In Re: Boy Scouts of America and Delaware BSA LLC
In re: BOY SCOUTS OF AMERICA and DELAWARE BSA LLC, Debtors
LUJAN CLAIMANTS, Appellants in No. 23-1664
LIBERTY MUTUAL INSURANCE COMPANY; THE OHIO CASUALTY INSURANCE COMPANY; LIBERTY INSURANCE UNDERWRITERS, INC.; LIBERTY SURPLUS INSURANCE CORPORATION, Appellants in No. 23-1665
DUMAS & VAUGHN CLAIMANTS, Appellants in No. 23-1666
THE CONTINENTAL INSURANCE COMPANY; COLUMBIA CASUALTY COMPANY, Appellants in No. 23-1667
INDIAN HARBOR INSURANCE COMPANY, Appellant in No. 23-1669
OLD REPUBLIC INSURANCE COMPANY, Appellant in No. 23-1670
TRAVELERS CASUALTY AND SURETY COMPANY, INC.; ST. PAUL SURPLUS LINES INSURANCE COMPAN; GULF INSURANCE COMPANY, Appellants in No. 23-1671
GREAT AMERICAN ASSURANCE COMPANY; GREAT AMERICAN E&S INSURANCE COMPANY, Appellants in No. 23-1672
ALLIANZ GLOBAL RISKS US INSURANCE COMPANY; NATIONAL SURETY CORPORATION; INTERSTATE FIRE & CASUALTY COMPANY, Appellants in No. 23-1673
ARGONAUT INSURANCE COMPANY; COLONY INSURANCE COMPANY, Appellants in No. 23-1674
GEMINI INSURANCE COMPANY, Appellant in No. 23-1675
ARROWOOD INDEMNITY COMPANY, Appellant in No. 23-1677
TRADERS AND PACIFIC INSURANCE COMPANY; ENDURANCE AMERICAN SPECIALTY INSURANCE COMPANY; ENDURANCE AMERICA INSURANCE COMPANY, Appellants in No. 23-1678
ARCH INSURANCE COMPANY, Appellant in No. 23-1780
On Appeal from the United States District Court for the District of Delaware (D.C. Nos. 1:22-cv-01237, 1:22-cv-01238, 1:22-cv-01239, 1:22-cv-01240, 1:22-cv-01241, 1:22-cv-01243, 1:22-cv-01244, 1:22-cv-01245, 1:22-cv-01246, 1:22-cv-01247, 1:22-cv-01249, 1:22-cv-01250, 1:22-cv-01251, 1:22-cv-01252, 1:22-cv-01258, 1:22-cv-01263)
District Judge: Honorable Richard G. Andrews
Argued on November 6, 2024
Before: KRAUSE, SCIRICA, and RENDELL, Circuit Judges
(Opinion filed: May 13, 2025)
Dumas & Vaughn, LLC
3835 NE Hancock St., Suite GLB
Portland, OR 97212
Charles J. Brown, III
Gellert Scali Busenkell & Brown LLC
1201 N. Orange St., 3rd Fl.
Wilmington, DE 19801
Counsel for Appellants Dumas & Vaughn Claimants
Delia Lujan Wolff [ARGUED]
Lujan & Wolff LLP
Suite 300, DNA Bldg.
238 Archbishop Flores St.
Hagatna, Guam 96910
Christopher D. Loizides
Loizides, P.A.
1225 King St., Suite 800
Wilmington, DE 19801
Counsel for Appellants Lujan Claimants
Deirdre M. Richards
Fineman Krekstein & Harris PC
1300 N. King St.
Wilmington, DE 19801
Susan N. Gummow
Foran Glennon Palandech Ponzi & Rudloff P.C.
222 N. LaSalle St., Suite 1400
Theodore J. Boutrous Jr.
Richard J. Doren
Blaine H. Evanson
Gibson, Dunn & Crutcher LLP
333 South Grand Ave.
Los Angeles, CA 90071
Michael A. Rosenthal
James Hallowell
Seth M. Rokosky
Gibson, Dunn & Crutcher LLP
200 Park Ave.
New York, NY 10166
Joseph T. Baio [ARGUED]
Christopher J. St. Jeanos
Patricia O. Haynes
Willkie Farr & Gallagher LLP
787 Seventh Ave.
New York, NY 10019
Counsel for Appellants National Union Fire Insurance Company of Pittsburgh, Pa., Lexington Insurance Company, Landmark Insurance Company, and the Insurance Company of the State of Pennsylvania
Ronald P. Schiller
Matthew A. Hamermesh
Hangley Aronchick Segal Pudlin & Schiller
One Logan Square, 27th Fl.
Philadelphia, PA 19103
Smith, Katzenstein & Jenkins LLP
1000 West St., Suite 501
P.O. Box 410
Wilmington, DE 19899
Counsel for Appellant Arch Insurance Company
Kathleen K. Kerns
Paul A. Logan
Post & Schell, P.C.
Four Penn Center, 13th Fl.
1600 John F. Kennedy Blvd.
Philadelphia, PA 19103
George R. Calhoun
Ifrah PLLC
1717 Pennsylvania Ave., N.W., Suite 650
Washington, DC 20006
Counsel for Appellants Argonaut Insurance Company and Colony Insurance Company
Michael J. Joyce
Joyce, LLC
1225 King St., Suite 800
Wilmington, DE 19801
Lorraine Armenti
Michael Hrinewski
Coughlin Midlige & Garland, LLP
350 Mount Kemble Ave.
Morristown, NJ 07962
Counsel for Appellant Arrowood Indemnity Company
Maria A. Sawczuk
Goldstein & Mcclintock LLLP
501 Silverside Rd., Suite 65
Wilmington, DE 19809
David Christian
David Christian Attorneys LLC
105 W. Madison St., Suite 1400
Chicago, IL 60602
Counsel for Appellants Continental Insurance Company and Columbia Casualty Company
William H. White Jr.
Kiernan Trebach LLP
1233 20th St., NW, 8th Fl.
Washington, DC 20036
John E.W. Baay II
Gieger Laborde & Laperouose, LLC
701 Poydras St., Suite 4800
New Orleans, LA 70139
Counsel for Appellant Gemini Insurance Company
Kelly A. Green
Smith, Katzenstein & Jenkins LLP
P.O. Box 410
Wilmington, DE 19899
Mary E. Borja
Gary P. Seligman
Ashley L. Criss
Wiley Rein LLP
2050 M St. NW
Washington, DC 20036
Counsel for Appellant General Star Indemnity Company
Konrad R. Krebs
Clyde & Co US LLP
340 Mt. Kemble Ave., Suite 300
Morristown, NJ 07960
Alexander E. Potente
Bruce D. Celebrezze
Clyde & Co US LLP
150 California St., 15th Fl.
San Francisco, CA 94111
David Christian
David Christian Attorneys LLC
105 W. Madison St., Suite 1400
Chicago, IL 60602
Bruce W. McCullough
Bodell Bove, LLC
Wilmington, DE 19801
Counsel for Appellants Great American Assurance Company and Great American E&S Insurance Company
Kathleen M. Miller
Smith, Katzenstein & Jenkins LLP
1000 West St., Suite 501
P.O. Box 410
Wilmington, DE 19899
Lloyd A. Gura
Pamela J. Minetto
Mound Cotton Wollan & Greengrass LLP
One New York Plaza 44th Fl.
New York, NY 10004
Counsel for Appellant Indian Harbor Insurance Company
Douglas R. Gooding
Jonathan D. Marshall
Bryana T. McGillycuddy
Choate, Hall & Stewart LLP
Two International Place
Boston, MA 02110
Kim V. Marrkand
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo PC
One Financial Center
Boston, MA 02111
Seitz, Van Ogtrop & Green, P.A.
