots Cast on the Second Modified Fifth Amended Chapter 11 Plan

of Reorganization for Boy Scouts of America and Delaware BSA, LLC [ECF 8345; admitted by

Stipulation ECF 9509] (“Initial Nownes-Whitaker Declaration”).

137 Bach claimant in Classes 7, 8 and 9 voted his/her/its claim in the amount of $1.00 so that the

percentage of acceptance/rejection by number is equivalent to the percentage of acceptance/

rejection by amount.

29

3. Continued Mediation and Further Insurance Settlements

Notwithstanding solicitation and as contemplated in the Disclosure Statement,

Debtors and the other mediation parties continued their attempts to resolve disputes.

Settlements reached post-solicitation with Century/Chubb, Zurich and Clarendon add

another $871 million from Settling Insurance Companies as well as an additional $40

million from Local Councils on account of Chartered Organizations.

Attached to the Seventh Mediator’s Report filed December 14, 2021, is a Term Sheet

reflecting a settlement among Debtors, Century/Chubb, the Local Council Committee, the

Coalition, the FCR and certain state court council, which, in general (and subject to final

documentation), provides that Century will buy back its insurance policies and obtain

certain releases for a payment of $800 million to the Settlement Trust.’ The Century

settlement is significant because, among other things, it established/clarified a baseline for

an acceptable resolution to claims of Chartered Organizations against Abuse Insurance

Policies‘ that had been left to further negotiation in the Hartford Term Sheet. The Century

settlement also required BSA and Local Councils to make additional contributions to the

Settlement Trust on behalf of Chartered Organizations in the form of: (i) $15 million in cash

and an increase of $25 million in the DST Note from Local Councils (“Supplemental LC

Contribution”) and (ii) up to $100 million from BSA and Local Councils tied to future

138 ‘The settlements with Hartford, Century/Chubb, Zurich and Clarendon are, collectively, the

“Settling Insurer Settlements.”

139 JTX 2834 Ex. AY 3. As finally documented, JTX 1-355 Ex. 1, the “Century Settlement

Agreement.”

140 Abuse Insurance Policies means “collectively, the BSA Insurance Policies, and the Local Council

Insurance Policies. Abuse Insurance Polices do not includes Non-Abuse Insurance Policies or

Postpetition Insurance Policies.” Plan Art 1.20.

30

membership increases on account of Chartered Organizations’ continued sponsorship of

Scouting Units (“Settlement Growth Payment”).

Attached to the Ninth Mediator’s Report filed December 22, 2021 is a Term Sheet

among Debtors, Zurich," the FCR, the Coalition and the Local Council Committee

reflecting, subject to final documentation, a settlement by which Zurich will buy back its

insurance policies and obtain certain releases for a payment of $52,500,000 to the Settlement

Trust.’ It is largely modeled after the Century settlement.

Attached to the Tenth Mediator’s Report filed January 3, 2022 is a Term Sheet

among Debtors, Clarendon, the Local Council Committee, the Coalition and the FCR

reflecting, subject to final documentation, a settlement by which Clarendon will buy back its

insurance policies and obtain certain releases for a payment of $16,500,000 to the Settlement

Trust.‘ It is also largely modeled after the Century settlement.

4, Additional Settlements with Chartered Organizations

After solicitation, Debtors also continued to work with organized Chartered

Organizations to reach resolutions. Attached to the Eight Mediator’s Report filed January

3, 2022 is a Term Sheet (subject to final documentation) among Debtors, the United

Methodist Ad Hoc Committee (“Methodist Committee”), the Coalition, the Local Council

11 Zurich means American Zurich Insurance Company, American Guarantee & Liability Insurance

Company and Steadfast Insurance Company (“Zurich”).

42 JTX 1-312, as finally documented, JTX 1-355 Ex. 2, the “Zurich Settlement Agreement.”

183 Clarendon means Clarendon National Insurance Company {as successor in interest by merger to

Clarendon American Insurance Company), River Thames Insurance Company {as successor in

interest to UnionAmerica Insurance Company Limited) and Zurich American Insurance Company

(as successor in interest to Maryland Casualty Company, Zurich Insurance Company and American

General Fire & Casualty Company) (“Clarendon”),

44 JTX 1-316, as finally documented, JTX 1-355 Ex. 3, the “Clarendon Settlement Agreement.”

31

Committee and the FCR reflecting an agreement by which (i) the United Methodist Entities

(as defined therein) will contribute $30 million to the Settlement Trust and (ii) the Methodist

Committee will recommend to the United Methodist BSA leadership team that it agree to

lead a fundraising effort to raise an additional $100 million for the Settlement Trust from

other Chartered Organizations.‘ In addition to its financial contribution, the United

Methodist Entities agree to continue to partner with BSA as Chartering Organizations

through 2036 and cooperate with youth protection efforts. Further, the Methodist

Committee agrees to support the Pian and recommend to holders of Direct Abuse Claims

that they support the Plan.

Attached to the Twelfth Mediator’s Report filed March 17, 2022 is a Term Sheet

among Debtors, the Roman Catholic Ad Hoc Committee (“Roman Catholic Committee”),

the FCR, the Coalition, the Local Council Committee and certain Settling Insurance

Companies by which certain Roman Catholic Entities (as defined in the Term Sheet) are

treated as Participating Chartered Organizations under the Plan.’ The Roman Catholic

Committee agrees to work with BSA and Local Councils to improve Scouting at least

through the year 2036 and the Roman Catholic Committee commits to encourage the U.S.

Council of Bishops to recommend that all Roman Catholic Entities do so as well. The

Roman Catholic Committee also agrees to support confirmation of the Plan, withdraw

significant confirmation-related discovery requests as well as objections to evidence offered

in support of confirmation by Plan supporters and withdraw its own expert reports and its

45 JTX 1-311.

46 JTX 2959,

32

objection to confirmation. The Roman Catholic Committee also agrees to cooperate and

support BSA’s youth protection efforts.

5. The Resolution with the TCC

As set forth above, the TCC did not support the Solicitation Plan, the Settling Insurer

Settlements or any of the mediated resolutions. That changed on February 10, 2022 when

the Eleventh Mediator’s Report was filed.'*’ Attached to that report is a Term Sheet among

Debtors, the TCC, the FCR, the Coalition, the Local Council Committee and the

Pfau/Zalkin claimants (“TCC Term Sheet”).'** The Term Sheet is also supported by

numerous state court counsel representing holders of Direct Abuse Claims who agree to

recommend that their clients who previously voted to reject the Plan change their votes to

acceptances. The terms of the TCC Term Sheet are also subject to definitive

documentation, but were to be incorporated into the Plan by way of modifications.

The TCC Term Sheet contains numerous, detailed terms. Some of the highlights

(which are discussed more fully injra) are:

Gi) The TCC will withdraw its opposition to the Plan and the settlements with

Hartford, Century/Chubb, Zurich and Clarendon.

(ii) The reworking of the definition of Abuse Claim in the Plan and the

introduction of a new term, “Mixed Claim.” A Mixed Claim is a Direct Abuse

Claim that makes allegations of Abuse related to Scouting and also makes

allegations of Abuse occurring prior to the Petition Date that are unrelated to

Scouting (“Non Scouting Abuse”).

47 JTX 1-350.

48 The Pfau/ Zalkin Claimants are Abuse claimants represented by two separate law firms, The

Zalkin Law Firm, P.C. and Pfau Cochran Vertetis Amala PLLC.

33

(iii) A return to the treatment of Chartered Organizations embodied in the

Solicitation Plan (and a retreat from the offer to Chartered Organizations under

the Century settlement) such that Chartered Organizations who do not choose

to be Opt-Out Chartered Organizations are now Participating Chartered

Organizations and must provide consideration to the Settlement Trustee to

become a Contributing Chartered Organization entitled to full releases from

holders of Direct Abuse Claims.

(iv) The redirection of the Supplemental LC Contribution so that it is now

consideration for the extension of a preliminary injunction prohibiting the

continuation of lawsuits against Participating Chartering Organizations/

Limited Protected Parties to give them an opportunity to negotiate with the

Settlement Trustee to become Contributing Chartered Organizations/Protected

Parties.‘

(v) An additional option in the TDP for liquidation of Direct Abuse Claims—the

Independent Review Option.

(vi) The adoption of a specific Youth Protection Program.

(vii) The reconstitution of the composition of the Settlement Trust Advisory

Committee (see below) as well as the establishment of voting requirements on

certain actions.

(viii) An agreement that Debtors will consult with the TCC, the FCR and the

Coalition on the presentation of the testimony of Dr. Bates and Ms. Gutzler at

9 This preliminary injunction has been in place since March 30, 2020.

34

the confirmation hearing as well as certain required findings related to the

same.

The terms of the TCC Term Sheet were ultimately incorporated into the Plan.

6. The Settlement Trust Agreement and the Trust Distribution Procedures, as

Amended'*4

a. The Settlement Trust Agreement

The Pian contemplates the creation of a Settlement Trust to receive the contributions

from BSA, Local Councils and settling parties.’"' The purpose of the Settlement Trust is to,

among other things:

assume liability for all Abuse Claims, to hold, preserve,

maximize and administer the Settlement Trust Assets [as defined

in the Plan], and to direct the processing, liquidation, and

payment of all compensable Abuse Claims in accordance with

the Settlement Trust Documents [as defined in the Plan].'”

