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The Roman Catholic Diocese of Harrisburg, Pa., filed for bankruptcy yesterday, becoming the first diocese in the state to seek protection from financial claims in the aftermath of a 2018 grand jury report that revealed decades of sexual abuse and cover-up by the church’s top leaders, the Philadelphia Inquirer reported. And, said a lawyer for the diocese, it’s not likely to be the last. Citing the fallout from that probe and recent court decisions that opened new avenues for some victims with time-barred claims to sue, attorney Matt Haverstick said that Harrisburg, like each of the state’s eight other Catholic dioceses, faces the prospect of crushing court judgments that it will be unable to pay. “There is no capacity to take that kind of exposure,” Haverstick said. “I think this is really the beginning — not just in Pennsylvania but across the country — of a wave of reorganizations spawned by … the economics of trying to maintain an organization in the face of catastrophic litigation.” With its filing yesterday, the Harrisburg Diocese joins more than two dozen others across the United States that have sought similar bankruptcy protections since the clergy sex-abuse scandal first exploded in Boston 18 years ago. The move comes six months after Bishop Ronald W. Gainer announced that the Harrisburg church had paid out $12.5 million in settlements with more than 100 accusers through an independently run victim compensation fund.

As the Boy Scouts of America hurries to emerge from bankruptcy and put allegations of sexual abuse to rest, lawyers for victims want the organization’s “dark side” revealed in its bankruptcy proceedings, the Wall Street Journal reported. With billions of dollars worth of land, buildings, cash and investments to protect, the Boy Scouts appeared for the first time yesterday before the U.S. Bankruptcy Court in Wilmington, where a lawyer for the organization, Jessica Boelter, said that it recognized the harm endured by victims of childhood sexual abuse. The bankruptcy filing is designed to resolve allegations of sexual abuse in 275 existing lawsuits and from thousands of more people who haven’t filed papers in court. “We need to move through this bankruptcy as quickly as possible,” Boelter said in court. Lawyers for abuse victims said they are looking to the bankruptcy process as a way to find out more about circumstances surrounding allegations of widespread abuse of boys as young as 5 years old by scoutmasters and others connected to the organization. “We’re not here because the Boy Scouts do a great job at taking care of boys or training boys,” said James Stang, a lawyer for sexual-abuse survivors. “There’s a very dark side to their history.” He said the 10 law firms he advises are representing “probably more than 2,700 men” combined, some of which are elderly, sick or have pressing psychological counseling needs.”

The Boy Scouts of America filed for chapter 11 amid sexual abuse lawsuits it is facing. On one level, the victims get some compensation while the organization gets legal clarity and finality. Yet on closer examination, it is troubling about using laws designed to resolve business meltdowns to address the social ills caused by nonprofit entities that are meant to do good, but have done harm, according to a Bloomberg commentary. The lawsuits against the Scouts, like the sexual abuse lawsuits against the Catholic Church and Gymnastics USA, are about our collective assignment of moral blame, and about what can be done for victims who can never be made whole by mere monetary compensation. Unlike chapter 7 bankruptcy, which essentially puts an end to a bankrupt corporation and liquidates its assets, chapter 11 is meant to save a corporation. As applied to for-profit corporations that have caused what are sometimes called mass torts — injuring many people through a common cause or pattern of behavior — chapter 11 still makes a kind of economic sense. The U.S. tort system assigns a monetary value to the injuries that people have suffered. Those who’ve been injured then effectively become creditors of the company. Because the company doesn’t have enough money to pay both the victims and its other creditors, we allow it to reorganize. As a mechanism necessary to make the system work, we impose on tort victims some of the same limits that bankruptcy imposes on other kinds of creditors. They have to file their claims by a certain date and agree to a system for determining what they will get. When it comes to nonprofits organized to provide public goods, like scouting or religion or gymnastics, this model makes much less sense, according to the commentary. These aren’t organizations whose future operations will make profits that would go to compensate victims. Read the full commentary. 

*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.

California power producer PG&E Corp. said yesterday that it was on track to exit chapter 11 protection by June 30 and that it plans to spend about $37 billion to $41 billion over the next five years to safeguard its equipment as it posted another quarterly loss on claims related to fires, Reuters reported. The company is restructuring amid chapter 11 proceedings, trying to bounce back from the negative publicity caused after its equipment in California was blamed for deadly, historic wildfires. PG&E needs to exit bankruptcy by June 30 to participate in a state-backed fund that would help power utilities cushion the hit from wildfires. But past wildfires took its toll on the company again, with it posting another fourth-quarter loss hurt by $5 billion in charges for third party claims for fires in 2015, 2017 and 2018. The company’s net loss narrowed to $3.6 billion, or $6.84 per share, in the fourth quarter ended Dec. 31, from $6.9 billion, or $13.24 per share, a year earlier. PG&E had filed for chapter 11 protection in January 2019, citing potential liabilities in excess of $30 billion from deadly wildfires in 2017 and 2018 linked to its equipment.

