On February 15, the Debtors filed a further Amended Plan, titled the Third Modified Fifth Amended Chapter 11 Plan of Reorganization (the “Current Plan”). A redline version of the Current Plan, which shows changes made to the immediately preceding plan dated December 18, 2021 (the “December Plan”), is attached.
Also attached is a Supplemental Class 9 Notice (the “Class 9 Notice”) and the Notice of Errata (the “Errata”) reflecting changes to the Current Plan since it was issued in mid-February. The following is a summary of some of the more important changes affecting Chartered Organizations.
Chartered Organizations will be deemed to be Participating Chartered Organizations under the Current Plan unless they Become Opt-out Chartered Organizations. If a Parish or Worshiping Community of ECCT would like to opt-out of the Current Plan, the Parish or Worshiping Community must complete and return the opt-out election form (attached to the Class 9 Notice). NOTE: This is not the same opt-out as opting out of the X.J.4. Release; unless the Parish or Worshiping Community specifically signed and returned the opt-out election form, the Parish or Worshiping Community did not opt-out of the December Plan and is not an “Opt-out Chartered Organization.
The deadline to return the opt-out election form is March 7, 2022 (note that Chartered Organizations could also opt-out by filing an objection to the Current Plan, but the deadline to file plan objections was Friday, February 25, 2022).
If an ECCT Parish or Worshiping Community previously opted-out of the December Plan and would like to now withdraw the prior opt-out and become a Participating Chartered Organization, the Parish or Worshiping Community must either complete the opt-out election form attached to the Class 9 Notice or inform the Debtors in writing of its election. The opt-out form or written notice must be submitted to the addresses set forth on page 7 of the Class 9 Notice. The form/notice must be received by the Debtors no later than the beginning of the confirmation hearing (discussed below).
If an ECCT Parish or Worshiping Community previously submitted a ballot for/against the December Plan and would like to now change its vote, it can submit a new ballot. The voting deadline is March 7, 2022, at 4:00 pm Eastern. The Class 9 Notice contains instructions on page 9 on how to request and submit a new ballot.
The hearing to consider confirmation of the Current Plan will begin on March 14, 202 at 10:00 am.
Protection from Abuse Claims
Under the Current Plan, all Chartered Organizations are considered Participating Chartered Organizations (Option 1), provided: a) those Chartered Organizations do not file a formal objection to the Plan or choose to opt-out of the Plan’s coverage (i.e., become an “Opt-out Chartered Organization” (Option 3)); or b) choose to become a Contributing Chartered Organization (Option 2).
To be a Participating Chartered Organization, ECCT Parishes or Worshiping Communities do NOT have to do anything UNLESS they previously opted out of the December Plan, in which case they will need to change their designation (see discussion above in section entitled “Important Dates”).
Under the December Plan, Participating Chartered Organizations, except for the Roman Catholics and the United Methodists, were to receive a release from all Abuse Claims regardless of when the Abuse Claims arose.
However, under the Current Plan, Participating Chartered Organizations are now receiving a narrower release. Specifically, the Current Plan provides that:
- all 1976-forward Abuse Claims are being channeled to the Settlement Trust, and holders of those claims will release the Participating Chartered Organizations from those claims; and
- all pre-1976 Abuse Claims for which there is insurance issued by a Settling Insurance Company are being channeled to the Settlement Trust, and holders of those claims will release the Participating Chartered Organizations from those claims.
At present, the Settling Insurance Companies include Century and the Chubb Companies, Hartford (and affiliates), the Zurich Insurers (and affiliates) and Clarendon.
The treatment being afforded Participating Chartered Organizations under the Current Plan is less advantageous than the treatment proposed in the December Plan. In fact, the treatment under the Current Plan is like the Participating Chartered Organizations’ treatment under the version of the plan solicited by the Debtors on September 30, 2021, except that now Participating Chartered Organizations are getting a release of pre-1976 Abuse Claims to the extent an insurance policy was issued by a Settling Insurance Company that would cover such claim.
Under the Current Plan, holders of Abuse Claims will be enjoined for a one-year period following the “Effective Date”, and potentially for a second one-year period, from prosecuting (but not filing) any Abuse Claims against Participating Chartered Organizations. Note that the Effective Date will not occur until, among other things, the District Court has entered an order affirming the confirmation order, and it may take some time for the District Court to hear any appeal and issue its ruling. This extended injunction period is designed to allow Participating Chartered Organizations time to negotiate settlements post-confirmation that would allow them to become Contributing Chartered Organizations (discussed below) and obtain releases from all Abuse Claims.
In exchange for the protection being afforded from select Abuse Claims, Participating Chartered Organizations will be required to:
- waive their Indirect Abuse Claims;
- release the Local Councils and other Protected Parties (as defined in the Plan);
- release their rights to any insurance policies issued to the BSA or Local Councils by the Settling Insurance Companies;
- release their rights to coverage under any insurance policies issued by a Settling Insurance Company for such Abuse Claims;
- assign causes of action against non-settling insurance companies relating to Abuse Claims that first occurred after January 1, 1976 (i.e., those Abuse Claims that are being channeled to the Settlement Trust); and
- release the Setting Insurance Companies from Abuse Claims for which the Setting Insurance Companies issued policies that did not specifically exclude abuse or molestation.
Importantly, Participating Chartered Organizations retain their rights under their own insurance policies issued by non-settling insurers.
Contributing Chartered Organizations (Option 2 under the Supplemental Notice)
The Current Plan allows Chartered Organizations to negotiate with the Debtors and others to make a “substantial monetary contribution” to the Settlement Trust and become a Contributing Chartered Organization. Contributing Chartered Organizations are released from all Abuse Claims, and all Abuse claims against Contributing Chartered Organizations are channeled to the Settlement Trust.
Opt-Out Chartered Organizations (Option 3 under the Supplemental Notice)
Chartered Organizations may elect to “opt out” of the Current Plan and become Opt-Out Chartered Organizations. Opt-Out Chartered Organizations:
- will remain liable for all Abuse Claims except those for which a Settling Insurance Company issued a policy that did not specifically exclude abuse or molestation;
- retain rights in BSA and Local Council insurance policies (except those issued by a Settling Insurance Company);
- are not releasing any rights under their own insurance policies; and
- will maintain their Indirect Abuse Claims which will be channeled to the Settlement Trust.
The Current Plan, by its incorporation of the Plan Appendix (Doc. No. 8815-1), permits the Settlement Trustee and holders of Direct Abuse Claims to seek discovery from Chartered Organizations pursuant to Bankruptcy Rule 2004 and any other discovery rules. The information and documents sought must be reasonably calculated to lead to the discovery of admissible evidence for the liquidation of Direct Abuse Claims. While the Current Plan provides that the Chartered Organizations reserve all rights, claims, and defenses with respect to the discovery requests, the discovery sought may be broad since Bankruptcy Rule 2004 permits more expansive discovery than that typically permitted in non-bankruptcy litigation.