222 Delaware Ave., Suite 1500
Wilmington, DE 19801
Counsel for Appellants Liberty Mutual Insurance Company, Ohio Casualty Insurance Company, Liberty Insurance Underwriters, Inc., and Liberty Surplus Insurance Corporation
Marla S. Benedek
Cozen O’Connor
1201 N. Market St., Suite 1001
Wilmington, DE 19801
Counsel for Appellants Traders and Pacific Insurance Company, Endurance American Specialty Insurance Company, and Endurance American Insurance Company
Louis J. Rizzo, Jr.
Reger Rizzo & Darnall LLP
1521 Concord Pike
Brandywine Plaza West Suite 305
Wilmington, DE 19803
Counsel for Appellants Travelers Casualty and Surety Company, Inc., St. Paul Surplus Lines Insurance Company and Gulf Insurance Company
Stephen M. Miller
Carl N. Kunz, III
500 Delaware Ave., Suite 1500
Wilmington, DE 19801
Counsel for Appellant Old Republic Insurance Company
Margaret H. Warner
Ryan S. Smethurst
Alex M. Spisak
McDermott Will & Emery LLP
The McDermott Building
500 North Capital St., NW
Washington, DC 20001-1531
Counsel for Appellant Allianz Global Risks US Insurance Company
David M. Fournier
Troutman Pepper Locke LLP
1313 N. Market St., Suite 5100
P.O. Box 1709
Wilmington, DE 19899
Harris B. Winsberg [ARGUED]
Matthew G. Roberts
Parker, Hudson, Rainer & Dobbs LLP
303 Peachtree St. NE, Suite 3600
Atlanta, GA 30308
Todd C. Jacobs
John E. Bucheit
Parker, Hudson, Rainer & Dobbs LLP
Chicago, IL 60606
Counsel for Appellants Allianz Global Risks US Insurance Company, Interstate Fire & Casualty Company, and National Surety Corporation
David R. Kuney
9200 Cambridge Manor Ct.
Potomac, MD 20854
Counsel for Amici Curiae Honorable Eugene Wedoff (Ret.) And Law Professors Ralph Brubaker, David Epstein, George Kuney, David Kuney, Jonathan Lipson, Juliet Moringiello, Chrystin Ondersma and Lawrence Ponoroff in Support of Appellants Dumas & Vaughn Claimants
Michael Huston [ARGUED]
Perkins Coie
2525 E Camelback Rd., Suite 500
Phoenix, AZ 85016
Jessica C. Lauria
Glenn M. Kurtz [ARGUED]
White & Case LLP
1221 Ave. of the Americas
New York, NY 10020
Matthew E. Linder
White & Case LLP
111 South Wacker Dr.
Chicago, IL 60606
White & Case LLP
555 South Flower St., Suite 2700
Los Angeles, CA 90071
Derek C. Abbott
Andrew R. Remming
Sophie Rogers Churchill
Morris, Nichols, Arsht & Tunnell LLP
1201 North Market St., 16th Fl.
P.O. Box 1347
Wilmington, DE 19899
Counsel for Appellees Boy Scouts of America and Delaware BSA, LLC
Philip D. Anker [ARGUED]
Wilmer Cutler Pickering Hale & Dorr LLP
7 World Trade Center
250 Greenwich St.
New York, NY 10007
Daniel N. Brogan
Gregory J. Flasser
Bayard
600 N King St., Suite 400
Wilmington, DE 19801
Counsel for Appellees Hartford Accident and Indemnity Company, First State Insurance Company, Twin City Fire Insurance Company, and Navigators Specialty Insurance Company
O’Melveny & Myers LLP
400 South Hope St.
Los Angeles, CA 90071-2899
Tancred Schiavoni
Nicole Molner
O’Melveny & Myers LLP
Seven Times Square
New York, NY 10036
Jonathan D. Hacker [ARGUED]
O’Melveny & Myers LLP
1625 Eye St., N.W.
Washington, DC 20006
Counsel for Appellee Century Indemnity Company
David Elbaum
Simpson Thacher & Barlett LLP
425 Lexington Ave.
New York, NY 10017
Stamatios Stamoulis
Stamoulis & Weinblatt
800 N West St., 3rd Fl.
Wilmington, DE 19801
Counsel for Appellees Federal Insurance Company and Westchester Fire Insurance Company
Matthew G. Summers
Ballard Spahr LLP
Wilmington, DE 19801
Counsel for Appellees Clarendon National Insurance Company, River Thames Insurance Company Limited, and Zurich American Insurance Company
Robert D. Cecil, Jr.
Tybout, Redfearn & Pell
501 Carr Rd., Suite 300
Wilmington, DE 19899
Counsel for Appellees American Zurich Insurance Company, American Guarantee Insurance Company, and Steadfast Insurance Company
R. Craig Martin
DLA Piper, LLP (US)
1201 North Market St., Suite 2100
Wilmington, DE 19801
Counsel for Appellees Ad Hoc Committee of Local Councils
Robert S. Brady
Edwin J. Harron
Kenneth J. Enos
Ashley E. Jacobs
Young Conaway Stargatt & Taylor, LLP
Rodney Square
1000 North King St.
Wilmington, DE 19801
Emily P. Grim
December L. Huddleston
Kyle Y. Dechant
Gilbert LLP
700 Pennsylvania Ave., SE, Suite 400
Washington, DC 20003
Counsel for Appellee Future Claimants’ Representative
Eric R. Goodman
David J. Molton
Brown Rudnick
7 Times Square, 47th Fl.
New York, NY 10036
Rachel B. Mersky
Monzack Mersky McLaughlin & Browder
1201 North Orange St., Suite 400
Wilmington, DE 19801
Counsel for Appellee Coalition of Abused Scouts for Justice
David M. Klauder
Bielli & Klauder, LLC
1204 N. King St.
Wilmington, DE 19801
Thomas E. Patterson
Daniel J. Bussel
Klee Tuchin Bogdanoff & Stern
1801 Century Park East, 26th Fl.
Counsel for Appellees Pfau Cochran Vertetis Amala PLLC and Zalkin Law Firm, P.C.
Gregory G. Garre
Eric J. Konopka
Latham & Watkins LLP
555 Eleventh St., NW, Suite 1000
Washington, DC 20004
Counsel for Amici Curiae Certain Contributing and Participating Chartered Organization in Support of Appellees
Adam J. Tragone
University of Pittsburgh School of Law
321 Barco Law Building
3900 Forbes Ave.
Pittsburgh, PA 15260
Evan Smola [ARGUED]
Hurley McKenna & Mertz, P.C.
20 S. Clark St. Ste. 2250
Chicago, IL 60603
Counsel for Amici Curiae Boy Scout Claimants Florian Gorski, Estate of Harry Babcock, Douglas Kennedy, Robert Zillox, Craig Miller, Kristofer Pyorre, Theodore W., and Frank S. in Support of Appellees
KRAUSE, Circuit Judge.
These appeals arise from the horrific history of sexual abuse in the Boy Scouts of America’s ranks. For decades, that abuse permeated scouting programs, ranging from single instances of harassment to serial offenses of sexual penetration. In recent years, more and more brave victims of this abuse have come forward and filed lawsuits against the Boy Scouts of America and others in the tort system to recover for the harm they suffered, prompting Debtors Boy Scouts of America and Delaware BSA, LLC (collectively BSA or the Debtors) in 2020 to declare bankruptcy and to commence years of negotiations with claimants, insurers, and other interested parties towards a global resolution for the thousands of tort claims against BSA and related entities. That plan (the Plan), confirmed by the Bankruptcy Court more than two years ago, among other things, provides for the creation of a trust (the Settlement Trust), funded by the sale of certain assets and contributions from BSA and other nondebtors, to pay out distributions to abuse claimants. The Plan became effective in April 2023 after the District Court affirmed the Bankruptcy Court’s confirmation order (the Confirmation Order).
