Opinion | Looting the Boy Scouts

You read that right. Insurer court filings note that when BSA filed for bankruptcy, it was a defendant in 275 cases and had been notified of a potential 1,400 more. BSA now faces 95,000 claims. Behind this assault is a sophisticated new tort machine that leverages Wall Street litigation funding, third-party brokers to collect and commoditize claims, and sweeping online marketing that recruits and coaches claimants. This is the new mass tort industry.

The insurer filings point to the Coalition of Abused Scouts for Justice, an ad hoc group of mass plaintiffs. In one June 2020 email presented to the court, a coalition founder explained that the “strategy” is to “keep focused on our marketing and media efforts,” so that “we control 80% of the claims[.] I.e. our coalition controls the case.” It did force its way in, filing 60% of all the claims in “mass filings just days before” the Nov. 16, 2020 cutoff.

Potential plaintiffs were encouraged via marketing on YouTube, social media and text message blasts. Insurers say the groups also “ran thousands of television, radio and internet advertisements that were riddled with falsehoods.”

These included “untrue statements” that claims could be filed “anonymously,” that the Boy Scouts had set up a $1.5 billion fund for payouts, that compensation was “ensured,” and that claimants wouldn’t have to appear in court, say the insurer filings. The ads were so deceptive that Judge Silverstein in September ordered the lawyers to stop running “false and misleading” information.

The lawyers also hired claims aggregators, which are private companies that employ call centers and advertising to produce claims. These processors “either sell the claims they generate or work on contract,” say the court filings. Plaintiff attorneys used hedge-fund money to buy claims, with the financiers “securing” their investment with “recoveries from the [Scouts] litigation,” the filings say.

The insurers have provided forensic evidence to the court showing that the attorneys likely didn’t even read what they filed. One plaintiff coalition attorney allegedly signed 890 “proof of claims” in a single day—one every 32 seconds, assuming eight hours. Another looks to have signed nearly 800 blank forms, allowing others to fill them in later.

It’s no wonder that a preliminary investigation by two insurers found that 11,676 claims appear to be duplicates. More than 7,000 do not identify a perpetrator. Some 4,700 do not identify any affiliation with scouting. More than 1,500 have already been the subject of litigation. And 54,000 look to be time-barred. Thousands more were signed by only a lawyer, not a claimant. A review of public information also found claimants who had been convicted of tax fraud, forgery, identity theft, false insurance claims, and child molestation.

The insurers are asking for discovery into a sample of the claimants, as well as into the methods used by 15 of the most prolific plaintiff attorneys. Judge Silverstein held a hearing last month, and this should be an easy call.

Bankruptcy law provides for discovery, and fairness demands it. A payout for fraudulent claims would reduce funds for legitimate victims. Notably, the original law firms appointed by the bankruptcy trustee to protect the interests of victims aren’t opposed to discovery into the tort coalition’s claims.

The tort bar is using these tools of mass torts in many cases, (see the opioid or Roundup chemical litigation), but the Boy Scouts’ case is the first based on sexual claims. Judge Silverstein has an opportunity to stop these abusive tactics in this case—and deter them in the future—by exposing them to legal and public scrutiny.