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The $2.4 Billion Question: Can Bankruptcy Shield the Guilty?

The $2.4 Billion Question: Can Bankruptcy Shield the Guilty?

Supreme Court finalizes one of America's largest sex-abuse settlements, closing the door on 82,000 victims' claims against Boy Scouts and affiliated organizations

Today: Supreme Court Declines Review

Overview

The Supreme Court declined to review a $2.4 billion Boy Scouts bankruptcy settlement on January 12, 2026, ending a six-year legal saga and cementing one of the largest sexual abuse settlements in U.S. history. Over 82,000 survivors filed claims alleging decades of abuse. The deal does something controversial: it shields local Boy Scout councils and chartered organizations from future lawsuits, even though they never filed for bankruptcy themselves.

A group of 75 survivors fought the settlement all the way to the Supreme Court, arguing these "third-party releases" violate bankruptcy law—especially after the Court struck down similar protections for the Sackler family in the Purdue Pharma opioid case six months earlier. The Court's refusal to hear the case leaves a circuit split unresolved and signals that mass tort defendants can still use bankruptcy to protect non-debtor affiliates, at least in some jurisdictions.

Key Indicators

82,000+
Abuse claims filed
Largest number of claims in any youth organization abuse case
$2.46B
Settlement fund size
Contributions from BSA, insurers, local councils, and chartered organizations
$7B+
Actual compensation cost
Final payout costs exceeded original estimates by more than 2x
75
Dissenting claimants
Survivors who appealed to Supreme Court, arguing settlement was unlawful
$3,500-$2.7M
Individual payment range
Varies by abuse severity, location, and documentation

People Involved

Laurie Selber Silverstein
Laurie Selber Silverstein
U.S. Bankruptcy Judge, District of Delaware (Approved Boy Scouts reorganization plan in September 2022)
Cheryl Ann Krause
Cheryl Ann Krause
Circuit Judge, U.S. Court of Appeals for the Third Circuit (Upheld Boy Scouts settlement despite Purdue Pharma precedent)

Organizations Involved

BO
Boy Scouts of America (Scouting America)
Youth Organization
Status: Emerged from bankruptcy April 2023, rebranded as Scouting America

America's largest youth organization faced financial collapse under the weight of 82,000 sexual abuse claims spanning decades.

LU
Lujan Claimants Group
Abuse Survivors Coalition
Status: Lost Supreme Court appeal January 2026

A coalition of 75 abuse survivors who challenged the settlement's third-party releases all the way to the Supreme Court.

CE
Century Indemnity Company
Insurance Company
Status: Contributed $800M to settlement fund

Major insurer that provided $800 million in exchange for release from all future abuse claims.

TH
The Hartford
Insurance Company
Status: Contributed $787M to settlement fund

Second-largest insurer contributor, providing $787 million for release from future claims.

TH
The Church of Jesus Christ of Latter-day Saints
Religious Organization / Chartered Organization
Status: Contributed $250M to settlement fund

The LDS Church sponsored thousands of Boy Scout troops and contributed $250 million for liability protection.

Timeline

  1. Supreme Court Declines Review

    Legal

    Court denies certiorari in Lujan Claimants case, finalizing settlement and leaving circuit split unresolved.

  2. Third Circuit Upholds Boy Scouts Deal

    Legal

    Appeals court preserves settlement on technical grounds despite Purdue precedent, creating circuit split.

  3. Supreme Court Strikes Down Purdue Releases

    Legal

    Court rules 5-4 that Sackler family can't use Purdue Pharma bankruptcy to shield themselves from opioid lawsuits.

  4. Supreme Court Denies Emergency Appeal

    Legal

    Court rejects Lujan Claimants' emergency request to block settlement implementation.

  5. First Payments to Survivors

    Legal

    Settlement trust distributes initial payments; approximately 60 survivors receive over $150,000 total.

  6. Boy Scouts Exits Bankruptcy

    Legal

    Reorganization takes effect, settlement trust activated to begin compensating survivors.

  7. Judge Approves $2.46B Plan

    Legal

    Bankruptcy Judge Silverstein confirms reorganization with third-party releases for councils and chartered groups.

  8. Insurers Contribute $1.6B

    Legal

    Century Indemnity ($800M) and Hartford ($787M) agree to major settlements, bringing fund above $2B.

  9. Initial $850M Settlement Proposed

    Legal

    First settlement with attorneys representing 60,000 claimants, supported by local councils and insurers.

  10. 82,000 Abuse Claims Filed

    Legal

    Claims deadline produces over 82,000 submissions, largest number in any youth organization abuse case.

  11. Boy Scouts Files for Bankruptcy

    Legal

    National organization files Chapter 11 in Delaware after spending $150M on abuse settlements since 2017.

Scenarios

1

Circuit Split Forces Supreme Court Review in Future Case

Discussed by: Bankruptcy scholars and legal analysts following mass tort settlements

The Third Circuit's narrow ruling preserving Boy Scouts' third-party releases contradicts the Supreme Court's Purdue Pharma logic, creating a circuit split that bankruptcy courts must navigate. When the next major mass tort defendant (potentially a diocese, university, or corporation facing abuse claims) seeks similar protections in a different circuit, conflicting precedents could force the Supreme Court to definitively rule on whether non-consensual third-party releases ever survive Purdue. Legal scholars expect this reckoning within 2-3 years as other institutional abuse cases reach confirmation.

