History
BSA Bankruptcy Filing
The Boy Scouts of America (BSA) national organization filed for bankruptcy on February 18, 2020 under Chapter 11 of the U.S. Bankruptcy Code to achieve two key objectives: equitably compensate victims who were harmed during their time in Scouting and continue carrying out its mission for years to come. The BSA intent was to use the Chapter 11 process to create a Victims Compensation Trust that would provide equitable compensation to victims. In announcing the bankruptcy filing, the BSA noted that local councils, which provide programming, financial, facility, and administrative support to Scouting units in their communities, had not filed for bankruptcy. They are legally separate, distinct, and financially independent from the national organization. Click here for the BSA press release on the bankruptcy filing.
Ad Hoc Committee
The BSA sought the formation of a committee to represent the interests of local councils while the national organization determined how it would equitably compensate victims of abuse while preserving the important mission of Scouting. The Ad Hoc Committee of Local Councils was formed by Ricky Mason, who was the council president of the Greater New York Council and a partner at the law firm of Wachtell, Lipton, Rosen & Katz, where he chaired the firm’s Restructuring and Finance Department.
The Ad Hoc Committee was composed of eight local councils of various sizes from every region of the BSA. The Committee’s primary purpose was to provide local councils a “seat at the table” should the national organization decide to begin bankruptcy proceedings. It was not anticipated that local councils would file for bankruptcy or become a debtor in the national BSA bankruptcy case. Instead, the goal was to allow local councils to participate in bankruptcy-related negotiations as a group and have their views heard.
The Ad Hoc Committee worked closely with the national organization and its advisors throughout the bankruptcy proceeding and related negotiations. The Ad Hoc Committee entered into a joint defense and common interest agreement with the national organization. The Ad Hoc Committee Chair reviewed information that the national organization provided to the attorneys representing victims. He also conferred with the national organization’s advisors about the restructuring strategies under consideration.
The Ad Hoc Committee facilitated the exchange of privileged information concerning the bankruptcy by the national organization and related issues affecting the local councils. Councils that wished to be part of those communications signed a separate “joinder” to the joint defense and common interest agreement in order to receive privileged information.
The Ad Hoc Committee needed technical and financial support from local councils who were willing and able to support the committee in its work.
Local Council Working Group
Many local councils came together to support the work of the Ad Hoc Committee by forming and participating in the Local Council Working Group (LCWG) which grew in membership during the BSA bankruptcy proceedings. The Ad Hoc Committee needed help collecting local council information and funding for its own financial restructuring experts. Leading councils of the LCWG provided almost $1 million to the Ad Hoc Committee so it could engage experts to support the work of the Ad Hoc Committee.
The Ad Hoc Committee also called upon the LCWG for technical support related to local council relationships with charter partner organizations, local council funding for the Victims Compensation Trust, and throughout the mediation and negotiation process that led to the submission of the BSA bankruptcy plan of reorganization. The LCWG also rallied local councils to commit to the proposed local council funding of the Victims Compensation Trust.
The LCWG conducted weekly calls for almost two and a half years during which lawyers for local councils (both pro bono and paid) worked with Ad Hoc Committee lawyers on federal and state legal issues related to the BSA bankruptcy affecting local councils. Council leaders participating in these calls helped the lawyers better appreciate the operational issues involved, especially as they related to local charter partner relationships. All of this work occurred subject to the joint defense privilege. Local council leaders also shared resources involving a variety of bankruptcy-related issues from dealing with local fundraising during the national organization bankruptcy, recruiting youth members while charter partners were negotiating their positions in the bankruptcy, to determining a fair method for local councils to contribute to the funding of the Victims Compensation Trust. Members of the LCWG also participated in the national governance reform efforts for the post-bankruptcy period. The LCWG was focused on helping the national organization successfully emerge from bankruptcy and insuring that local councils and the national organization could thrive in the future.
Local councils participating in the LCWG recognized that the collaboration among councils--big and small, far and wide--was beneficial and would be valuable even after the national organization bankruptcy was concluded. The LCWG formed a task force to formalize an ongoing relationship, recognizing, as the BSA noted, that local councils are legally independent, separate and distinct from the national organization. Local councils and the national organization share values and the common interest of promoting Scouting values and making the Scouting programs available to as many young people as possible in our local communities. Working together we can deliver the promise of Scouting.