BSA creates the Settlement Trust pursuant to the Settlement Trust Agreement.’ The

Settlement Trust is a statutory trust under Chapter 38 of title 12 of the Delaware Code'™ and

it is the § 1123(b)(3)(B) estate representative as specifically spelled out (and qualified) in the

Pian.“ The beneficial owners of the Settlement Trust (“Beneficiaries”) are the holders of

150 Capitalized terms not defined in this Section have the meaning ascribed to them in the TDP.

The T'DP contain a lot of commentary. To the extent that the commentary is inconsistent with

conclusions reached in this Opinion, any future iteration of the TDP should be revised to eliminate

the unnecessary rhetoric.

151 Plan Art. IV.

52 See Plan Art. IV.B.1.

153 The BSA Settlement Trust Agreement is attached as Exhibit B to the Plan (the “Settlement Trust

Agreement”).

St Settlement Trust Agreement Ast. 1.1.

5 Plan Art. IV.C.2.

35

Abuse Claims (defined in the Settlement Trust as the holders of Class 8 Direct Abuse

Claims and Class 9 Indirect Abuse Claims).'*°

In addition to the statutorily required Delaware trustee, the Settlement Trust

Agreement provides for one other trustee (“Settlement Trustee”).°’ BSA has nominated the

Hon. Barbara Houser (ret.) to serve as the Settlement Trustee. The Settlement Trust

Agreement also provides for two Claims Administrators to oversee the administration of

claims—one each to oversee the Claims Matrix Process/Expedited Distribution election

and the Independent Review Option discussed below.

The Settlement Trust Agreement further provides for the creation of a Settlement

Trust Advisory Committee (“STAC”).'” Pursuant to the TCC Term Sheet, the STAC □□□□

be comprised of three members chosen by the Coalition, three members chosen by the TCC

and one member chosen by the Pfau/Zalkin Claimants. All members are lawyers that

represent holders of Direct Abuse Claims. As discussed more fully below, the STAC has a

certain oversight/consulting role with respect to the Settlement Trustee.

b. The Trust Distribution Procedures’

The TDP create four processes by which Direct Abuse Claims are liquidated and an

Allowed Claim Amount (or, a Final Determination) is determined. These processes are: (1)

the Expedited Distribution election, (i) evaluation under the Claims Matrix (“Claims

56 Settlement Trust Art. 1 Sec. 1.6(a); Recital (B).

‘57 Settlement Trust Art. 5 Sec. 5.1.

58 Settlement Trust Art. 4 Sec. 4. 1(a).

Settlement Trust Art. 6.

160 The TDP are attached as Exhibit A to the Plan.

36

Matrix Process”), (iii) the Tort System Alternative, and (iv) the Independent Review

Option.

The Expedited Distribution election permits a holder of a Direct Abuse Claim

(“Direct Abuse Claimant”) to receive a payment of $3,500 on account of his claim with a

minimal level of review. A Direct Abuse Claimant must have timely submitted a

“substantially completed” proof of claim signed by the claimant (not his lawyer) under

penalty of perjury.'“' He must also have elected the Expedited Distribution on his ballot.”

Under the TDP, Direct Abuse Claimants will receive their Expedited Payment upon

executing certain required releases.“ Seven thousand three hundred eighty-one (7381)

Direct Abuse Claimants made the Expedited Distribution election.’

Under the Claims Matrix Process, a Direct Abuse Claimant must: (1) make a Trust

Claim Submission to the Settlement Trust, which includes a completed questionnaire signed

under oath, the production of all records in his possession, custody or control related to the

Abuse (including records regarding past or expected recoveries from any source) and a

signed agreement to produce further records and documents upon request of the Settlement

Trustee, (ii) consent to a Trustee Interview (including by healthcare professionals) and (iit)

consent to a written and/or oral examination under oath, if requested.’* The Settlement

61 TDP Art, VLA.

162 Plan Art. TI.B.10(b)(i).

63 TDP Art. VIB.

164 Supplemental Declaration of Catherine Nownes-Whitaker of Omni Agent Solutions Regarding

the Submission of Votes and Final Tabulation of Ballots Cast in Connection with the Limited

Extended Voting Deadline for Holders of Claims in Class 8 and Class 9 on the ‘Third Modified Fifth

Amended Chapter 11 Plan of Reorganization for Boy Scouts of America and Delaware BSA, LLC.

[ECF 9275] (“Supplemental Nownes-Whitaker Declaration”).

165 TDP Art. VILA.

37

Trustee performs an Initial Evaluation to see if these submissions meet the requisite criteria.

If so, the claim submission moves to the next step. If not, the Direct Abuse Claim is a

Disallowed Claim.

In the next step, the Settlement Trustee evaluates all claims that were not disallowed

for compliance with the General Criteria. These General Criteria are: (i) identification of

alleged acts of Abuse; (ii) identification of the abuser by either name or specific information

such that the Settlement Trustee can determine whether the alleged abuser was an

employee, agent or volunteer of a Protected Party or associated with Scouting and the

Abuse directly relates to Scouting activities; (iii) the Abuse is connected to Scouting and a

Protected Party “may bear legal responsibility;” (iv) identification of the date of the Abuse

directly or through other evidence and (v) identification of the venue or location of the

Abuse. If the claim submission meets the General Criteria and the materials submitted do

not contain false or deceptive information, the Direct Abuse Claim is deemed an Allowed

Abuse Claim. If the submitted materials do not meet the General Criteria or if they contain

fraudulent and/or deceptive material, the Direct Abuse Claim is deemed a Disallowed

Claim.'

An Allowed Abuse Claim is then run through the Claims Matrix and Scaling

Factors. The Claims Matrix establishes six tiers of Abuse types and provides a Base Matrix

Value and Maximum Matrix Value to each tier, as follows:!*’

166 TDP Art. VILC.

167 TDP Art. VIOLA.

38

Value Value

1 Anal or Vaginal Penetration by Adult $600,000 $2,700,000

Perpetrator—includes anal or vaginal

sexual intercourse, anal or vaginal

digital penetration, or anal or vaginal

penetration with a foreign, inanimate

object.

2 Oral Contact by Adult Perpetrator— $450,000 $2,025,000

inciudes oral sexual intercourse, which

means contact between the mouth and

penis, the mouth and anus, or the

mouth and vulva or vagina. Anal or

Vaginal Penetration by a Youth

□□□□□□□□□□□□□□□□□□□□□□□ anal or vaginal

sexual intercourse, anal or vaginal

digital penetration, or anal or vaginal

penetration with a foreign, inanimate

object.

3 Masturbation by Adult Perpetrator— $300,000 $1,350,000

includes touching of the male or female

genitals that involves masturbation of

the abuser or claimant. Oral Contact by

a Youth

Perpetrator—includes oral sexual

intercourse, which means contact

between the mouth and penis, the

mouth and anus, or the mouth and

vulva or vagina.

4 Masturbation by Youth Perpetrator— $150,000 $675,000

includes touching of the male or female

genitals that involves masturbation of

the abuser or claimant.

Touching of the Sexual or Other

Intimate Parts (unclothed) by Adult

Perpetrator.

39

5 Touching of the Sexual or Other $75,000 $ $337,500

Intimate Parts (unclothed) by a Youth

Perpetrator.

Touching of the Sexual or Other

Intimate Parts (clothed), regardless of

who is touching whom and not

including masturbation.

Exploitation for child pornography.

Sexual Abuse-No Touching. $3,500 $8,500

Adult Abuse Claims

The Settlement Trustee assigns an Allowed Abuse Claim to one of the six tiers and applies

the Scaling Factors to the Base Matrix Value to determine a Proposed Allowed Claim

Amount for each Allowed Abuse Claim. While the Maximum Matrix Value is just that—

the maximum that can be awarded by the Settlement Trustee in the Claims Matrix Process,

the Base Matrix Value is not a minimum amount, but merely a starting point for the

calculation of a Proposed Allowed Claim Amount.

Ifa Direct Abuse Claimant is satisfied with the Proposed Allowed Claim Amount

proposed by the Settlement Trustee or takes no further action with respect to it, then it

becomes the Allowed Claim Amount.'®

If a Direct Abuse Claimant is dissatisfied with the Settlement Trustee’s Proposed

Allowed Claim Amount, he may make a Reconsideration Request within thirty days of

receiving the determination.’” Alternatively, he may notify the Settlement Trustee that he

intends to seek a de novo determination of his claim by a court of competent jurisdiction

168 TDP Art. VILE.

16? TDP Art. VIG.