Four groups of appellants now appeal that decision, seeking varied forms of relief. Two of these groups, the Lujan Claimants and the Dumas & Vaughn (D&V) Claimants, collectively represent 140 abuse victims and ask us to reverse the Confirmation Order and throw out BSA’s Plan in its
As explained in more detail below, we will decline the Lujan Claimants’ and D&V Claimants’ invitation to reverse the Confirmation Order at this late stage and will dismiss their appeals because the Bankruptcy Code precludes us from reaching the merits of their claims. The narrow relief advanced by the Certain Insurers and Allianz Insurers, however, does not trigger the same statutory bar, so we reach the merits, but with different consequences for these two groups of appellants: The Certain Insurers’ claims fail because the Confirmation Order and Plan already preserve their rights and defenses under their policies, while the Allianz Insurers are entitled to relief because the Confirmation Order impermissibly releases their claims under their policies.
Accordingly, we will dismiss the Lujan Claimants’ and D&V Claimants’ appeals, affirm as to the Certain Insurers’ claims, and reverse as to the Allianz Insurers’ claims.
Background
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The Boy Scouts of America
These consolidated appeals come to us on an extensive procedural record, but the facts that precipitated BSA’s bankruptcy long predate its filing. Chartered by Congress in 1916 as a non-profit corporation, BSA’s charitable mission includes preparing young people for life by instilling in them values like trustworthiness, kindness, friendliness, and helpfulness. It carries out this mission and delivers scouting programs through a network of national, regional, and local entities. BSA sits atop this structure and “develops and disseminates the structure and content of the Scouting program, owns and licenses intellectual property, and establishes merit badge requirements and membership qualifications.”1 In re Boy Scouts of Am. and Del. BSA, LLC, 650 B.R. 87, 106 (D. Del. 2023). Below BSA lie approximately 250 Local Councils—each a distinct non-profit organization incorporated under state law—that cover various geographical regions throughout the country and that charter local organizations, recruit scouts and leaders, and enforce BSA policies. Finally, Local Councils operate in conjunction with Chartered Organizations—often schools, religious institutions, and civic associations—that provide facilities and support for scouting activities.
Since 1935, BSA had purchased insurance policies that covered a variety of potential liabilities, including abuse claims. Local Councils and Chartered Organizations, which were not covered as insureds under BSA’s policies before 1971, purchased independent insurance policies. Beginning in the 1970s, however, BSA offered the option for Local Councils to pay a premium to be included as insureds under BSA’s policies, which many Local Councils elected to do. And from 1975 onward, BSA included all Local Councils as insureds, with Chartered Organizations gaining coverage in 1976. The need for that insurance became painfully apparent in the decades that ensued. What began as a trickle of seemingly isolated claims in the 2000s steadily increased as the degree and pervasiveness of the abuse came to light. Between 2017 and 2019, BSA resolved about 250 abuse claims for approximately $150 million. Meanwhile, many states enacted revival statutes enabling survivors to assert claims that were previously barred by statutes of limitation, and by 2019, it became apparent that BSA could not continue to defend individual abuse claims on a cases-by-case basis and would need to declare bankruptcy.
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BSA’s Petition and the Plan
On February 18, 2020, BSA filed for bankruptcy protection in the District of Delaware. The Bankruptcy Court set a “bar date” of November 16, 2020, meaning all prepetition creditors (such as abuse claimants) had to file proofs of claim by that date to have an allowable claim. As of the bar date, creditors had filed over 100,000 proofs of claim, of which 82,209 were unique and timely abuse claims. The Bankruptcy
Court estimated the total value of abuse claims as between $2.4 and $3.6 billion. To resolve this massive liability and achieve a global resolution of abuse claims, the Bankruptcy Court appointed mediators to facilitate discussions among the parties, and the Debtors “engaged in near-continuous mediation with every major constituency in the Chapter 11 Cases.” BSA Answering Br. 17. These negotiations eventually yielded the Plan at issue in this appeal that establishes the Settlement Trust funded with approximately $2.48 billion in noncontingent assets contributed by BSA and various nondebtors. The vast majority of that funding—over $1.6 billion—derives from the proceeds of BSA’s sale of its liability insurance policies back to a group of its pre-petition insurers (the Settling Insurers). This “Insurance Policy Buyback” is effectuated through a series of individual, but materially identical, settlement agreements between BSA and each of the Settling Insurers that provide for:
(i) the payment by the insurer of an agreed amount on an agreed schedule to the Settlement Trust to be used to pay Abuse Claims; (ii) the assignment of the Local Council Insurance Policies to the estate and the sale of the Local Council Insurance Policies and the BSA Insurance Policies . . . to the insurer under
§ 363 free and clear of all claims and interests of all parties; and (iii) a complete release from all parties . . . of all causes of action arising out of their respective insurance policies and any liability for Abuse Claims.In re Boy Scouts of Am. and Del. BSA, LLC, 642 B.R. 504, 562–63 (Bankr. D. Del. 2022). That third provision—contemplating nonconsensual third-party releases—enables the Settling Insurers to “obtain a complete release of liability for Abuse claims on behalf of themselves, the named insured(s) under their policies and any additional insureds (whether specifically named or categorically identified).” Id. at 563. In addition to establishing the Settlement Trust, the Plan sets forth the Trust Distribution Procedures that govern distribution of trust assets to individual claimants. The Trust Distribution Procedures establish four mechanisms for distributing payments for allowed abuse claims: (a) the Expedited Distribution election, (b) evaluation under the Claims Matrix, (c) the Tort System Alternative, and (d) the Independent Review Option.
Claimants who choose the Expedited Distribution election must have submitted a timely proof of claim for scouting-related abuse and have personally signed the proof of claim, affirming its veracity. Upon meeting these criteria, a claimant is entitled to a distribution from the Settlement Trust of $3,500 as satisfaction for his claim.
The Claims Matrix election offers a more rigorous and individualized assessment of abuse claims. To make this election, a claimant must (1) make a Trust Claim Submission to the Settlement Trust, which includes a completed questionnaire signed under oath, producing all records in his possession related to the abuse (including records indicating monetary recoveries or expected recoveries on account of the abuse), and agreeing to produce further records as requested by
the Settlement Trustee; (2) consent to an interview (including by healthcare professions) conducted by the Settlement Trustee; and (3) consent to sworn written or oral examination. The Settlement Trustee screens these submissions for compliance and disallows those that do not meet these criteria. Satisfactory submissions proceed to the second stage of evaluation where they are screened for compliance with the General Criteria defined in the Trust Distribution Procedures.2 Satisfaction of the General Criteria results in an Allowed Abuse Claim, which is then run through the Claims Matrix and Scaling Factors that assign monetary values to claims involving particular types of abuse.3 This calculation yields a
claimant’s proposed allowed claim amount which, if the claimant is satisfied or takes no further action to contest, becomes the amount that a claimant is entitled to receive from the Settlement Trust. Alternatively, a claimant may ask the Settlement Trustee to reconsider the calculation within thirty days of receipt. A claimant dissatisfied with the Settlement Trustee’s initial or reconsidered proposed allowed claim amount may elect to pursue the Tort System Alternative and have that amount reviewed “by a court of competent jurisdiction.” In re Boy Scouts, 642 B.R. at 544. Under this election, the amount a claimant may receive from the Settlement Trust “is the final judgment less any payments actually received and retained by the [claimant], but if the claimant receives a judgment in excess of the Maximum Matrix Value for the applicable tier, that additional amount is subordinate in right of distribution to the prior payment in full” of all other allowed abuse claims. Id.
Finally, a claimant may elect to pursue the Independent Review Option, which “contemplates recoveries above the values stated in the Claims Matrix and is designed to permit [claimants] with higher value claims to potentially receive a higher award and directly trigger excess insurance coverage.” Id. Within six months of the effective date of the Plan, a claimant could seek an individualized evaluation of his claim “by a neutral third party (a retired judge with tort experience on a panel maintained by the Settlement Trust)” who, after accounting for the “relative shares of fault and the standard of proof” under governing law, makes a settlement recommendation to the Settlement Trustee. Id.