The Boy Scouts of America today filed for bankruptcy protection, as one of the country’s largest youth organizations tries to endure intensifying legal pressure over accusations of childhood sexual abuse going back decades, the Wall Street Journal reported. The chapter 11 filing covers the national Boy Scouts organization and automatically halts the hundreds of lawsuits it faces alleging sexual misconduct by employees or volunteers. The Boy Scouts are seeking to compensate claimants through bankruptcy proceedings while protecting 261 local scouting councils across the country and the billions of dollars in assets they hold. The bankruptcy filing marks a watershed moment in the 110-year history of the Boy Scouts, which for years have been embroiled in lawsuits blaming the organization for failing to screen out sexual predators. It said in court papers that its “ability to deliver its mission to future generations of scouts may be in peril” unless it can reach a broad settlement of hundreds of current and future sex-abuse claims. Laws passed in California, New York and other states have created temporary windows allowing for sex-abuse lawsuits to be filed regardless of when the alleged abuse occurred, exposing the Boys Scouts to an unprecedented level of potential liability. These laws took effect in more than a dozen states last year, opening the courthouse doors to more potential claimants. States including Florida, Ohio and Virginia are also considering passing similar legislation. In court papers, the Boy Scouts said the cost of defending and resolving sex-abuse claims “has become unsustainable,” totaling more than $150 million in settlements and legal fees since 2017. The Boy Scouts generated roughly $394 million in total gross revenue last year, according to court papers. There are roughly 275 pending lawsuits, and attorneys representing victims have supplied information on roughly 1,400 additional claims that haven’t been filed, roughly 90% of them alleging abuse more than 30 years ago, court papers said.

An $18 billion offer from three major drug wholesalers aimed at settling litigation over their alleged role in the opioid crisis fell through, after more than 20 state attorneys general rejected it in a letter to the companies’ law firms this week, the Wall Street Journal reported. The letter shows that the drug industry hasn’t won enough support from states to begin moving the sprawling litigation to a global resolution. At least 30 states have either sued the distributors or have been involved in talks to resolve claims. Whether they support the $18 billion offer or not, states said they continue to negotiate with the wholesalers to potentially strike some kind of deal. Many in the industry had hoped the offer would be a first step toward resolving the claims outside bankruptcy. In September, OxyContin maker Purdue Pharma LP filed for bankruptcy to help implement a settlement the company’s owners, the Sackler family, estimate to be worth at least $10 billion. The dissenting states want a larger total amount, or for the sum to be paid out sooner than the proposed 18 years, according to people familiar with the matter. Some states are targeting between $22 billion and $32 billion over fewer than 18 years.

PG&E Corp. proposes to pay half of its $13.5 billion settlement with California wildfire victims in company shares, a move that would make victims the utility’s largest shareholders — and jeopardize payments if PG&E sparks future fires, the Wall Street Journal reported. As part of its plan to exit bankruptcy, PG&E would pay fire-victim claims through a trust funded with equal parts cash and stock. The trust would own 20.9 percent of PG&E’s shares upon the company’s emergence from chapter 11, PG&E has said, and would gradually sell the stakes over several years to compensate individuals who lost family members and property. While share-funded trusts have been used before to settle claims from asbestos victims and others, some legal experts say that the PG&E trust would pose an unusual set of risks for claimants, tying their payment prospects to a company still scrambling to reduce the threat that its aging electrical grid will start fires. Since the fall of 2017, state investigators have linked PG&E equipment to 18 wildfires that killed 107 people and destroyed more than 15,700 homes.

PG&E Corp. told a federal judge it opposes his proposals to intervene in the company’s wildfire prevention efforts after it admitted to not fully complying with the terms of its criminal probation, Bloomberg News reported. The bankrupt northern California utility’s pushback is a response to U.S. District Judge William Alsup, who last month threatened to order the company to hire more tree trimmers and restrict how management doles out bonuses. The San Francisco judge is overseeing PG&E’s probation after it was convicted in 2016 of gas-pipeline safety crimes. Failure to comply with any law is a violation of probation. Judge Alsup is testing how far he can push the utility to prevent its equipment from causing another devastating wildfire as it simultaneously navigates a complicated exit from bankruptcy. The judge has set a Feb. 19 hearing to determine what he should do after PG&E reported in January that it fell short on commitments to inspect and repair lines, and clear vegetation and branches to maintain safety standards in compliance with California law.

Wedding chain Noah’s Event Venue closed abruptly last week, leaving numerous engaged couples without a place to have their ceremonies, the Houston Chronicle reported. The Utah-based company filed for reorganization under chapter 11 protection in May 2019, according to the Better Business Bureau. A judge and a U.S. Bankruptcy trustee overseeing the case changed it to a chapter 7 liquidation last Thursday, the company's attorney Kenneth L. Cannon II, told other media outlets. he Better Business Bureau advises people with a monetary claim against Noah's, which includes couples who booked the venue, to obtain a proof of claim form from the U.S. Bankruptcy Court and submit it to the U.S. Bankruptcy Court.

A bankruptcy judge reprimanded a Houston manufacturer involved in a fatal explosion, criticizing the company for focusing on emergency financing instead of victims of the Jan. 24 blast, WSJ Pro Bankruptcy reported. Bankruptcy Judge Marvin Isgur on Monday rejected an emergency financing motion from Watson Grinding & Manufacturing Co. and a sister company, Watson Valve Services Inc., admitting he was angry about the maneuver. Two people were killed in the explosion and another death has since been linked to the event, which took place at a plant located in a heavily populated residential and commercial area of Houston. Lawyers representing 250 homeowners whose properties were damaged in the blast appeared at Monday’s hearing, as did lawyers for the families of those who died in the explosion. “The families who have lost a loved one, who are caring for an injured child, who have lost their homes or had damage to their homes are facing true emergencies,” Judge Isgur said at a hearing in the U.S. Bankruptcy Court in Houston. Watson Grinding had sought to use $3 million in insurance proceeds to pay off lender Texas Capital Bank and avoid a fight over the use of cash collateral. Judge Isgur said the bank created an artificial emergency by putting Watson Grinding on a tight deadline. “There is no emergency,” the judge said.