40)

(the “TDP Tort Election.”).!” The Final Determination/Allowed Abuse Amount of a

Direct Abuse Claim that goes through the TDP Tort Election is the amount awarded in the

lawsuit.!”! The Tort System Altemative also includes a STAC Tort Election option which

permits the commencement or continuation of a lawsuit by a Direct Abuse Claimant against

the Settlement Trust to obtain the Allowed Claim Amount.'” The Allowed Claim Amount

in these instances is the final judgment less any payments actually received and retained by

the Direct Abuse Claimant, but if the claimant receives a judgment in excess of the

Maximum Matrix Value for the applicable tier, that additional amount is subordinate in

right of distribution to the prior payment in full of all other Allowed Abuse Claims.'” If one

of these methods of liquidation is chosen or permitted, the Settlement Trustee shall provide

notice to any Non-Settling Insurance Companies and seek defense in accordance with the

terms of any relevant insurance policies.'™

The Independent Review Option contemplates recoveries above the values stated in

the Claims Matrix and is designed to permit Direct Abuse Claimants with higher value

claims to potentially receive a higher award and directly trigger excess insurance

coverage.! Under the Independent Review Option, a Direct Abuse Claimant can have his

claim evaluated by a neutral third party (a retired judge with tort experience on a panel

1 TDP Art. XILA. An Abuse Claimant can also make a TDP Tort Election Claim if dissatisfied

with the results of his Reconsideration Request.

-TDP Art, XILH.

1 ‘TDP Art. XILC.

3 TDP Art. XILG.

4 TDP Art. XILD.

5 Gutzler Decl. 4 132-134.

Al

maintained by the Settlement Trust) who makes a Settlement Recommendation to the

Settlement Trustee. The Neutral’s Settlement Recommendation seeks to replicate the

amount a reasonable jury would award taking into account relative shares of fault and the

standard of proof applicable under applicable state law.'° A Direct Abuse Claimant has six

months after the Effective Date of the Plan to select this Option.

The submissions required under the Independent Review Option have parallels to

those required under the Claims Matrix Process, but, generally require “confirmation of” or

“evidence that” the criteria is satisfied. For example, a Direct Abuse Claimant must submit

evidence that he was in a Scouting unit by submitting a photograph, a membership card or

document that reflects the claimant’s rank in Scouting or a sworn statement from a third

party, who will agree to a deposition if requested. The Direct Abuse Claimant must also

provide evidence that that the claim is timely under an applicable statute of limitations,

including satisfying any recognized exceptions under applicable law. And, the Direct Abuse

Claimant “shall be subject to” a six hour sworn interview, mental health examination or

signed and dated supplemental interrogatories.‘ The Direct Abuse Claimant is also

entitled to certain discovery from the Settlement Trust.'”

The Settlement Trustee is required to provide notice to “any potentially responsible

non-settling insurer(s)” of any claim for which the Independent Review Option is selected.

Those insurers are given a “reasonable opportunity” to participate in the Independent

Review and may review and comment on the Neutral’s evaluation, including attending any

TDP Art. XTILG.

™% TDP Art. XITLT.

42

interview or deposition and raising and presenting (at the insurer’s cost) applicable defenses

to a claim.'”

If the Settlement Trustee accepts the Neutral’s Settlement Recommendation, that

amount is the Allowed Claim Amount of the Direct Abuse Claim.” The Settlement

Trustee must then provide notice to the applicable Non-Settling Insurance Company(ies)

and seek consent. The insurer may elect to pay the Allowed Claim Amount or decline to do

so. If the Responsible Insurer declines to pay, the Settlement Trustee may sue under the

applicable insurance policies.'*'

If the Settlement Trustee declines to accept the Neutral’s recommendation, within

forty-five days of service of a notice of rejection, the Direct Abuse Clatmant may commence

a lawsuit in any court of competent jurisdiction against the Settlement Trust to liquidate his

claim."

If the Settlement Trustee accepts a recommendation of zero, the Direct Abuse

Claimant shall receive zero and may not pursue any Protected Parties. If the settlement

Trustee accepts a recommendation under $1 million the award is paid from the Settlement

Trust.!® If the Settlement Trustee accepts a recommendation that is $1 million or more, the

first $1 million of the award is paid from the Settlement Trust and the excess is collected

from the Excess Award Fund.'"* The Excess Award Fund is funded from comprehensive

‘TDP Art. XIILK.

180 TDP Art. XIILA.

181 TDP Art. XIILK, L.

182 TDP Art. XTILA.

183 TDP Art. XULD.

84 TDP Art. XIILE.

43

settlements reached by the Settlement Trustee with a Non-Settling Insurance Company with

80% of such settlement proceeds contributed to the Excess Award Fund, and 20% of the

proceeds remaining with the General Trust funds.'*

Amounts collected by the Settlement Trustee from Non-Settling Insurance

Companies in satisfaction of the Accepted Settlement Recommendation from any policy

that has applicable aggregate limits are awarded 80% to the Direct Abuse Claimant, with

the balance contributed to the General Trust until the Direct Abuse Claimant has collected

80% of the Excess Award Share. Thereafter policy proceeds are divided 70% to the Direct

Abuse Claimant and 30% to the General Trust.'*°

If the Neutral’s Settlement Recommendation determines that a Chartered

Organization not protected by the Channeling Injunction (e.g. an Opt-Out Chartered

Organization) is responsible for some or all of a Direct Abuse Claim assigned to the

Settlement Trust, at the claimant’s request, the Settlement Trustee may assign back to the

claimant its right to pursue the Chartered Organization and its insurer for that allocated

share. The Direct Abuse Claimant can bring an action in a court of competent jurisdiction

against the Chartered Organization and its insurers to obtain a judgment for damages.'*”

7. Chartered Organizations

While Chartered Organizations may have claims against Debtors, the lens through

which to view them relative to confirmation is as the beneficiary of the channeling

injunction and/or the recipient of third-party releases.

85 TDP Art. XID.LGi(a).

186 TDP Art. XIIML(GY3).

187 TDP Art. XIIL.N(iii).

44

The Plan provides Chartered Organizations with three alternatives. A Chartered

Organization can choose to be a Contributing Chartered Organization, a Participating

Chartered Organization or an Opt-Out Chartered Organization. These alternatives

determine their respective post-confirmation exposure to Abuse Claims and, depending on

the choice, also resolve their claims against BSA.

a. Contributing Chartered Organizations

To become a Contributing Chartered Organization, a Chartered Organization must

make a monetary contribution to the Settlement Trust. It must also release its rights to or

interests in the BSA Insurance Policies and Local Council Insurance Policies’® as well as its

rights in its own insurance policies covering Abuse Claims and claims against both Settling

and Non-Settling Insurance Companies. It must also waive all claims against Debtors,

including Indirect Abuse Claims.”

In exchange for this consideration, all Abuse Claims regardless of when such claims

arose are channeled to the Settlement Trust. Further, a Contributing Chartered

Organization is a Protected Party and therefore the beneficiary of third-party releases from

Releasing Parties, which include holders of Abuse Claims.

TCIC and the United Methodist Entities are the only two Contributing Chartered

Organizations at this time.

“188 These rights and interests will be assigned to the Settlement Trust or otherwise sold back to the

Settling Insurers, as applicable.

189 See Plan Art. [.A.85.

45

b. Participating Chartered Organizations

If a Chartered Organization takes no action with respect to its Chartered

Organization status, it is a Participating Chartered Organization." No monetary

contribution is required. Instead, a Participating Charter Organization must assign and

transfer to the Settlement Trust all rights, claims, benefits, or Causes of Action under or with

respect to the (a) Abuse Insurance Policies (but not the policies themselves), (b) the

Participating Chartered Organization Insurance Actions, (c) the Insurance Action

Recoveries and (d) the Insurance Settlement Agreements.

In exchange for this contribution of insurance rights as well as contributions made by

others, all Abuse Claims that are alleged to first arise from January 1, 1976 forward are

channeled to the Settlement Trust. Additionally, any Abuse Claims that pre-date January

1, 1976 are channeled to the Settlement Trust to the extent covered under an Abuse

Insurance Policy issued by a Settling Insurance Company.

90 Plan Art. LA.199. provides:

199. “Participating Chartered Organization” means a Chartered Organization (other than a

Contributing Chartered Organization, including the ‘TCJC and the United Methodist Entities)

that does not (a) object to confirmation of the Plan or (b) inform Debtors’ counsel in writing on

or before the confirmation objection deadline that it does not wish to make the Participating

Chartered Organization Insurance Assignment. Notwithstanding the foregoing, with respect to

any Chartered Organization that is a debtor in bankruptcy as of the Confirmation Date, such

Chartered Organization shall be a Participating Chartered Organization only if it advises

Debtors’ counsel in writing that it wishes to make the Participating Chartered Organization

Insurance Assignment, and, for the avoidance of doubt, absent such written advisement, none of

such Chartered Organization’s rights to or under the Abuse Insurance Policies shall be subject to

the Participating Chartered Organization Insurance Assignment. A list of Chartered

Organizations that are debtors in bankruptcy and may not be Participating Chartered.

Organizations is attached hereto as Exhibit K. For the avoidance of doubt, any Chartered

Organization that is a member of an ad hoc group or committee that objects to the confirmation

of the Plan shall not be a Participating Chartered Organization.

46

A Participating Chartered Organization also becomes a Limited Protected Party and

therefore receives releases from Releasing Parties, including holders of Abuse Claims, for all

Abuse Claims alleged to have occurred on or after January 1, 1976 (parallel with the

channeling of such claims) and any Abuse Claims alleged to have occurred prior to January

1, 1976 that are covered under an insurance policy issued by a Settling Insurance Company

that meet certain criteria.”