The Settlement Trustee, in turn, may accept or reject the neutral’s settlement recommendation. If the Trustee accepts the recommendation, that amount becomes the allowed claim amount, and the Trustee must provide notice to any applicable non-consenting insurer.4 If the Trustee rejects the neutral’s recommendation, the claimant may sue the Settlement Trust in any court of competent jurisdiction to liquidate his claim. But this option is not without risk. If the neutral recommends, and the Trustee accepts, a settlement of zero, the claimant neither receives a distribution from the Settlement Trust nor can he pursue his claim in a separate action. -
Confirmation
On September 29, 2021, the Bankruptcy Court approved the Debtors’ disclosure statement, permitting them to begin solicitation for the Plan. The Plan carried approval from each of the nine classes of creditors entitled to vote on it.5 After their initial solicitation, the Debtors continued to work with interested parties to resolve remaining disputes. Through these efforts, BSA secured additional insurance settlements which resulted in greater contributions from BSA, Local Councils, and the Settling Insurers to the Settlement Trust. The Debtors
incorporated these post-solicitation settlements and modifications into the Plan, submitted and disseminated supplemental disclosures to affected creditors (those in Classes 8 and 9), and offered those creditors the opportunity to change their votes given the modifications. Following an extension of the voting period, Classes 8 and 9 voted to accept the Plan by an even greater margin. But not all class members were so solicitous. Thirty-nine parties filed objections to the Plan’s confirmation, with the objectors falling into two broad groups—non-settling insurance companies and direct abuse claimants. In commendably thorough and inclusive proceedings, the Bankruptcy Court held a twenty-two-day confirmation trial that featured fifteen days of testimony from twenty-six witnesses and over 1,000 exhibits, followed by seven days of oral argument. On July 29, 2022, that Court issued its 269-page confirmation opinion, meticulously analyzing the objections to the Plan and approving many of its key elements, but declining to confirm the Plan in its entirety. See In re Boy Scouts, 642 B.R. 504. It then proceeded to hold two more hearings and, on September 8, 2022, issued supplemental findings of fact and conclusions of law and entered the Confirmation Order confirming the Plan. See In re Boy Scouts of Am. and Del. BSA, LLC, No. 20-10343, 2022 WL 20541782 (Bankr. D. Del. Sep. 8, 2022).
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Procedural History
On appeal, the District Court, after reviewing the Plan and record and hearing two days of oral argument, affirmed the Confirmation Order in its own 155-page opinion. The Plan went effective on April 19, 2023 (the Effective Date).
Appellants then initiated these appeals.6 After opening briefs were filed, Appellees moved to dismiss all claims as equitably and statutorily moot. The parties briefed these motions, as well as the effect of the Supreme Court’s intervening decision in Purdue, and we now consider these issues along with the merits of these appeals.
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Jurisdiction and Standard of Review
The District Court had jurisdiction over the appeal from the Confirmation Order pursuant to
28 U.S.C. § 158(a) . We have jurisdiction under28 U.S.C. § 158(d)(1) and§ 1291 , and exercise “plenary review of an order from a district court sitting as an appellate court in review of a bankruptcy court.” In re Exide Techs., 607 F.3d 957, 961–62 (3d Cir. 2010). We thus employ the same standard of review as the District Court, “review[ing] the bankruptcy court’s legal determinations denovo, its factual findings for clear error and its exercise of discretion for abuse thereof.” In re Trans World Airlines, Inc., 145 F.3d 124, 131 (3d Cir. 1998). -
Discussion
While Appellants raise a number of different claims, most lie beyond our purview. We proceed below by addressing four issues: (A) the Bankruptcy Court’s subject matter jurisdiction; (B) statutory mootness under
§ 363(m) of theBankruptcy Code ; (C) the application of equitable mootness to these appeals; and (D) the merits of the Certain Insurers’ and Allianz Insurers’ claims.-
The Bankruptcy Court’s Jurisdiction
We begin, as we must, with jurisdiction. See George v. Rushmore Serv. Ctr., LLC, 114 F.4th 226, 234 (3d Cir. 2024). The Lujan and D&V Claimants argue the Bankruptcy Court lacked jurisdiction over “claims against nondebtors local councils, chartered organizations, religious orders, and insurers . . . [because] any prepetition case against these nondebtors cannot bind BSA and therefore cannot determine any rights, liabilities, or course of action of BSA.” Lujan Opening Br. 11. We agree with the District Court that, at a minimum, the Bankruptcy Court properly exercised related-to jurisdiction over these third-party claims.
Bankruptcy jurisdiction has four varieties: (1) cases under the
Bankruptcy Code ; (2) proceedings “arising under” the Code, meaning rights or remedies expressly provided by the statute; (3) proceedings “arising in” a bankruptcy case, meaning those that would not exist outside of bankruptcy; and(4) proceedings “related to” a bankruptcy case, often causes of action under non-bankruptcy law. See In re Resorts Int’l, Inc., 372 F.3d 154, 162 (3d Cir. 2004); In re Essar Steel Minn., LLC, 47 F.4th 193, 197 (3d Cir. 2022). The first three categories fall within bankruptcy courts’ “core” statutory jurisdiction, In re Combustion Eng’g, Inc., 391 F.3d 190, 225 (3d Cir. 2004), which they may “hear and determine” without intervention from the district court, 28 U.S.C. § 157(b)(1) . The fourth category, proceedings “related to” a bankruptcy case, is generally considered “non-core,” In re Combustion Eng’g, 391 F.3d at 225, and bankruptcy courts have to “submit proposed findings of fact and conclusions of law to the district court” for plenary review and entry of a final judgment,28 U.S.C. § 157(c)(1) .This case deals with proceedings “related to” a bankruptcy case. A proceeding relates to a bankruptcy case when “the outcome of that proceeding could conceivably have any effect on the estate being administered in bankruptcy.” Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir. 1984) (emphasis omitted), abrogated on other grounds by Things Remembered, Inc. v. Petrarca, 516 U.S. 124 (1995). We have defined a “conceivable effect” to mean “the outcome could alter the debtor’s rights, liabilities, options, or freedom of action (either positively or negatively) and which in any way impacts upon the handling and administration of the bankrupt estate.” Id.
Here, we address two bases for the Bankruptcy Court’s related-to jurisdiction.7 First, shared insurance policies may serve as a basis for related-to jurisdiction. See In re Combustion Eng’g, 391 F.3d at 232–33. As the Bankruptcy Court found, and as the record supports, BSA and the nondebtor, would-be defendants shared liability insurance coverage since at least 1976. Because these policies carry various per-occurrence and aggregate coverage limits, successful prosecution of Appellants’ claims would result in “[a] dollar-for-dollar reduction of [BSA’s] available insurance coverage.” In re Boy Scouts, 650 B.R. at 131. Thus, an effect on the estate is likely, let alone conceivable, and that is more than sufficient to impose the requisite “specter of direct impact on the res of the bankrupt estate” to support related-to jurisdiction. In re Quigley Co., 676 F.3d 45, 58 (2d Cir. 2012). Second, related-to jurisdiction may exist where there are “indemnity obligations between the debtor and non-debtor that automatically result[] in indemnification liability against the debtor.” In re Combustion Eng’g, 391 F.3d at 226; see also In re W.R. Grace & Co., 900 F.3d 126, 139 (3d Cir. 2018). As
the Bankruptcy Court found and, again, as the record supports, BSA’s contractual and corporate relations with Local Councils and Chartered Organizations give rise to non-contingent, automatic indemnity obligations, including those asserted through thousands of proofs of claim in BSA’s bankruptcy. Appellants’ claims against Local Councils and Chartered Organizations therefore conceivably affect the bankruptcy estate, and the Bankruptcy Court properly exercised related-to jurisdiction on that basis. True, the Bankruptcy Court did not submit proposed findings of fact and conclusions of law to the District Court for final determination. See
28 U.S.C. § 157(c)(1) . But doing so is not necessary where, as here, a bankruptcy court exercises its related-to jurisdiction as part of the plan confirmation process. See In re Millennium Lab Holdings II, LLC, 945 F.3d 126, 133 (3d Cir. 2019), abrogated on other grounds by Harrington v. Purdue Pharma, L.P., 603 U.S. 204 (2024). As we have explained in applying Stern v. Marshall, 564 U.S. 462 (2011), in a similar scenario in In re Millennium, when a bankruptcy court “resolves a matter that is integral to the restructuring of the debtor-creditor relationship,” it may constitutionally resolve third-party claims. In re Millennium, 945 F.3d at 135. And implicit in that holding is the recognition that bankruptcy courts have statutory authorization to finally determine third-party claims over which they have related-to jurisdiction during the plan confirmation process.In short, because the Lujan and D&V Claimants’ claims against nondebtors have a conceivable effect on BSA’s estate, the Bankruptcy Court properly exercised related-to jurisdiction over those claims. And because the Bankruptcy Court resolved those claims in the context of confirming the Plan, it did not
need to submit proposed findings of fact and conclusions of law to the District Court. -
Statutory Mootness
Having concluded the Bankruptcy Court properly exercised jurisdiction, we turn to Appellees’ first argument for dismissal of these appeals—that they are “statutorily moot” under
§ 363(m) of theBankruptcy Code . Importantly, not only is statutory mootness the primary argument the Settling Insurers advance on appeal—and one the Debtors join—but it is a protection for which theBankruptcy Code expressly provides. Thus, we decline to resort to the judge-made doctrine of equitable mootness before evaluating these appeals under the statutory mootness provision contained in theBankruptcy Code . Cf. Pearson v. Sec’y Dep’t of Corr., 775 F.3d 598, 603–04 (3d Cir. 2015) (considering statutory tolling before equitable tolling and concluding that, where statutory tolling disposed of the issue, the court “need not address” the judge-made equitable doctrine).No doubt, that statutory bar to relief on appeal is applicable in limited circumstances and, as we caution below, is constrained by explicit statutory criteria and the careful scrutiny of the reviewing judge. See infra Section III.B.2. But even so, we agree with Appellees that it applies here, and the relief the Lujan Claimants and D&V Claimants seek is therefore precluded.
