In re: Boy Scouts of America, et al., Debtors

Wilmington, Delaware, bankruptcy lawyers represented the parties.



The Coalition of Abused Scouts for Justice (the "Coalition”), an ad hoc group of sexual abuse tort claimants who participated in the bankruptcy of the Boy Scouts of America and Delaware BSA, LLC (the "Debtors”), appeals the District Court's order affirming the Bankruptcy Court's order denying the Coalition's request for the payment of its professional fees under 11 U.S.C. §§ 363(b) and 503(b)(3)(D) and (4).





The Debtors, non-profit corporations that provide adult-run youth programs, filed for bankruptcy due to numerous lawsuits alleging sexual abuse by adult volunteers and declining membership. Shortly after the Debtors filed for bankruptcy, the United States Trustee appointed a Future Claimants' Representative, an official committee of

unsecured trade creditors, and an official committee representing all sexual abuse tor claimants (the "TCC”). Those official committees employed professionals under 11 U.S.C. § 1103(a).



Tort lawyers (the "State Court Counsel”) representing 60,000 survivors, a majority of the tort claimants against the Debtors, formed the Coalition due to disagreements about the TCC's strategy.1 The Coalition began participating in the bankruptcy and retained its own professionals. Under agreements with these professionals, the State Court Counsel

directed the professionals' actions in the bankruptcy cases and paid them for their services. The Coalition represented to the Bankruptcy Court that the State Court Counsel would not "charge back the fees of any of the Coalition's professionals to the individual survivors in any way, including by reducing an individual survivor's claim distribution.





About a year and a half after filing their bankruptcy petitions, the Debtors moved to enter a restructuring support agreement (the "RSA”). Therein, the Debtors proposed paying the Coalition's professional fees under 11 U.S.C. § 363(b).3 The Bankruptcy Court could not determine whether it would be permissible for the Debtors to pay the Coalition's professional fees until it knew the outcome of the Coalition's efforts and left it to the parties to decide whether they wanted to proceed with the remaining aspects of the RSA. The parties never submitted a revised order, so the Bankruptcy Court did not authorize the Debtors to enter the RSA.



Around the same time, the Debtors filed a reorganization plan and several amendments to the proposed plan. A modified fifth amended plan proposed that the Coalition's professional fees (1) could be capped at $21 million, and (2) would be

reimbursed "[o]n or as soon as practicable after the Effective Date, and subject to the Bankruptcy Court granting a [fee] motion filed pursuant to §§ 363(b), 1129(a)(4) and 503(b) of the Bankruptcy Code, Bankruptcy Rule 9019, or otherwise applicable 3 At the evidentiary hearing on the RSA motion, the Debtors' witnesses testified bankruptcy and non-bankruptcy law.” Bankr. D. Del. Dkt. 8813 § V.T.1. The plan also set forth a process for the Coalition to submit their "reasonable, documented, and contractual professional advisory fees” for the Debtors' review. Bankr. D. Del. Dkt.

8813 §§ II.A.2, V.T.1. The Bankruptcy Court confirmed the modified fifth amended plan4 with an Effective Date of April 19, 2023. The Bankruptcy Court acknowledged that the "Debtors' agreement” that "the Coalition's fees will be brought separately,” id. at 678 n.763, emphasized that the Bankruptcy Court would not approve the request to pay "the Coalition fees . . . as part of the plan,” and instead would later decide whether the Debtors could pay the Coalition fees based "on all appropriate factors,” App. 648.



A few months after the plan was confirmed, the Coalition moved to approve Debtors' Proposed Payment of the "Coalition Restructuring Expenses,” seeking $21 million in fees and expenses billed by its retained professionals either (1) under § 363(b) as a sound exercise of the Debtors' business judgment, or (2) as a substantial contributionDebtors never filed another request to pay the Coalition's fees.

Motion denied.



Affirmed