Supremes First Side With 144 Claimants Against >82,000 Other Claimants, But Then Vacate: A Good Sign? (Lujan Claimants v. Boy Scouts)

By: Donald L Swanson

Congress, the federal appellate courts and the U.S. Supreme Court all need to recognize this historical reality:

• bankruptcy is an efficient and effective tool for resolving mass tort cases, as demonstrated by cases with huge-majority approval votes from tort victims.

And all those institutions need to prevent anti-bankruptcy biases, legal technicalities, and hold-out groups from torpedoing the huge-majority votes.

Supreme Court moving in the right direction?

Recently, the U.S. Supreme Court moves toward upholding huge-majority votes in bankruptcy . . . but only after it appeared to go the opposite direction.

I’ll try to explain.

Justice Alito in the Boy Scouts case

144 individual claimants in the Boy Scouts case, and their two law firms, want more money and are preventing compensation payments to more than 82,000 other individuals with similar claims who want their settlement money—now.

And Justice Alito at the U.S. Supreme Court sides with the 144 over the >82,000 by entering a stay order on February 16, 2024, with this text entry on the Court’s docket:

• “it is ordered that the March 28, 2023 order of the United States District Court for the District of Delaware, case No. 1:22-cv-1237, and the consolidated cases, is hereby administratively stayed pending further order of Justice Alito or of the Court.”

Supreme Court Vacates

But on February 22, 2024, in a surprising turn of events, Justice Alito refers the matter to the entire Supreme Court, by a docket entry that says, “Application (23A741) referred to the Court.”

And on that same day (February 22, 2024), the Supreme Court vacates Justice Alito’s stay, with this docket entry:

• “Application (23A741) for stay presented to Justice Alito and by him referred to the Court is denied. The order heretofore entered by Justice Alito is vacated.”

Unfortunately, there is no written opinion on any of this, so we’ll never know exactly what is happening behind the scenes.

But the appearance is this: the U.S. Supreme Court is allowing the Boy Scouts plan, with its high levels of approval from tort victims, to proceed.

The case is Lujan Claimants v. Boy Scouts of America, Case No. 23A741 at the U.S. Supreme Court.

Facts

Here’s how it happens:

• the Bankruptcy Court approves a plan of reorganization for Boy Scouts of America, which provides for compensation payments to more than 82,200 victims of sexual abuse—many of whom are aged and dying;
• requests for a stay prohibiting those plan payments are denied by both, (i) the U.S. District Court for the District of Delaware, and (ii) the U.S. Third Circuit Court of Appeals; but
• as compensation payments are about to begin, 144 of those >82,200 victims ask Justice Alito of the U.S. Supreme Court to issue the stay that the courts below refused; and
• on February 16, 2024, Justice Alito grants the stay request of those 144 claimants—which prevents all the other >82,000 victims from receiving their payments.   

Alternative Remedy Available

Those 144 claimants acknowledge in their stay request that the Boy Scouts plan provides them an alternative remedy that would not have stopped payments to other claimants. 

Under the alternate remedy, the 144 claimants:

• could each have requested an Independent Review Option, designed for claimants “with higher value claims to potentially receive a higher award”;  but
• don’t like this remedy because it requires each of them to finance an “administrative fee” of $10,000.

The 144 claimants and their attorneys prefer, instead, to prevent all of the other >82,000 claimants from getting settlement payments—so the 144 can continue their litigation.

Double Dipping?

Further, one brief for a group of 321 individual claimants says this about some of the 144 claimants:

• “The victims of one law firm have already received compensation for their injuries by the Roman Catholic Diocese of Agana”; and
• “They apparently want to double-dip and hold hostage the more than 99% of tens of thousands of child sexual abuse survivors, hoping to secure a better side-deal.”

Applicants’ Reply

In a striking illustration of a we-don’t-really-care attitude from the 144 claimants, about delaying payments to the rest of the >82,000, they say this in a Reply to the U.S. Supreme Court:

• “Boy Scouts of America (BSA) and the Trustee put on their best performance of Chicken Little to convince this Court that the sky will fall in the event the bankruptcy plan is stayed.”
• “But like that passionate yet misguided character, all of their warnings about dire, catastrophic consequences amount to nothing more than ‘a tale . . . full of sound and fury, / Signifying nothing. William Shakespeare.”
• “Contrary to their fears, Abuse Claimants are merely seeking to preserve the status quo while their appeal challenging the bankruptcy plan before the Third Circuit is resolved.”

Conclusion

While things looked dire for the >82,000 following Justice Alito’s stay, the entire Supreme Court acts to vacate that stay, allowing the Boy Scouts case to proceed toward paying claimants.

This looks like a step in the right direction . . . with positive implications for other mass tort cases having high rates of approval from the tort victims.

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