Third Circuit Delivers Big Win for Sexual Abuse Survivors in Boy Scouts of America Bankruptcy

On May 14, 2025, the United States Court of Appeals for the Third Circuit issued a decision in the Boy Scouts of America (BSA) bankruptcy, predominately affirming the District of Delaware, reversing and remanding back to the bankruptcy court on minor technical grounds. See In re: Boy Scouts of America, No. 23-1664 (3d. Cir. May 13, 2025).

A small group of sexual abuse survivors appealed, arguing that the Boy Scouts of America (BSA)’s plan of reorganization needed to be thrown out entirely because it contained non-consensual third-party releases, which the United States Supreme Court ruled last year are unenforceable in Harrington v. Purdue Pharma L.P., 603 U.S. 204 (2024).

Certain Insurers appealed, requesting that the Third Circuit add new language into the plan clarifying that Certain Insurers retained the same defenses and rights in the BSA bankruptcy that they had prior to the BSA bankruptcy.

Allianz Insurers appealed, requesting that the Third Circuit change language in the plan, which had purported to eliminate Allianz’s right to seek indemnification for litigation costs from settling insurers, a right which Allianz had prior to the bankruptcy.

The Third Circuit rejected the survivor’s arguments as statutorily moot, reasoning that when The Hartford and Chubb bought back their insurance policies from BSA in exchange for contributing money to the BSA settlement trust, those purchases triggered the protection of §§363(b) and (m).

The Third Circuit noted that BSA’s plan would not have been confirmable as written after SCOTUS’s decision in Purdue, but concluded that it was allowable given the timing of this case pre-dated the Purdue decision.

The Third Circuit also rejected the Certain Insurer’s arguments, reasoning that the plan left the Certain Insurer’s rights intact and that BSA proposed the plan in good faith under 11 U.S.C. §1129(a)(3). As such, the Third Circuit affirmed the District Court on those issues.

The Third Circuit agreed with the Allianz Insurers, reasoning that because the confirmation order interpreted the plan’s judgment reduction clause to enjoin contribution and indemnity claims the Allianz Insurers could otherwise have asserted against the Settling Insurers, Purdue rendered that provision of the plan unenforceable.

As such, the Third Circuit reversed the District Court’s judgment as to the Allianz Insurers’ claims, and remanded the case back to the District Court to modify the plan’s judgment reduction clause to impose a Settlement Trust backstop as set out in Exhibit A of the Allianz Insurers’ Opening Brief.

On June 13, 2025, the Third Circuit issued a decision, denying appellants’ request for a rehearing En Banc. See In re: Boy Scouts of America and Delaware LLC, Sur Petition for Rehearing, No. 23-1666 (3d Cir. June 13, 2025). The only potential appeal left in this case could be to the United States Supreme Court.

Assuming the Third Circuit’s initial decision holds up on appeal, the Bankruptcy Court will eventually need to enter a new order confirming the plan with the new Allianz Insurer language ordered by the Third Circuit.

Overall, this decision is a positive outcome for the significant majority of sexual abuse survivor claimants who supported the plan and are actively participating in the claims resolution process.

This decision brings them one step closer to larger settlements—as a result of access to the Chubb and Hartford settlement funds and from other potential recovery from the Trustee’s litigation against non-settling insurers in the Federal District Court for the Northern District of Texas, see Houser v. Allianz et al., No. 3:23-cv-01592-S (N.D. Tex. July 17, 2023).

Edward Neiger, Alexandra Robertson and David Stern are members of Ask LLP.