Participating Chartered Organizations also receive the protection of the Post

Confirmation Interim Injunction—a twelve-month injunction (subject to further extension)

from prosecution of Abuse Claims beginning on the Effective Date—to afford Participating

Chartered Organizations an opportunity to negotiate an appropriate contribution with the

Settlement Trust to become a Contributing Chartered Organization.'” This protection is

paid for by the $40 million Supplemental LC Contribution.

Ail but a couple of hundred of the more than 100,000 Chartered Organizations listed

on the Omni website are Participating Chartered Organizations.'”

c. Opt-Out Chartered Organizations

An Opt-Out Chartered Organization is a Chartered Organization that objected to the

Plan or informed Debtors’ counsel that it does not wish to become a Participating Chartered

Organization.“ A Chartered Organization that is itself a debtor in a bankruptcy case as of

the Confirmation Date is also placed in this category unless it affirmatively informs Debtors’

Plan Art. X.J.3, X.J.6.

2 Plan Art. X.D.

3 Day 20 Hr’g Tr. 16-19.

4 Plan Art. LA.196.

47

counsel that it wishes to be a Participating Chartered Organization and make the necessary

assignments.

An Opt-Out Chartered Organization does not voluntarily relinquish any rights to the

BSA Insurance Policies or the Local Council Insurance Policies and retains its own rights in

any insurance policies it procured.’

An Opt-Out Chartered Organization is not a Protected Party or a Limited Protected

Party and does not receive a release. Notwithstanding, Abuse Claims are channeled to the

Settlement Trust to the extent that the Abuse Claim is covered by an insurance policy issued

by a Settling Insurance Company. This channeling of Abuse Claims effectively acts as a

release.

8. Youth Protection

Direct Abuse Claimants have participated in this case officially through the TCC,

unofficially, but in an organized fashion, through the Coalition and pro se. Additionally,

certain Direct Abuse Claimants testified or provided argument at confirmation. Many of

them supported the notion that any resolution with BSA must include enhanced youth

protection measures.° Certain Direct Abuse Claimants testified that a successful plan of

reorganization could not exist without improvements in youth protection sounding in

transparency, third-party professional engagement and survivor recognition and activism.'”’

1% Plan Art. V.S.1.g(i1). But, assuming approval of the buyback of its insurance policies under

§ 363(f), Opt-Out Chartered Organizations will lose their rights or interests in the Abuse Insurance

Policies issued by Settling Insurers.

% Day 4 Hr’g Tr. 10:22-25. “I can’t tell you how many survivors contacted us and said, regardless

of whatever financial result comes of this, we want to make sure there is applicable and appropriate

youth protection measures.”

17 Day 4 Hr’g Tr. 10:3-11:11; Day 8 Hr’g Tr. 3:11-23.

48

The TCC did not support the Plan until an agreement on youth protection measures was

achieved.

In November 2021, the Coalition formed a Survivor Working Group specifically to

engage in negotiations with BSA about youth protection." The Survivor Working Group is

comprised of fifteen members of diverse educational backgrounds, employment, economic

circumstances and race/ethnic identity.” The Survivors Working Group first met with

members of BSA’s National Executive Committee, the Local Council Committee and

Praesidium’s™ child protection experts on November 12, 2021.7" On December 16, 2021,

the Survivors Working Group finalized an “issues list” for BSA’s review.” BSA responded

in late January, 2022 seeking further clarification on issues and solutions.“” On January 30,

2022, the Survivors Working Group began negotiating with BSA on the exact terms of the

youth protection enhancements. The TCC “flanked” the Survivors Working Group for

eight days of negotiations before the TCC, the Survivors Working Group and BSA agreed

on the terms included in the Eleventh Mediator’s Report Following agreement, both the

TCC and the Survivors Working Group support confirmation of the Plan.”

% Day 8 Hr’g Tr. 18:12-24.

9 Day 8 Hr’g Tr. 20:20-21:2.

20 Praesidium is a consulting service retained by BSA specializing in preventing Abuse of children

and vulnerable adults.

201 Day 8 Hr’g Tr. 23:10-17.

20 Day 8 Hr’ Tr. 29:4-9.

203 Day 8 Hr’g Tr. 29:13-25.

204 Day 8 Hr’g Tr. 31:16-22.

205 Day 4 Hr’g Tr. 9:25-11:11; Day 8 Hr’g Tr. 34:23-35:2.

49

The Youth Protection terms are memorialized as Exhibit L to the Plan and contain

numerous, detailed provisions. Some of the highlights are:

(i) Hiring a “Youth Protection Executive” with responsibilities over all aspects of

youth protection including implementing and monitoring policies and trainings at

the Local Council and Chartered Organization level.

(ii) Creating a “Youth Protection Committee” comprised of members from BSA,

Local Councils, Chartered Organizations, the TCC, and the Survivors Working

Group that will work alongside the Youth Protection Executive in all aspects of

youth protection.

(iii) | Updating existing BSA policies such as requiring routine criminal background

checks, registering all adults staying overnight in connection with Scouting

activities as adult leaders and consolidating all aspects of BSA’s youth protection

materials into a single, accessible, manual.

(iv) Enhancing training materials to ensure the training is clinically evidence- and

research-based and reflective of survivor-informed experiences.

(v) Integrating youth protection into the Scouting program through educational

programs designed to teach Scouts how to recognize and report inappropriate

behavior.

(vi) Enhancing incident reporting procedures through mandatory notifications to an

affected Troop’s parents, Chartered Organization, Local Council Executive

Committee, Youth Protection Executive and Youth Protection Committee when

an adult offender is placed on the Volunteer Screening Database.

50

(vii} Expanding survivor representation by requiring a qualified survivor of Scouting

Abuse to serve on the National Executive Board as well as each Local Council

Executive Board.

(viii) Promoting survivor recognition by establishing a place of remembrance for all

child Abuse survivors at prominent locations at each of BSA’s High Adventure

Bases and creating a survivor-focused path to Eagle Scout.

(ix) Enhancing volunteer screening by exploring opportunities to both make the

Volunteer Screening Database public and share the database with other youth

servicing organizations.””

The agreed-upon terms coupled with BSA’s existing youth protection program meet or

exceed industry standards relating to volunteer and employee screening, Abuse

identification and prevention training, internal policies and procedures and response

procedures.” Further, the enhanced youth protection program provides a framework for

continuously evaluating and working toward BSA’s goal of becoming the “gold standard”

in Abuse prevention.”

As both the Direct Abuse Claimants and Debtors recognize, enough is never enough

when it comes to youth protection.”” The Survivors Working Group did not get every term

206 TTX 1-353 Ex. L. at 1-8.

7 Day 10 Hr’g Tr. 88:4-23.

208 Day 10 Hr’g Tr. 99:3-10.

09 Day 8 Hr’g Tr. 35:10-17; Day 17 Hr’g Tr. 14:9-12.

51

it felt was important.? Overall, however, the Survivors Working Group and TCC are

pleased with the enhancements made to youth protection.”

9, Plan Modifications, Supplemental Disclosure and Voting

On February 15, 2022, Debtors filed the Plan incorporating the post-solicitation

settlements and resolutions. They also filed executed versions of the Century Settlement

Agreement, the Zurich Settlement Agreement, the Clarendon Settlement Agreement, the

Hartford Settlement Agreement and the agreements with TCJC and the United Methodist

Ad Hoc Committee?” After a hearing, Debtors submitted supplemental disclosures

targeted to holders of claims in Class 8 and Class 9 explaining the modifications.”’” The

notices provided a summary of the modifications to the Plan and offered each holder in

Class 8 and Class 9 an opportunity to change his/its vote. At the conclusion of the

extended voting period, the results for Classes 8 and 9 were:

Debtor BSA

Class # Votes Accept Reject

Class 8 56,536 48,463 = 85.72% 8,073 = 14.28%

Class 9 7,239 5,966 = 82.41% 1,273 = 17.59%

10 Day 8 Hr’g Tr. 34:8-9.

2 Day 8 Hr’g Tr. 35:1-12.

42 Notice of Filing of Exhibits I-2, 1-3, I-4 and J-2 to Debtors’ Third Modified Fifth Amended

Chapter 11 Plan of Reorganization [ECF 8817].

213 Supplemental Disclosure Regarding Plan Modifications and Summary of Chartered

Organizations’ Options Under the Debtors’ Modified Chapter 11 Plan of Reorganization, Opt-Out

Election Procedures for Participating Chartered Organizations, and Supplemental Voting Deadline

of March 7, 2022 at 4:00 pm (Eastern Time) for Holders of Class 9 Indirect Abuse Claims [ECF

8904]; Notice of Supplemental Voting Deadline of March 7, 2022 at 4:00 p.m. (Eastern Time) for

Holders of Class 8 Direct Abuse Claims and Limited Disclosure Regarding Changes in Debtors’

Chapter 11 Plan of Reorganization [ECF 8905].