Below, we address, first, the mechanics of
§ 363(m) and, second, the statute’s application to these appeals and the Lujan and D&V Claimants’ arguments that§ 363(m) does not bar the relief they request.-
Section 363(m)’s Mechanics
We and our sister circuits have referred to § 363(m) ’s bar as “statutory mootness” since it imposes “a constraint . . . on our capacity to fashion relief.” In re Energy Future Holdings Corp., 949 F.3d 806, 820 (3d Cir. 2020). That subsection provides:The reversal or modification on appeal of an authorization under subsection (b) or (c) of this section of a sale or lease of property does not affect the validity of a sale or lease under such authorization to an entity that purchased or leased such property in good faith, whether or not such entity knew of the pendency of the appeal, unless such authorization and such sale or lease were stayed pending appeal.
11 U.S.C. § 363(m) .In other words, when confronted with a challenge to a
§ 363(b) sale, the reviewing court must first “ascertain[] that the appeal is from an authorization of a sale, that the purchase was made in good faith, and that the sale was not stayed.” In re Energy Future Holdings, 949 F.3d at 821. If those circumstances are met, the court then must determine “whether a remedy can be fashioned that will not affect the validity of the sale.” Id. (quoting Krebs Chrysler-Plymouth, Inc. v. Valley Motors, Inc., 141 F.3d 490, 498–99 (3d Cir. 1998)). That determination requires close scrutiny. If the remedy does not affect the sale’s validity, the court may entertain the appeal. But if it would necessarily affect the sale’s validity, the relief is unavailable, so the appeal must be dismissed. The answer iseasy where the requested relief “would materially increase or decrease the purchase price,” but other remedies, too, may fall into that category with “careful study[,] depending on the nature of the claim and the type of relief sought.” Id. In restricting appeals for this narrow category of appeals, Congress chose “to promote the policy of . . . finality.” Krebs Chrysler-Plymouth, 141 F.3d at 500. And this policy serves an important role in the bankruptcy process. Debtors often enter bankruptcy in dire financial straits with the value of their assets depreciating rapidly—the proverbial “melting ice cube.” Sometimes, in order to avoid a liquidation or risk further dissipation and losses to the estate, “it is more advantageous for the debtor to begin to sell as many assets as quickly as possible in order to [e]nsure that the assets do not lose value.” Fla. Dep’t of Revenue v. Piccadilly Cafeterias, Inc., 554 U.S. 33, 57 (2008) (Breyer, J., dissenting) (quotation omitted).
Section 363(b) permits just that: a debtor may, with approval from the bankruptcy court, “use, sell, or lease . . . property of the estate” outside the ordinary course of business.11 U.S.C. § 363(b)(1) .But without assurance that a
§ 363(b) sale is final, potential purchasers of estate assets would be chilled from dealing with the debtor, causing assets to languish idly while the bankruptcy progresses, all the while hemorrhaging value and undermining the very purpose§ 363(b) aims to serve.Section 363(m) provides the protection that§ 363(b) sales require. Indeed, absent its protections, “purchasers of bankruptcy estate assets could be dragged into endless rounds of litigation to determine who has what rights in the property,” which not only would disrupt the efficient flow of commerce, “but would also substantially reduce the value of the estate.”In re Rare Earth Mins., 445 F.3d 359, 363 (4th Cir. 2006) (quotation omitted). By sheltering unstayed sale authorizations to good-faith purchasers from “reversal or modification on appeal,” § 363(m) serves Congress’s goals of “attract[ing] investors and help[ing] effectuate debtor rehabilitation,” Cinicola v. Scharffenberger, 248 F.3d 110, 122 (3d Cir. 2001)—goals we will not lightly discard.To be sure, “while
§ 363(m) aims to make sales of estate property final and inject predictability into the sale process . . . it does [not do] so at all costs.” In re ICL Holding Co., Inc., 802 F.3d 547, 554 (3d Cir. 2015). By its terms,§ 363(m) only prohibits “reversal or modification on appeal” of a§ 363(b) “authorization.” It does not prohibit all appeals, but only those in which the authorization was not “stayed pending appeal.” And it does not prohibit the appeal of challenges to all sales and leases, but “only those challenges that would claw back the sale from a good-faith purchaser.” Id. Plus, it bars only those challenges where the relief sought would affect the “validity of the sale.” In re Energy Future Holdings, 949 F.3d at 821. So in the normal course,§ 363(m) permits challenges “that are so divorced from the overall transaction that the challenged provision would have affected none of the considerations on which the purchaser relied” and to “collateral issues not implicating a central or integral element of a sale.” In re Pursuit Cap. Mgmt., LLC, 874 F.3d 124, 139 (3d Cir. 2017) (quoting In re Westpoint Stevens, Inc., 600 F.3d 231, 249 (2d Cir. 2010)).In short,
§ 363(m) precludes judicial review of a narrow and well-defined category of cases, so we turn now to whether this is one of them. -
Application to These Appeals
We can quickly dispense with the application of § 363(m) to the Certain Insurers and Allianz Insurers, and so address those appeals before turning to the appeals of the Lujan and D&V Claimants.-
The Certain Insurers and Allianz Insurers
The Certain Insurers and Allianz Insurers each seek a limited form of relief sufficiently collateral to the Insurance Policy Buyback and, therefore, their appeals avoid triggering
§ 363(m) .The Certain Insurers seek what they characterize as “minimal, but critical, modifications to the Plan to ensure that their rights are preserved” under their insurance policies assigned to the Settlement Trust. Certain Insurers Opening Br. 7. These changes include (1) elimination of language in the Plan that makes the Certain Insurers’ rights “subject to the terms of the Plan and the Confirmation Order”; (2) inclusion of language in the Plan requiring the Settlement Trustee to balance the rights of the Certain Insurers along with other interested parties when administering the Settlement Trust; and (3) inclusion of a provision requiring the Settlement Trustee to “consider any further limitation on Abuse Claimants’ recovery in the tort system” when determining a claimant’s entitlement to compensation. Id. at 7–8.
