In a landmark legal battle that has shaped the future of bankruptcy protections and mass tort settlements, the Boy Scouts of America (BSA)—now rebranded as Scouting America—recently secured a critical legal victory. On May 13, 2025, the Court of Appeals for the Third Circuit upheld the organization’s $2.46 billion Chapter 11 plan of reorganization, including its controversial third-party releases shielding non-debtor entities from future sexual abuse claims.
This decision came after years of legal wrangling, sparked by over 82,000 abuse claims—the largest sexual abuse case in U.S. history. The reorganization plan not only compensates survivors, but also provides liability releases to local Boy Scouts councils and affiliated organizations, in exchange for their contributions to the victim compensation trust.
What Are “Third-Party Releases”?
Third-party releases are provisions in bankruptcy cases that protect non-debtors—parties not filing for bankruptcy—from future lawsuits related to the bankrupt debtor’s liabilities. In this case, that means local councils, insurers, and chartered organizations (like churches and community groups) involved with the BSA cannot be sued for past abuse claims after contributing to the settlement fund.
These releases were hotly contested by some survivors and attorneys who argued that they violated constitutional rights by stripping victims of their ability to sue wrongdoers outside the bankruptcy court. The appeals court ruled, however, that the releases were fair, necessary, and within the court’s powers under bankruptcy law.
Why It Matters
The Boy Scouts case sets an important precedent for mass tort bankruptcies, echoing similar strategies used in cases like Purdue Pharma. It reinforces the idea that bankruptcy can be used as a mechanism not only to reorganize finances, but also to resolve widespread liability by granting global peace to involved parties—at a cost.
While many survivors have begun receiving payments from the trust, critics argue that the use of third-party releases should be limited or explicitly authorized by Congress. Legal scholars and lawmakers alike continue to debate whether victims’ rights are sufficiently protected under this model.
Final Thoughts
The resolution of the Boy Scouts’ bankruptcy case marks a historic moment in the intersection of tort law and bankruptcy proceedings. As institutions continue to face liability on a large scale, the legal tools used here may influence how future mass harm cases are resolved—raising fundamental questions about fairness, accountability, and justice.
By Deanna Rahmani
The author interacted with the following artificial intelligence tools to create or assist in the creation of content included in this blog: ChatGPT