52

Debtor Delaware BSA, LLC

Class 9 775 628 = 81.03% 147 = 18.97%

10. The Confirmation Hearing

In contemplation of a contested confirmation hearing, on October 8, 2021, I entered

a Scheduling Order detailing a discovery schedule for both fact and expert witnesses,

containing objection, reply and motions in limine deadlines, and establishing a confirmation

hearing date of January 24, 2022.* Due to discovery disputes and the extended voting

deadline the confirmation hearing date was twice extended ultimately commencing on

March 14, 2022.

a. The Objectors

Objections to all or some aspect of the Plan were timely filed by thirty-nine parties.”

While several objections (or portions thereof) were resolved before or during the course of

the confirmation hearing, ultimately, there is much to be decided. For the most part, the

objectors reside in one of two camps—-Non-Settling Insurance Companies or holders of

Direct Abuse Claims.

Taking the lead role for the Non-Settling Insurance Companies at trial was the

Certain Insurers.” Their main objection raises issues as to good faith, certain proposed

214 Order (1) Scheduling Certain Dates and Deadlines in Connection with Confirmation of the

Debtors’ Plan of Reorganization, (II) Establishing Certain Protocols, and (III) Granting Related

Relief [ECF 6528}.

5 See Addendum A for a list of objections and/or supplemental objections filed.

46 The Certain Insurers are: (i) the AIG Companies, (ii) The Continental Insurance Company and

Columbia Casualty Company, (iii) Indian Harbor Insurance Company on behalf of itself and as

successor in interest to Catlin Specialty Insurance Company, (iv) Travelers Casualty and Surety

Company, Inc. (f/k/a/ Aetna Casualty & Surety Company), St. Paul Surplus Lines Insurance

Company and Gulf Insurance Company; (v) Arrowood Indemnity Company, (vi) Gemini Insurance

Company, (vii) National Surety Corporation and Interstate Fire & Casualty Company, (viii) Allianz

Global Risks US Insurance Company; (ix) Argonaut Insurance Company and Colony Insurance

53

findings, and the provisions of the TDP. They also raise specific issues relative to their

Indirect Abuse Claims.

On the Direct Abuse Claimant side, three objectors, the Archbishop of Agafia a

Corporation Sole, (“Archbishop”), the Lujan Claimants*”’ and the Official Committee of

Unsecured Creditors for the Archbishop of Agafia (“Guam Committee”),’" focused on

rights held by either the Archbishop or Direct Abuse Claimants with claims against both the

Archbishop and BSA. The Archbishop filed its own bankruptcy case under chapter 11 in

the District Court of Guam, Territory of Guam, Bankruptcy Division in 2019.7" The Guam

Committee, consisting of seven individuals who hold tort claims against the Archbishop,

was appointed by the Office of the United States Trustee. The Lujan Claimants assert

claims against both BSA and the Archbishop of Agafia stemming from Abuse perpetrated

by Father Louis Brouillard, a Catholic priest and Scoutmaster. They allege that Brouillard

abused them not only as a Scoutmaster, but in his capacity as a Catholic priest in settings

unrelated to Scouting. The Guam Committee objects to the third-party releases and the

buyback of the insurance policies free and clear of the Archbishop’s rights as a co-insured

Company, (x) Liberty Mutual Insurance Company, (xi) General Star Indemnity Company; (xii)

Great American Assurance Company, f/k/a Agricultural Insurance Company; Great American

E&S Insurance Company, f/k/a Agricultural Excess and Surplus Insurance Company; and Great

American E&S Insurance Company, (xiii) Arch Insurance Company.

“7 Lujan Claimants’ Objection to Second. Modified Fifth Amended Chapter 11 Plan of

Reorganization for Boy Scouts of America and Delaware BSA, LLC, and Jomder in Objection filed

by Guam Committee [ECF 8708] (“Lujan Claimants’ Objection”).

218 See e.g., Objection of the Official Committee of Unsecured Creditors for the Archbishop of Agafia

(Bankr. D. Guam 19-00010) to the Second Modified Fifth Amended Chapter 11 Plan of

Reorganization for Boy Scouts of America and Delaware BSA, LLC [ECF 8683].

219 See e.g,. Joinder of Archbishop of Agafia, a Corporation Sole, to the Roman Catholic Ad Hoc

Committee’s Objection to the Debtors’ Second Modified Fifth Amended Chapter 11 Plan of

Reorganization [ECF 8687].

54

under the policies. The Lujan Claimants join in those objections and also assert that the

insurance policies may not be sold (or bought back) free and clear of their right to sue

insurers directly under Guam law.*”

Other Direct Abuse Claimants represented by the law firm of Dumas & Vaughn,

LLC (the “D&V Claimants”), other counsel or appearing pro se join in the objections to the

third-party releases as did the Office of the United States Trustee. The Girl Scouts of the

United States of America, Claimant I.G., Mr. Pai, Jane Doe and certain pro se claimants

also raise specific confirmation issues related to their claims.

220 At argument, Debtors raised for the first time the issue of the Guam Committee’s standing to

object to confirmation. Citing Jn re Lifeco Inv. Group, Inc., 173 B.R. 478, 487-88 (Bankr. D. Del.

1994), Debtors argue that as a creditor of a creditor (the Archbishop of Agafia), the Committee is not

a party-in-interest under § 1109 and so cannot file objections in this case. See Day 19 Hr’g Tr. 8:18-

9:23, Debtors also assert that the Guam Committee may not participate in this case because it did

not receive permission from the Guam bankruptcy court to act on behalf of the Archbishop of

Agafia. Debtors submitted into evidence the motion of the Guam Committee in the Guam

Bankruptcy for “derivative standing to enforce the automatic stay and take other actions” (JTX

4015) (“Derivative Standing Motion”), the objection of the Archbishop to that motion (JTX 4016,

4017) and numerous other filings in response to the Derivative Standing Motion (JTX 4018 through

4026). The Derivative Standing Motion was ultimately denied, as moot, in a Final Order Approving

Stipulation and Denying Derivative Standing Motion as Moot (JTX 4027), which was an agreed

order submitted by the Guam Committee and the Archbishop of Agafia. Notwithstanding, the

Guam Comunittee contends that it is a party in interest in the BSA bankruptcy case under the plain

meaning of § 1109 and, in any event, it does not need derivative standing to object to confirmation

in the BSA case because it did not bring an adversary proceeding. See Day 19 Hr’g Tr. 86:19-87:9.

I disagree. The Guam Committee is not a creditor of this estate. Indeed, while members of the

Guam Committee may have claims against BSA which they may assert on their own behalf, the

Guam Committee, as a committee, has no claims whatsoever against BSA. Moreover, the Guam

Committee cites to no case for the proposition that §1109 contemplates that a committee in one

bankruptcy case is a party-in-interest in another bankruptcy case. Finally, the Guam Committee

cites to no case for the proposition that a committee does not need derivative standing to file an

objection in a contested matter (as opposed to an adversary proceeding) when it is asserting a

debtor’s claims. In this case, where the Guam Committee sought relief to advance the position of

the Archbishop of Agafia, and that relief was denied after the Guam Committee agreed to a form of

order, I conclude that the Guam Committee does not have standing to appear im this case.

Nonetheless, by the time Debtors raised this argument, the Guam Committee had fully participated

in the evidentiary portion of the trial and the Archbishop of Agafia thereafter adopted the Guam

Committee’s legal arguments. See Day 19 Hr’g ‘T'r. 176:3-11. Accordingly, I will address the Guam

Comuunittee’s legal contentions.

55

b. Plan Supporters

Responses and/or replies were filed.”' Current supporters of the Plan include the

UCC, IPM, the TCC, the Coalition and the Local Council Committee. Hartford, Century,

Zurich, Clarendon, the Roman Catholic Committee, the Methodist Committee, TCJC, the

Pfau/Zalkin Claimants and certain law firms that represent members of the Coalition are

generally supportive of the Plan.

c. The Hearing

During three weeks of evidentiary hearings twenty-six witnesses were called by live

testimony, declaration or a combination of both and portions of six video depositions were

played. Additionally, over one thousand exhibits were admitted into evidence.

Subsequently, I reviewed designated and counter-designated portions of eight depositions.

The record is closed?”

I also entertained six days of oral argument, which proceeded in accordance with a

chart of “Confirmation Closing Issues” prepared by Debtors.” Each objecting party was

provided with an opportunity to present argument on legal issues encompassed within its

objection. A specific time slot was provided for pro se objectors. At the conclusion of

argument, I took the matter under advisement.

JURISDICTION

Jurisdiction exists over this case under 28 U.S.C. § 1334. Confirmation is a core

proceeding under 28 U.S.C. § 157(b)(2). Except as further discussed below, no objector has

See Addendum A for a listing of filings made in support of the Plan.

222 A few evidentiary objections were taken under advisement during trial. I rule on those herein.

223 The chart was circulated and discussed at least twice in advance of argument. During those

discussions, I asked if there were any confirmation issues not reflected on the chart. No party

suggested any additional issues.

56

contested that this court can enter a final order on confirmation consistent with the United

States Constitution.”

DISCUSSION

To confirm a plan of reorganization, a debtor must prove by a preponderance of the

evidence that all elements of § 1129 of the Code are satisfied.” Preponderance of the

evidence means that a fact that the proponent is attempting to prove is more likely to be true

than not.”