None of these requested changes to the Plan implicate the terms of the Insurance Policy Buyback; instead, they reduce primarily to modifications ensuring that the Certain
Insurers’ interests are protected and considered in the administration of the Settlement Trust. So rather than seeking relief “implicating a central or integral element of a sale,” the Certain Insurers’ requested relief is sufficiently “divorced from the overall transaction” such that, if granted, it would “affect[] none of the considerations on which the purchaser relied.” In re Pursuit Cap. Mgmt., 874 F.3d at 139. Accordingly, § 363(m) poses no barrier to our consideration of the merits of their appeal.The same goes for the Allianz Insurers. Like the Certain Insurers, the Allianz Insurers propose targeted changes that implicate neither the terms nor the validity of the Insurance Policy Buyback. Specifically, they contend that the Confirmation Order’s “judgment reduction clause” impermissibly releases contribution and indemnity claims they would otherwise have against the Settling Insurers. As a fix, they propose modifications to the Confirmation Order to require the Settlement Trustee to pay these released claims to the extent they accrue. This change does not implicate any provision of the Insurance Policy Buyback—indeed, the Allianz Insurers’ argument takes as a given the existence of the Settlement Trust, funded in part by the proceeds of the Insurance Policy Buyback and the release of their claims against the Settling Insurers. And in proposing that the Settlement Trust, rather than the Settling Insurers, cover the cost of satisfying their released claims, the Allianz Insurers have not asked for relief that “would materially increase . . . the purchase price” paid by the Settling Insurers. In re Energy Future Holdings, 949 F.3d at 821; cf. In re ICL Holding Co., 802 F.3d at 554 (concluding that reallocation of escrowed funds to satisfy administrative expenses was not barred by
§ 363(m) ). For these reasons, the Allianz Insurers’ appeal likewise does not implicate§ 363(m) . -
The Lujan and D&V Claimants
The Lujan Claimants and D&V Claimants, however, are differently situated, and we have little difficulty concluding that the relief they seek would affect the validity of the Insurance Policy Buyback authorized by the Confirmation Order. These Claimants have steadfastly urged us to reverse the Confirmation Order and vacate the Plan in its entirety. But the Confirmation Order contains the authorization for the sale of BSA’s insurance policies. See In re Boy Scouts, 2022 WL 20541782, at *10–11. Granting these Claimants’ requested relief would reverse on appeal an authorization made pursuant to
§ 363(b) —the very result§ 363(m) prohibits.Our concurring colleague disagrees, asserting that the buyback of some of the Settling Insurers’ policies has yet to occur because it is “expressly condition[ed]” on the Confirmation Order becoming a “Final Order” as defined in the settlement agreements. Concurring Op. 12. But this contention is doubly mistaken.
First, as counsel for the Settling Insurers represented to us at oral argument, and as is borne out in the Plan, the Insurance Policy Buyback was completed on the Effective Date, meaning “the policies have been sold.” Oral Arg. Tr. 76:6; see also App. 975 (“Notwithstanding anything to the contrary and for the avoidance of doubt, the Abuse Insurance Policies [including Hartford’s and Zurich’s policies] shall be sold by the Debtors to the applicable Settling Insurance Companies free and clear of all liens, claims, encumbrances,
-
-
-
Second, even if that were not the case,
As we have explained,
As for the concurrence‘s contentions that “[s]ection 363(m) clearly contemplates not only an authorized sale, but a completed sale” and “an appeal cannot affect the validity of a sale that has not happened,” Concurring Op. 14, both our precedent and common sense disagree. As explained above, we have identified three conditions to
In an effort to avoid this conclusion, the Claimants raise a bevy of arguments, but none is persuasive.8 First, they argue
Second, the Lujan Claimants argue that the Settling Insurers are not good faith purchasers because they purchased BSA‘s policies despite abuse claimants asserting rights in those policies and with the knowledge that the Lujan Claimants intended to challenge the Plan on appeal. But this argument ignores both the text of
In this case, the Bankruptcy Court unequivocally determined that “[t]he Settling Insurance Companies are each good faith purchasers for value within the meaning of section 363(m) of the Bankruptcy Code.” In re Boy Scouts, 2022 WL 20541782, at *8. And, for the reasons above, we agree with that determination.11
Third, Appellants contend that they do not seek to upset the Insurance Policy Buyback, but rather only take issue with the nonconsensual third-party releases contained in the Plan. But where, as here, the releases form a portion of the consideration for the Insurance Policy Buyback, that is a distinction without a difference. Under the Plan, the Settling Insurers paid over $1.6 billion in exchange for the return of their insurance policies from BSA, with liability cabined by the third-party releases. So without the releases, the Settling Insurers would receive less than they bargained for in exchange for their cash contribution to the Settlement Trust, which “would materially increase . . . the purchase price” and, thus,
Perhaps recognizing the import of the relief they seek—relief that would send BSA and over 82,000 abuse claimants back to square one and would almost certainly unleash years of litigation in the wake of the vacated Plan—the Lujan and D&V Claimants suggest that more limited remedies are available that “do[] not touch the insurance sale or dismantle the plan.” D&V Claimants Opp. Mot. to Dismiss 32. They offer two by way of “example.” Id. But the Bankruptcy Code permits neither.
The proposal that “the third parties benefiting from the releases could pay more money,” id., is the quintessential example of relief that “would materially increase . . . the purchase price.” In re Energy Future Holdings, 949 F.3d at 821. And permitting the Lujan and D&V Claimants to “opt out of the nonconsensual releases,” D&V Claimants Opp. Mot. to Dismiss 32, effects the same result: the Settling Insurers would receive less in exchange for their cash contribution than they bargained for under the terms of the Insurance Policy Buyback. BSA and the Settling Insurers struck a deal for a global resolution, and blue-penciling a post-confirmation opt-out structure—even for a relatively small number of claimants—would fundamentally undermine that bargain. Allowing some claimants, but not others, to circumvent the releases and pursue claims against previously released parties would also violate the Bankruptcy Code‘s requirement that a plan “provide the same treatment for each claim or interest of a particular class” absent consent from a claimholder to less favorable treatment.
Fourth, in a brief passage near the end of their opposition to the Settling Insurers’ motion to dismiss, the Lujan Claimants contend that even if the releases of some of their claims were integral to the Insurance Policy Buyback, their other claims against “Limited Protected Parties,” particularly Chartered Organizations like the Roman Catholic Entities (who were not insured under BSA‘s pre-1975 insurance policies), do not implicate the sale and thus can be pursued on appeal. But this final gesture at more limited relief also falls short for both pre- and post-1976 abuse claims. That is because the Plan provides releases for Limited Protected Parties for abuse claims after 1975 and for pre-1976 claims against Limited Protected Parties covered by policies provided by a Settling Insurer. And for pre-1976 claims against Limited Protected Parties that were not then insured with the Settling Insurers, the Plan and Confirmation Order neither release those claims nor enjoin their prosecution. See In re Boy Scouts, 2022 WL 20541782, at *28.
Additionally, throughout their briefs, the Lujan Claimants and D&V Claimants argue that embracing
As for
The bankruptcy and district courts of this Circuit have also acknowledged and applied the doctrine in examining sales under
We endorse this practice and join the Fifth and Second Circuits in applying the doctrine where warranted. No doubt, differentiating a permissible use of
This case raises none of those concerns.16 Here, the Insurance Policy Buyback was included in the Plan and subject to all of Chapter 11‘s procedural protections afforded to creditors: The Insurance Policy Buyback was included in the
This abundance of process and conformity with the Code distinguishes this case from those where a debtor‘s use
* * *
In sum, the Settling Insurers qualify as good-faith purchasers, and the purported more-limited relief proposed by the Lujan and D&V Claimants would strike at the heart of the Insurance Policy Buyback. Because
C. Equitable Mootness
Because we conclude that the appeals of the Certain Insurers and Allianz Insurers are not statutorily moot, we reach Appellees’ alternative argument for dismissal that the doctrine of equitable mootness precludes relief. In light of the limited relief those Appellants seek, the success of their appeals does not threaten to fatally scramble the Plan. Thus, equitable mootness does not prevent us from reaching the merits of their claims.