2

Mass Tort Defendants Flock to Delaware and Third Circuit

Discussed by: Bankruptcy practitioners and institutional defense attorneys

The Boy Scouts outcome creates a roadmap for forum shopping. Institutions facing mass tort liability will file bankruptcy in Delaware (Third Circuit) rather than jurisdictions following Purdue's stricter interpretation. This concentrates institutional abuse cases in one court system and entrenches third-party releases as standard practice, at least regionally. Victims' advocates warn this undermines accountability, while defense lawyers argue it provides certainty for settlement negotiations. The pattern accelerates as Catholic dioceses, universities, and other institutions copy the Boy Scouts playbook.

3

Backlash Prompts Congressional Bankruptcy Reform

Discussed by: Victims' rights groups and congressional Democrats

Growing outrage over institutions using bankruptcy to shield wealthy non-debtors from liability triggers legislative action. Congress amends the Bankruptcy Code to explicitly prohibit non-consensual third-party releases in mass tort cases, codifying the Purdue Pharma principle. Reform gains bipartisan support after high-profile cases show affiliated entities contributing minimal settlements while gaining complete immunity. However, business groups and restructuring professionals lobby hard against changes, arguing settlements collapse without releases. Legislative gridlock could stall reform indefinitely.

4

Settlement Costs Balloon, Triggering Renegotiation

Discussed by: Wall Street Journal, bankruptcy monitoring committees

The settlement fund's actual costs already exceed $7 billion—nearly triple the $2.46 billion estimate. If payouts continue outpacing projections, the trust depletes faster than anticipated, leaving later claimants with pennies on the dollar. Insurers who bought releases may face pressure to contribute more, but the settlement's finality makes renegotiation legally difficult. Some survivors could challenge the trust's distribution formula in court, arguing early claimants received disproportionate shares. The trust faces years of contentious claims resolution.

Historical Context

Johns-Manville Asbestos Bankruptcy (1982-1988)

1982-1988

What Happened

Johns-Manville Corporation, facing thousands of asbestos injury lawsuits, became the first major company to use Chapter 11 bankruptcy to resolve mass tort claims. The bankruptcy court approved a reorganization plan creating a $2.5 billion trust to compensate victims. The case pioneered the use of trusts to handle long-tail mass tort liabilities and established precedents for channeling future claims to settlement funds rather than traditional litigation.

Outcome

Short Term

Created first asbestos trust fund in 1988, providing compensation pathway for thousands of victims.

Long Term

Led to 1994 congressional legislation requiring asbestos bankruptcies to establish trust funds; became template for mass tort bankruptcy strategy.

Why It's Relevant Today

Johns-Manville created the playbook Boy Scouts followed: bankruptcy trust, third-party releases, and long-term victim compensation replacing traditional trials.

Catholic Church Sex Abuse Bankruptcies (2004-Present)

2004-Present

What Happened

Forty-two U.S. Catholic dioceses filed Chapter 11 bankruptcy to resolve clergy sexual abuse claims, collectively paying nearly $4.4 billion to survivors through 2025. Early cases like Portland (2004) and Spokane (2004) established patterns of diocesan bankruptcy to cap liability while preserving church assets. More recent filings followed abuse statute of limitation reforms in California, New York, and other states opening windows for old claims. Plans typically included third-party releases for parishes, schools, and affiliated entities in exchange for settlement contributions.

Outcome

Short Term

Dioceses avoided potentially unlimited liability, preserving operational capacity while compensating thousands of abuse survivors.

Long Term

Created two-tier justice system where bankruptcy survivors received negotiated settlements while non-bankruptcy survivors pursued litigation with uncertain outcomes.

Why It's Relevant Today

Catholic bankruptcies normalized institutional abuse settlements with third-party releases, directly influencing Boy Scouts' strategy and legal arguments.

Purdue Pharma Opioid Settlement Rejection (2024)

2019-2024

What Happened

Purdue Pharma filed bankruptcy in 2019 facing thousands of opioid addiction lawsuits. The company proposed a settlement where the billionaire Sackler family would contribute $6 billion in exchange for complete release from all opioid-related liability, despite never filing for bankruptcy themselves. Bankruptcy and appellate courts approved the deal, but the U.S. Trustee and several states appealed. On June 27, 2024, the Supreme Court ruled 5-4 in Harrington v. Purdue Pharma that bankruptcy courts lack authority to discharge non-debtors' liabilities without creditors' consent, striking down the Sackler releases.

Outcome

Short Term

Purdue settlement collapsed; parties returned to mediation seeking restructured deal complying with Supreme Court ruling.

Long Term

Created circuit split when Third Circuit distinguished Boy Scouts case months later; clouded future of mass tort bankruptcy settlements.

Why It's Relevant Today

Purdue established that non-consensual third-party releases violate bankruptcy law, yet Boy Scouts settlement survived through narrow procedural distinction—highlighting unresolved legal tensions.

10 Sources:
+4
CNN SCOTUSblog Newsweek Bloomberg Law Jones Day Supreme Court of the United States Scouting Settlement Trust PBS NewsHour Wikipedia PBS NewsHour