Rulings on several key issues are fundamental to the nature of this Plan and impact

many of the § 1129 factors. Accordingly, before walking through § 1129, I will first make

additional findings on the aggregate value of the Direct Abuse Claims and the available

unsettled insurance.”” J will then turn to the Settling Insurer Settlements, which involve the

buyback of insurance policies “free and clear” and require third-party releases and

channeling injunctions. I will then address the “Findings” required under the Plan,

I. Additional Findings Related to Direct Abuse Claims

A. The Aggregate Value of the Direct Abuse Claims

While the lead up to confirmation suggested that the issue of the aggregate value of

Direct Abuse Claims would be a hotly contested matter, the settlement with the TCC

24 Discussion of jurisdictional issues surrounding the third-party releases and channeling injunction

are addressed separately, infra.

225 See e.g., In re Tribune Co., 464 B.R. 126, 151-152 (Bankr. D. Del. 2011), afd in part, 587 B.R. 606

(D. Del. 2018); In re Purdue Pharma L.P., 633 B.R. 53, 61 (Bankr. $.D.N.Y. 2021), vacated, 635 B.R.

26 (S.D.N.Y 2021}. While the Purdue Pharma opinion was vacated, I cite it where I find the

reasoning persuasive.

226 Ty ve Lafferty, 2019 WL 10431875 at *3 (Bankr. M.D. Pa. Dec. 20, 2019) (“To establish a fact by

the preponderance of the evidence means to prove that the fact is more likely true than not true.”)

(internal citations omitted).

These findings are made for purposes of confirmation only.

57

brought relative peace on this front. Part of this resolution resulted in only one valuation

expert testifying at trial. Dr. Charles Bates, chairman of Bates White LLC and Debtors’

retained expert was qualified without objection as an expert in claim valuation, mass tort

matrixes and trust distribution structures. He spent approximately eight hours on the

stand.”*> One of his four assignments was to estimate the total value of Direct Abuse Claims

and Future Claims as of the filing of the petition assuming the claims would be resolved at

values consistent with prepetition settlements. Within the scope of this work, he was asked

to evaluate trends in the proofs of claim submitted in the BSA case.

Dr. Bates employed a frequency severity methodology to determine an aggregate

value for the Direct Abuse Claims. The frequency severity model is an accepted valuation

methodology within the valuation community and Dr. Bates has employed this

methodology in every mass tort case in which he has provided expert testimony.’” The

frequency severity model takes guidance from historical claims about their values and

characteristics to come up with averages for groups of claims within the historical data pool.

It then applies those averages to groups of claims within the subject pool that share similar

characteristics to come up with an aggregate valuation of the subject pool.” This

methodology necessarily includes testing though scenario analysis which requires an

228 Dr, Bates presented his testimony through the use of thirty-four demonstratives. At the

conclusion of his testimony, Debtors moved to admit the demonstratives into evidence. I took the

matter under advisement. I decline to admit the demonstratives into evidence. While exceedingly

helpful, they are not evidence and they present a view of the facts--Dr. Bates’s view~—not just the

facts.

229 Day 6 Hr’g Tr. 115:4-116:1.

39 Day 6 Hr’g Tr. 116:11-19.

58

evaluation of the assumptions used to value and group the claims to see the impact on the

analysis if factors are changed.

Consistent with the severity frequency methodology, Dr. Bates first analyzed

historical data about BSA’s prepetition settlements with Abuse claimants as provided to him

by Ogletree Deakins.”' For the most part, Dr. Bates disregarded data pre-dating Ogletree’s

retention because the recordkeeping pre-Ogletree did not record important facts surrounding

the claims; rather it was kept for accounting purposes.*” Further, the Ogletree data was

superior because Dr. Bates could discuss facts of each case with Mr. Griggs, as necessary.””

The Ogletree data yielded 262 prepetition claims (the “Historical Abuse Claims”).

Dr. Bates made several observations about the Historical Abuse Claims. First, there

is a wide variation in the settlements amounts.”** In grouping the Historical Abuse Claims

by size of payment to claimants (dismissed without payment, four and five figure payments,

six figure payments and seven figure payments), Dr. Bates concluded that a significant

amount of the aggregate value of the settlements was concentrated in a small number of

high value claims.*® He further isolated the most severe claims (penetration claims) and

observed a distinct bimodal distribution pattern. Fifty-five percent of the claims were

resolved for less than $300,000 and about thirty-three percent of the claims settled for over

$900,000. Relatively few claims settled for values in between.

231 Day 6 Hi’g Tr. 56:18-21, 100:13-18.

22 Day 6 Hr’g Tr. 101:14-18.

23 Day 6 Hr’g Tr. 103:4-10.

234 Day 6 Hr’g Tr. 104:20-105:15.

25 Day 6 Hr’g Tr. 106:5-10.

59

To explain the bimodal distribution, Dr. Bates looked at the facts underlying the

Historical Abuse Claims and identified repeat abusers as the primary driver of highest

settlement values.”° Dr. Bates equates repeat abuser to institutional responsibility /

knowledge.”*’ Dr. Bates also observed that the settlement average is higher for claims

involving penetration followed by claims involving other sex acts and then claims involving

groping/ touching. Using this data, Dr. Bates established a benchmark value for penetration.

claims of $212,500 for once-identified abusers and $975,000 for repeat abusers. He then

discounted those values by 54% for claims of other sex acts ($114,750/$526,500) and by

one-half again for claims of groping/touching ($57,375/$263,250).

Having analyzed the Historical Abuse Claims and established his benchmarks, Dr.

Bates next turned to the proofs of claim filed in the bankruptcy case. Dr. Bates segmented

the proofs of claim filed by Direct Abuse Claims (“Proofs of Claim”) into categories that

overlap the data in the Historical Abuse Claims based on severity (penetration, other sex

acts and groping/touching) and whether the abuser was a repeat abuser or once-identified

abuser. In order to do so, Dr. Bates excluded Proofs of Claims that did not reflect the name

an abuser, where the claims were presumptively barred, where the claimant was not a minor

when first abused and which did not contain an allegation of Abuse.*** He then discounted

the Historical Abuse Claims benchmarks by 20% to account for the age difference between

the claimants asserting Historical Abuse Claims and claimants who filed the Proofs of

237 Day 6 Tr. 112:5-114:20.

238 Day 6 Hr'g Tr. 129:22-131:8.

60

Claim.“ Dr. Bates also applied assumptions for “other relationships.”*” Applying the

Historical Abuse Claim benchmarks to this set of data and assumptions results in an

ageregate Initial Benchmark Valuation of $2.5 billion."

To test his assumptions, Dr. Bates next developed a list of “plus” and “minus”

factors that would move the Initial Benchmark Valuation up or down, as applicable.”

These factors account for unknowable future possibilities such as (1) a change in the legal

landscape (e.g. passing of revival statutes), (ii) one or more claimants supplying information

not currently contained in the Proofs of Claim or (iii) more future claimants coming

forward.2" To account for these, Dr. Bates determined a relative likelihood and the relative

impact of each factor.“ He landed on a 50% variance around his first Initial Benchmark

239 ‘The Historical Abuse Claims reflect that the age of the claimant is highly reflective of the claim.

Settlement values decrease significantly based on the delay in asserting the allegations. Day 6 Hr’g

Tr. 139:9-140:14.

240 An “other relationship” is a non-BSA relationship between a victim and an abuser. This is

another proxy for institutional responsibility.

’41 The Initial Benchmark Valuation changed over time. In Spring 2021, when using data from

Proofs of Claim in Tranche IV, Dr. Bates arrived at an Initial Benchmark Valuation of $4.75 billion,

which was used in connection with Debtors’ estimates in the Disclosure Statement. In Fall, 2021,

when using data from the Proofs of Claim in Tranche VI, Dr. Bates arrived at an Initial Benchmark

Valuation of $5.84 billion. This revision in the Initial Benchmark Valuation accounted for (i) the

passage of revival statutes in four states and (ii) amendments to several thousand proofs of claim

adding the names of abusers and the Abuse suffered. These changes necessarily raised the Initial

Benchmark Valuation. In continuing to review the Tranche VI data, Dr. Bates observed that there

were anomalous single-Abuse claims that resulted in relatively high-value settlements, Day 6 Hr’g

Tr. 183:5-184:5. Through additional research in the ineligible volunteer files and/or

contemporaneous news reports of the Abuse, Dr. Bates learned that claims classified as single abuser

claims were, in actuality, repeat abuser claims. Day 6 Hr’g Tr. 185:9-20. Updating that information

in the Tranche VI data set resulted in the $2.5 billion Initial Benchmark Valuation. These changes in

the Initial Benchmark Valuation were the result of updated information and not any change in the

methodology. Day 6 Hr’g Tr. 186:5-11.