As we explained when we first endorsed this “judge-made abstention doctrine,” In re Semcrude, L.P., 728 F.3d 314, 317 (3d Cir. 2013), by a slim margin in In re Continental Airlines, 91 F.3d 553 (3d Cir. 1996) (en banc), equitable mootness permits a federal court to dismiss and decline to consider the merits of a bankruptcy appeal following the consummation of a plan “when, even though effective relief could conceivably be fashioned, implementation of that relief would be inequitable,” id. at 559 (cleaned up). The doctrine is invoked when “requested relief is almost certain to produce a ‘perverse’ outcome—significant ‘injury to third parties’ and/or
The doctrine is not without its critics. See, e.g., In re One2One Commc‘ns, 805 F.3d at 438-54 (Krause, J., concurring); In re City of Detroit, 838 F.3d 792, 805-814 (6th Cir. 2016) (Moore, J., dissenting). And this case highlights a potentially troubling aspect of adherence to the doctrine. As discussed above, Congress took great care to define the circumstances where appellate remedies are unavailable, see
We have repeatedly admonished, however, that the doctrine is “limited in scope” and must be “cautiously applied.” In re Cont‘l Airlines, 91. F.3d at 559; see also In re Phila. Newspapers, LLC, 690 F.3d at 170; In re Zenith Elecs. Corp., 329 F.3d 338, 343 (3d Cir. 2003); Nordhoff Invs. Inc. v. Zenith Elecs. Corp., 258 F.3d 180, 185 (3d Cir. 2001); In re PWS Holding Corp., 228 F.3d 224, 236 (3d Cir. 2000); In re Cont‘l Airlines, 203 F.3d 203, 209 (3d Cir. 2000). And, importantly, equitable mootness is only available in “complex bankruptc[ies]” “where the reorganization involves intricate transactions.” In re One2One Commc‘ns, 805 F.3d at 435-36 (first quoting In re Phila. Newspapers, 690 F.3d at 169; and then quoting In re Cont‘l Airlines, 91 F.3d at 560-61). In those “very few cases,” In re Trib. Media, 799 F.3d at 289 (Ambro, J., concurring), where the doctrine applies, courts deploy it “with a scalpel rather than an axe,” id. at 278 (quoting In re Blast Energy Servs., Inc., 593 F.3d 418, 425 (5th Cir. 2010)).
Our criteria for invoking the doctrine have shifted over time,22 but as we encounter it today, the inquiry has two prongs. First, we ask “whether a confirmed plan has been substantially consummated.” In re Semcrude, 728 F.3d at 321. Second, if it has, we consider “whether granting the relief requested in the appeal will (a) fatally scramble the plan and/or (b) significantly
With these considerations in mind, we apply this two-pronged test to the evidentiary record before us.
1. Substantial Consummation
Appellees urge us to conclude, at this first prong, that the Plan has progressed to the point that it should be considered substantially consummated. We determine whether the threshold for “substantial consummation” has been met by reference to the three criteria set forth in the Bankruptcy Code‘s definition of the term. See, e.g., In re Semcrude, 728 F.3d at 321. Under that definition, “substantial consummation” means:
(A) transfer of all or substantially all of the property proposed by the plan to be transferred;
(B) assumption by the debtor or by the successor to the debtor under the plan of the business or of the management of all or substantially all of the property dealt with by the plan; and
(C) commencement of distribution under the plan.
a. Transfer
The
No doubt, there has been movement of all of substantially all of that property. Since the Effective Date, BSA has contributed to the Settlement Trust the BSA Settlement Trust Note in the principal amount of $80 million; $42.8 million of proceeds of a loan by the National Boy Scout Foundation; assignments of insurance rights; the right, title, and interest in and to artwork valued at approximately $59 million; and oil and gas interests valued at approximately $7.6 million. The Settling Insurers have transferred all their contributions under the Plan, paying nearly $200 million directly to the Settlement Trust and placing approximately $1.4 billion into escrow. Local Councils have transferred to the
But does that movement qualify as “disposing of or parting with” the property? Some Appellants say not.23 They point out, correctly, that the Settling Insurers have merely deposited $1.4661 billion—approximately 90% of their total contribution to the Settlement Trust—in escrow and not in the hands of the Settlement Trust. And on that basis, they argue that “conditionally transferring funds to escrow does not complete the transaction” and holding the funds in escrow, as opposed to diverting them directly to the Settlement Trust, “defeats the notion that there has been a ‘completed’ transfer.” D&V Opp. Mot. to Dismiss 19–20.
The problem with this argument is that neither
Having dispatched this argument, we conclude that the Settling Insurers’ placement of funds into escrow qualifies as a “transfer.” At its most basic, escrow is a mechanism by which “property delivered by a promisor to a third party [the escrow agent] [is] held by the third party for a given amount of time or until the occurrence of a condition, at which time the third party is to hand over the document or property to the promisee.” Escrow, Black‘s Law Dictionary (12th ed. 2024). Thus, once property is placed in escrow, an equitable interest in that property is transferred from promisor to the promisee. 28 Am. Jur. 2d Escrow § 16 (2025). The escrow agent acts as both an agent and fiduciary of the parties and “is under a duty not to deliver the escrow to anyone except upon strict compliance with the conditions imposed by escrow agreement.” 30A C.J.S. Escrows § 19 (2024). So when a party places property in escrow, it relinquishes control of that property to the extent provided for in the escrow agreement.
Here, by placing a portion of their Settlement Trust contribution in escrow, the Settling Insurers conditionally parted with their property to be distributed upon satisfaction of the conditions precedent to their funding obligations under the Plan—i.e., among other things, when the Confirmation Order becomes a “Final Order.” Such a “conditional” transaction satisfies the Code‘s definition of “transfer.” And with the Settling Insurers having transferred their share, substantially all of the property dealt with under the Plan has been transferred.
As to the second criterion for “substantial consummation“,
BSA has satisfied that condition. No party disputes that “BSA has been operating as a recognized charitable non-profit . . . since emergence from bankruptcy in April 2023” and “has fully resumed its operations, including receiving charitable donations, implementing the robust supplemental youth protection measures outlined in the Plan, implementing new bylaws and rules and regulations, and electing new board members.” BSA Suppl. Br. 7, 13. Thus, BSA has assumed control of the scouting program, satisfying
c. Distribution
BSA has also satisfied the third criterion for substantial consummation: “commencement of distribution under the plan.”
In this case, all agree that the Settlement Trust has begun distributing settlement payments to abuse claimants. As of April 22, 2025, 5,552 abuse claimants have elected an Expedited Distribution under the Trust Distribution Procedures, resulting in over $18.3 million in distributions made under that election alone. Additionally, as of that same date, 12,807 claimants have received distributions under the Claims Matrix election in the aggregate amount of approximately $107.4 million. So distributions under the Plan have commenced, satisfying
* * *
As the Debtors have demonstrated that the Plan has been substantially consummated, we proceed to consider the second prong of the equitable-mootness inquiry.
2. Scrambling the Plan and Justified Reliance
At this step, we assess “whether granting the relief requested in the appeal will (a) fatally scramble the plan and/or (b) significantly harm third parties who have justifiably relied on plan confirmation.” In re Semcrude, 728 F.3d at 321. On the record before us, BSA and the Settling Insurers have not demonstrated that the relief the Certain Insurers and Allianz Insurers seek imperils the Plan‘s success. Unlike the Lujan and D&V Claimants, the Certain Insurers and Allianz Insurers do not seek invalidation of the releases; instead, they ask us to
Accordingly, we decline to dismiss these appeals as equitably moot and proceed to consider the merits of the Certain Insurers’ and Allianz Insurers’ claims.24
D. The Remaining Appeals
As we noted at the outset, the Certain Insurers and Allianz Insurers each advance arguments that the Plan impermissibly infringes on their rights under their insurance policies. Below, we address each of those arguments in turn and conclude the Certain Insurers’ arguments fail because the Plan and Confirmation Order already preserve all of the rights and defenses required. But the Confirmation Order‘s judgment reduction clause impermissibly releases contribution and indemnification claims the Allianz Insurers otherwise would be able to assert, and we will reverse with respect to those claims.