742 Day 6 Hr’g Tr. 165:8-12; 175:21-176:2,

443 Day 6 Hr’g Tr. 174:8-180:17.

44 Day 6 Hr’g Tr. 180:18-25.

61

Valuation of $4.75 billion to create an appropriate valuation range of $2.4 to $7.1 biilion for

the Direct Abuse Claims.” The valuation range is inclusive of future claims.” The range

was admittedly large reflective of the inherent uncertainties in the Direct Abuse Claims.”*’

Since the creation of that range, Dr. Bates reviewed the expert reports filed by others

in this case, received additional information regarding repeat abusers (see fn. 241, supra) and

performed additional analysis. One of the “biggest questions” Dr. Bates sought to answer

was why so many Proofs of Claim were filed in the case as opposed to the prepetition

average of fifty per year." He came to two conclusions. The first reason is claimant

privacy/hesitancy to come forward in a public setting with their claims.” This is reflected

in the Proofs of Claim. Ninety-eight percent of the Direct Abuse Claimants did not check

the box which would make their proof of claim public and more than eighty-five percent

indicated they had never told anyone they were abused.” But, holders of Direct Abuse

Claimants are willing to come forward in this forum. The second reason is the economic

245 Day 6 Hr’g Tr. 181:1-5.

248 To determine the impact of future abuse claimants (a plus factor) on his Benchmark Valuation,

Dr. Bates performed a regression analysis and estimated that 400 future claims would be asserted.

Day 6 Hr’g Tr. 198:20-25-199:1-19. He testified this followed the downward trend in the trajectory

of claims since the 1960s. Certain objectors sought to seize on Mr. Patton’s testimony that the FCR

believes there are 11,000 future claimants. I give no evidentiary weight to that testimony. Mr.

Patton was not offered for this purpose, he is not an expert, and there was no support offered for this

position.

47 Day 6 Hr’g Tr. 97:8-23.

48 Day 6 Hr’g Tr. 135:21-25; 142:15-143:3.

49 Day 6 Hr’g Tr. 143:4-9.

250 Day 6 Hr’g Tr. 143:10-22. Dr. Bates’s testimony was that 98 percent of survivors did not check

the box that would make their proof of claim private. Read in context, that is in error. The proof of

claim form provides that the submission “will be maintained as confidential unless you expressly

request that it be publicly available by checking the ‘public’ box and signing below.” JTX 1475

at 3 (emphasis in original).

62

considerations of claimants and their attorneys.’ Dr. Bates observed that “recovery

attorneys” did not mass-recruit these Direct Abuse Claimants until the bankruptcy case was

imminent. He noted the lack of mass advertising for Abuse cases as compared to

mesothelioma cases or Roundup cases, the expense of such advertising and the statute of

limitations defenses which could make Abuse cases more expensive to litigate.” Based on

these observations, Dr. Bates concluded that Abuse claims will not be brought in the tort

system unless the value is sufficiently high for law firms to make a reasonable return on

investment and claimants to overcome their privacy concerns.””

To test his hypothesis, Dr. Bates conducted a thought experiment/economic

simulation assuming that a minimum claim value of $200,000 would merit bringing the case

in the tort system. He chose $200,000 because the median wealth of the individuals

asserting Direct Abuse Claims is between $200,000 and $300,000." A typical 40%

contingency fee would yield $80,000 for the law firm, which must cover costs and a profit.

The result of his thought experiment confirmed his view that the value of a Direct Abuse

Claim, on average, will be less than the average value of Historical Abuse Claims although

the aggregate of such claims could be significant. Using a pool of 47,433 claims, he

251 Day 6 Hr’g Tr. 143:4-9,

22 Day 6 Hr’g Tr. 187:19-188:3.

53 Day 6 Hr’g Tr. 143:23-145:11. Dr. Bates finds confirmation for his conclusions in the record in

this case, specifically JTX 1-225, Verified Statement of Kosnoff Law, Pllc Pursuant to Rule of

Bankruptcy Procedure 2019.

24 Day 6 Hr’g Tr. 156:22-157:23.

63

concluded that only 1171 of them would yield enough value to be filed in the tort system.”

Dr. Bates concludes that this forum—a mass tort bankruptcy case with TDP that reduce the

cost to present claims and at the same time assure relative confidentiality—permit these

claims to be filed in the bankruptcy case, when they would not have been filed in the tort

system.”

This scenario analysis also confirms Dr. Bates’s conclusions that the Proofs of Claim

pool is generally weaker than the Historical Abuse Claims pool. For example, he believes

the link between the abuser and the level of institutional responsibility is tenuous as most

abusers were volunteers and not employees, and the vast majority of the claims reflected in

the Proofs of Claim reflect once-identified abusers where the vast majority of the Historical

Abuse Claims involve repeat abusers.”*’

Having employed a frequency severity methodology, including testing by scenario

analysis, Dr. Bates concludes that it is more likely that the value of Direct Abuse Claims is

in the lower quartile of his previous range, or between $2.4 and $3.6 billion.**

455 Dr, Bates ran this simulation using a pool of the Proofs of Claim created by another expert. Of

the 47,433 claims, 46,262 did not have value over the $200,000 assumed value. In this simulation,

the average value of a Direct Abuse Claim is $74,000 and the aggregate value is $3,463,600. As

applied to the 82,209 Proofs of Claim, Dr. Bates believes at least 70,000 of such claims would not

have been brought in the tort system. Day 7 Hr’g Tr. 27:2-10,

456 Day 6 Hr’g Tr. 146:15-148:18.

27 Day 7 Hr’g Tr. 27:11-29:10.

258 Day 6 Hr’g Tr. 97:10-23; See also Day 6 Hr’g Tr, 190:17-191:6.

Q And do you have a reasonable degree of confidence as an expert in claim valuation that your

range of 2.4 to $7.1 billion is an appropriate valuation range for the current abuse claims?

A. I believe it is. I think, to a reasonable degree of scientific certainty, that would be the range,

based on the information. It's a wide range, albeit reflective on the uncertainty that exists. But I

think that range is a reliable range for that purpose.

Q And do you have a reasonabie degree of confidence as an expert in claim valuation that the

value of the current abuse claims will fall within the lower quartile of 2.4 to $3.6 billion?

64

Notwithstanding his valuation, as Dr. Bates recognizes, only a claim-by-claim analysis

performed by the Settiement Trustee as contemplated by the TDP will establish the actual

amount of any individual Direct Abuse Claim or the aggregate amount of Direct Abuse

Claims.”

Dr. Bates’s analysis was thorough and credible based on the data available. It was

also undisputed. No other expert testified on the aggregate valuation of the Direct Abuse

Claims. Cross-examination by the Certain Insurers did not challenge the aggregate

valuation of the Direct Abuse Claims, Cross-examination by the Lujan Claimants, the

Guam Committee and the D&V Claimants questioned the data points and “pluses” and

“minuses” used in Dr. Bates’s analysis and emphasized his lack of knowledge of specific

facts of the underlying cases. They also established that Dr. Bates did not gather

information from the plaintiffs’ bar, conduct legal analysis of the import of his “plus” and

“minor” factors or review specific complaints. But, none of the objectors challenged his use

of the frequency severity model, suggested another analysis or undercut his conclusions.

Based on the record and my assessment of Dr. Bates’s credibility, there is no reason to

disregard Dr. Bates’s analysis and conclusions, which I accept for purposes of confirmation

as his best estimate of the aggregate valuation of the Direct Abuse Claims. Accordingly, I

A 1--I do. I think that is reflective of the most likely outcome, based on what I know at this

time.

29 Day 6 Hr’g Tr. 128:15-22.

Q Was it your understanding that the settiement trustee would have the ability to obtain

additional data where -- to extent there was any uncertainty in the data that is available today to

the proof of claims?

A. The trust distribution procedures have that opportunity and 1 think require the trustee to

develop an additional questionnaire to gather additional information for the use in valuing these

claims.

65

conclude based on the record of evidence presented and the information known to date

regarding the Direct Abuse Claims, that the aggregate valuation of the Direct Abuse Claims

is most likely between $2.4 billion and $3.6 billion.

B. The Potential Available Coverage of Non-Settling Insurance Companies for Allocated and

Unallocated Claims

As set forth in the Background Section, both BSA and Local Councils purchased

insurance that responds to Direct Abuse Claims. Ms. Gutzler modeled the value of BSA’s

and Local Councils’ insurance programs by employing a set of assumptions. She testified

that this is a routine analysis performed by both insurers and insureds to evaluate coverage

potentially available to pay underlying claims.” Her task was to allocate tens of thousands

of underlying Direct Abuse Claims across thousands of liability policies." Ms. Gutzler was

offered and accepted without objection as an expert on allocation of claims to insurance

policies.”

In order to make an allocation, Ms. Gutzler uses certain factual assumptions

regarding policies (based on primary and secondary evidence)’® as well as allocation

methodology assumptions, which are more legal in nature and provided by Debtors’

insurance counsel.”** She also testified that the assumptions are reasonable based on her

review of underlying information.”® The “trigger date” assumption assumes that the date of

first Abuse would determine the policy year a claim is allocated to. This assumption is

69 Gutzler Decl. § 32 n.57.

261 Gutzler Decl. § 42; Day 9 Hr’g Tr. 73:3-17.

262 Day 9 Hr’g Tr. 8:4-16.

263 Day 9 Hr’g Tr. 27:11-18.

764 Gutzler Decl. 42.

*5 Gutzler Decl. 42.

66

consistent with the First Encounter Agreement entered into between BSA and Century in

1996 and followed by many other insurance companies.” The “occurrence” assumption

(i.e. how many time a policy would pay) is the “survivor” approach (1.e. each survivor, no

matter how many times he was abused, is a single occurrence).”” Ms. Gutzler also assumes

an aggregate limit on the matching deductible policies between 1988 and 2008 based on the

fact that Zurich and Clarendon, which are higher in the tower, agreed to settle for significant

sums relative to her allocation modeling of different assumptions.’ Finally, Ms. Gutzler

assumes joint and several liability among all defendants after discussions with Mr. Griggs as

to how BSA handled claims in settlement prepetition.

Applying her allocation model to five of Dr. Bates’s aggregate claim valuations, Ms.

Gutzler concludes that the potential allocation to solvent Non-Settling Insurance

Companies (i.c., not Hartford, Century/Chubb, Zurich and Clarendon) is between

$321,319,886 and $400,546,854 depending on which of Dr. Bates’s aggregate claim

valuation is used.?”

66 Paragraph 7 of the First Encounter Agreement, as read into the record by Ms. Gutzler, provides:

The first encounter rule shali mean that, for purposes of determining coverage under any policy

the date of occurrence pertaining to any sexual molestation claim shall be the date when the first

act of sexual molestation took place, even if additional acts of sexual molestation or additional

personal injuries arising therefrom also occurred in subsequent policy periods. And all damages

arising out of such additional acts of sexual molestation or additional persona injuries shall be

deemed to have been occurred — incurred during the policy year when the first act of sexual

molestation took place.

Day 9 Hr’g Tr. 32:10-21, 33:5-36:2.

267 Day 9 Hr’g Tr. 29:2-36:2, 87:13-88:4.

266 Day 9 Hr’g Tr. 36:24-38:13.

26° Gutzler Decl. 62, 118; Day 9 Hr’g T'r. 106:24-108:25. In her declaration, Ms. Gutzler provides

an allocation for each of Dr. Bates’s $2.4 Billion BW Tort Distribution, $3.0 Billion TDP

Distribution, $3.3 Billion TDP Distribution, $3.6 Billion TDP Distribution, and $3.6 Billion BW

Tort Distribution. Her narrative, and her testimony do not reflect an actual opinion for the $2.4

67

Ms. Gutzier then analyzes potential coverage from Non-Settling Insurance

Companies on policies that receive no allocation in her modeling. The lack of allocation

could be because limits of lower tier policies are not fully exhausted due to the value of

claims allocated to that year. These higher tier policies, however, are still at risk for

coverage depending on the actual determination of claim values in given years. Ms. Gutzler

concludes that the total limits of coverage potentially available under policies issued by

Non-Settling Insurance Companies to both BSA and Local Councils is between

$4,295,878,628 and $4,404,844,433, again, depending on which claim valuation is used.?”

Ms. Gutzler notes that while it is difficult to precisely quantify the expected value of these

policies without additional information, her experience is that insurers often settle policies

with no current allocation to mitigate risk.*”! Current non-allocation simply means it is less

likely that these insurers will be required to pay out based on current valuation scenarios.”

She also opines, however, that the Independent Review Option, which is designed to ensure

that excess layers of coverage are triggered, increases the odds that the value of higher fevel

excess policies will be unlocked.”

Ms. Gutzler’s analysis was methodical and credible. It was also undisputed. As

with Dr. Bates, no other expert testified on allocation. While the Guam Committee, on

Billion BW Tort Distribution presumably because the Settlement Trust assets exceed $2.4 billion

without these additional sources of funding.

20 Gutzler Decl. □ 121; Day 9 Hr’g Tr. 40:13-41:11. Ms. Gutzler determined the total limits of

coverage potentially available for each of Dr. Bates’s $3.0 Billion TDP Distribution, $3.3 Billion

TDP Distribution, $3.6 Billion TDP Distribution, and $3.6 Billion BW Tort Distribution.

21 Gutzler Decl. q 122.

22 CGutlzer Decl. 120.

23 Gutzler Decl. ff 131-134.

68

cross-examination, questioned certain assumptions, the cross-examination did not

undermine Ms. Gutzler’s credibility nor undercut her opinions. Ms. Gutzler was quite

candid that other assumptions could have been employed.” Similarly, on cross

examination by the Certain Insurers, Ms. Gutzler acknowledged that there are thousands of

modeling variations that could be run, though the results might not necessarily differ.’”

But, neither the Guam Committee nor the Certain Insurers offered an expert to opine as to

the reasonableness of other assumptions, the unreasonableness of Ms. Gutzler’s

assumptions or any alternative allocation.

Based on the record and my assessment of her credibility, there is no reason to

disregard Ms. Gutzler’s analysis and conclusions, which I accept for purposes of

confirmation as her best estimate of what coverage may be available based on the potential

ageregate values of Direct Abuse Claims. Accordingly, I conclude based on the record of

evidence presented and the information known to date regarding the Direct Abuse Claims,

that the potential allocation to solvent Non-Settling Insurance Companies is between

$321,319,886 and $400,546,854 and the total limits of coverage potentially available under

policies issued by Non-Settling Insurance Companies to both BSA and Local Councils is

between $4,295,878,628 and $4,404,844,433.

C. The Plan is a 100% Plan with Respect to Direct Abuse Claims

Based on the testimony of Dr. Bates and Ms. Gutzler, and the value of the

contributions and settlements, I conclude that if the Plan is confirmed, Direct Abuse Claims

will more likely than not be paid in full, The Initial Benchmark Valuation of the aggregate

274 Day 9 Hr’g Tr. 29:5-31:15.

28 Day 9 Hr’g Tr. 62:4-15.

69

Abuse Claims is $2.5 billion with a range between $2.4 billion and $3.6 billion, The assets

available to the Settlement Trust to satisfy those claims are:

□□ Initial Funding | Funding Over time

BSA $78,200,0007 $86,000,000 (BSA Settlement Trust Note)

$75,000,000 (Share of Settlement Growth Payment)

Local Councils $515,000,000 $125,000,000 (DST Note)

$25,000,000 (Share of Settlement Growth Payment)

Methodist Committee $30,000,000 $100,000,000 (Seek to Raise)

Range of Allocated

Insurance against Non-

Settling Insurance $321,319,886 - $400,546,854

Companies

Range of Unallocated

Insurance against Non-

Settling Insurance $4,295,878 ,628 - $4,404,844,433

Companies

Additional Contributions

Chartered Organizations Unknown

The fully noncontingent funding is $2,484,200,000, which is already within the range

of Direct Abuse Claims albeit just slightly, and only $16 million below Dr. Bates’s $2.5

billion Initial Benchmark Valuation. The committed, but contingent funding could bring

another $200 million into the Settlement Trust. These funds, together with the available

allocated insurance against Non-Settling Insurance Companies brings the total to

This amount excludes any cash component.

70

$3,005,519,886 to $3,084,746.854, well over the Initial Benchmark Valuation and quite

comfortably within the aggregate range. Finally, the Settlement Trust assets include an

additional $4 billion in currently unallocated insurance against Non-Settling Insurance

Companies.?”

I have excluded from this analysis the $250 million contribution from TCJC because,

as set forth below, I cannot approve that settlement as it is based on a release of Non-Abuse

Claims. Of course, BSA and TCJC may come to another monetary arrangement and if so,

the Settlement Trust Assets will be increased by that amount. Alternatively, the Settlement

Trust Assets include whatever claims BSA has against TCJC.

I have also excluded any additional contributions from other Chartered

Organizations. Under the Plan, Participating Chartered Organizations may choose to

become Contributing Chartered Organizations by contributing funds to the Settlement

Trust. I have no evidence, however, from which to draw any conclusions regarding the

magnitude of any such contributions. Nonetheless, these Chartered Organizations are also

a source of additional funds.

T have also excluded Pachulski Stang’s voluntary contribution of 10% of the total

amount of fees it bills to the Settlement Trust.””

277 T understand that the unallocated insurance is not currently triggered by the modeled claims in

the range of $2.4 billion to $3.6 billion. Nonetheless, Ms. Gutzler testified that it is not unusual for

insurers to settle policies with no current allocation in order to mitigate risk.

238 Application of the Official Tort Claimants’ Committee for Entry of an Order, Pursuant to 11

U.S.C. §§ 328 and 1103, Fed. R. Bank. P. 2014 and Local Rule 2014-1, Authorizing and Approving

the Employment and Retention of Pachulski Stang Ziehl & Jones LLP as Counsel to the Tort

Claimants’ Committee Effective as of March 4, 2020 [ECF 292] 4 9.

71

Based on the Initial Benchmark Value, the aggregate range of Direct Abuse Claims

and the Settlement Trust Assets, I conclude that Debtors have shown by a preponderance of

the evidence that Direct Abuse Claims wiil be paid in full.

Il. The Settlements

Not every resolution of a disagreement in a bankruptcy case is a settlement for

purposes of Bankruptcy Rule 9019. Debtors mediated with numerous parties and entered

into various agreements, which they termed “Settlement Agreements” documented by term

sheets and/or formally finalized agreements, some of which were eventually baked into the

Plan. Certain of these “Settlement Agreements,” however, are not truly settlement

agreements, but rather consensual resolutions of Plan terms or resolutions of confirmation

objections. Here, the Roman Catholic Committee settled its objectio

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