1. The Certain Insurers’ Appeal
The Certain Insurers levy objections to various provisions of the Plan and Confirmation Order that, they argue, impermissibly impair their rights and defenses under their insurance policies. Specifically, they ask us to excise the language in the Trust Distribution Procedures that states the Certain Insurers’ rights and the Debtors’ obligations are “subject to the Plan and Confirmation Order” and preserved “to the extent such rights and obligations are otherwise available under applicable law.” App. 1017. They also urge
a. Preservation of Rights and Defenses
Non-bankruptcy law generally defines parties’ property rights. See Butner v. United States, 440 U.S. 48, 55 (1979). Thus, while the estate is comprised of “all legal or equitable interests of the debtor in property” “wherever located,”
modify, amend, or supplement, or be interpreted as modifying, amending, or supplementing, the terms of any Insurance Policy or rights and obligations under any Insurance Policy assigned to the Settlement Trust to the extent such rights and obligations are otherwise available under applicable law and subject to the Plan and Confirmation Order. The rights and obligations, if any, of any Non-Settling Insurance Company relating to these TPD[s], or any provision hereof, shall be determined pursuant to the terms and provisions of the Insurance Policies and applicable law.
Nonetheless, the Certain Insurers contend these provisions are inadequate. As evidence, they point to the Settlement Trustee‘s initiation of insurance coverage litigation against the Certain Insurers. There, they fault the Settlement Trustee for seeking “a declaration that the Certain Insurers have breached the insurance policies and are obligated to provide full coverage for the Abuse Claims” and complain that the Trustee “makes no mention of the Certain Insurers’ rights or defenses under the policies or the Trustee‘s corresponding obligations, which the courts below said were preserved.” Certain Insurers Opening Br. 43.
First, it should come as no surprise that the Settlement Trustee—who owes a fiduciary duty to abuse claimants—would seek to maximize the value of the Settlement Trust by advancing legal arguments that the Certain Insurers bear liability for abuse claims. Second, and relatedly, the position concerning the Certain Insurers’ obligations taken by the Settlement Trustee in coverage litigation is just that: a litigating position. Contrary to the Certain Insurers’ contention, the Settlement Trustee‘s litigating positions are not evidence of the meaning of the Plan or Confirmation Order, nor does the Settlement Trustee authoritatively interpret those documents and the provisions contained in them that preserve the Certain Insurers’ rights and defenses.
For these reasons, we decline to rewrite the Plan and fasten suspenders to this already well-secured belt.
b. Good Faith
The Certain Insurers also assert that the Debtors failed to propose the Plan in good faith as required under
Importantly, the Certain Insurers do not challenge the Bankruptcy Court‘s factual findings supporting its good-faith determination. Instead, they “challenge only the Bankruptcy Court‘s ‘culminating determination’ that the totality of the circumstances and the language of the Plan support a finding of good faith.” Certain Insurers Reply Br. 39. And in doing so, they reveal the real thrust of their argument. At bottom,
Because the Certain Insurers provide no basis to conclude otherwise, we agree with the Bankruptcy and District Courts that the Debtors proposed the Plan in good faith.
2. The Allianz Insurers’ Appeal
Finally, we consider the Allianz Insurers’ argument that the Plan and Confirmation Order non-consensually release their claims and vitiate their ability to recover certain defense costs. They rely on the Supreme Court‘s recent decision in Purdue, to which we now turn.
In Purdue, the Supreme Court held that the
The Allianz Insurers contend that Purdue makes the Confirmation Order‘s judgment reduction clause intolerable because it, coupled with the Plan, impermissibly releases and enjoins contribution and indemnity claims they could otherwise assert against the Settling Insurers. We agree.
To fully understand the Allianz Insurers’ objection, some context proves helpful. When two insurance companies provide overlapping coverage—such as the Allianz Insurers’ and the Settling Insurers here—the insurer who ends up paying more than its fair share of a claim may seek contribution from the other insurer to appropriately allocate their shares of liability. See, e.g., McDermott, Inc. v. AmClyde, 511 U.S. 202, 215 (1994). The Plan upsets this arrangement by enjoining claims against the Settling Insurers and channeling them to the Settlement Trust subject to the judgment reduction clause. That clause limits a non-settling insurer to recovery against the Settlement Trust in the form of a reduced judgment, i.e., after
Usually, this arrangement will pose no problem because the Settlement Trust will pay claimants under the Plan and, if necessary, initiate a coverage action against the appropriate non-settling insurer. And if the non-settling insurer obtains a judgment against a Settling Insurer, its liability to the Settlement Trust offsets accordingly. But a non-settling insurer will not be fully compensated for defense costs if (1) abuse claimants pursue the Tort System election, (2) a Settling
The Allianz Insurers argue that this result is impermissible under Purdue because the Plan effectively discharges claims they would have against the Settling Insurers. And to correct this flaw, they propose amending the judgment reduction clause to provide that “if [a] Non-Settling Insurance Company is not subject to any such claim, cause of action, or judgment held by the Settlement Trust . . . then after such determination in the Insurance Action, the Settlement Trust shall pay the amount to the Non-Settling Insurance Company.” Allianz Insurers Opening Br. Ex. A.
Appellees recognize that Purdue‘s “full satisfaction” language applies here and invokes “the bedrock common-law principle that a plaintiff is entitled to only one satisfaction for each injury.” BSA Suppl. Br. 21. Often dubbed the “one-satisfaction rule,” courts apply this principle to “bar[] a subsequent suit . . . where the prior proceedings can reasonably be construed to have resulted in full satisfaction of the plaintiff‘s claim.” United States v. Occidental Chem. Corp., 200 F.3d 143, 149–50 (3d Cir. 1999) (quoting Greenleaf v. Garlock, Inc., 174 F.3d 352, 357 (3d Cir. 1999)); see also Restatement (Second) of Judgments § 49 cmt. a (Am. L. Inst. 1982) (“Double recovery is foreclosed by the rule that only one satisfaction may be obtained for a loss.“). But “[u]nless the
We agree with the Allianz Insurers that Purdue makes the Confirmation Order‘s current judgment reduction mechanism inadequate. Here, the District Court did not find that non-settling insurers would be fully compensated for their extinguished claims.27 It merely found that non-settling
Without factual findings about the extent of the Allianz Insurers’ excess claim liability—including, given the various layers of contingency, whether it is real versus speculative28—the record does not support the conclusion that the judgment reduction clause is an adequate alternative to the Allianz
As the Bankruptcy Court poignantly observed, “no compensation will ever be enough” for the abuse claimants have suffered. In re Boy Scouts, 642 B.R. at 518. The Plan nonetheless permits survivors to pursue their claims through the Trust Distribution Procedures and recover for at least some fraction of the suffering they have endured. That human reality must not be lost among the legal intricacies of these appeals.
Our decision today depends on the unique characteristics of this Plan, this
Accordingly, we will dismiss the Lujan Claimants’ and D&V Claimants’ appeals as statutorily moot under
No. 23-1664 et al.
RENDELL, Circuit Judge, concurring:
The majority‘s characterization of the instant appeal of the Lujan and D&V Claimants as an appeal from a
The first fundamental flaw in the majority‘s resort to
While I agree with the majority that this is not a case in which a pre-confirmation sale made up a “sub rosa” plan, I see it as just as problematic, for nearly identical reasons. As the majority acknowledges, the sub rosa doctrine recognizes that “[t]he court may not . . . in the guise of authorizing a transaction out of the ordinary course of business [under
First,
Perhaps for these reasons, several courts have suggested that sales accomplished under plans do not fall within
The majority urges that we have already resolved this question, as In re Energy Future Holdings, 949 F.3d 806 (3d Cir. 2020) and Cinicola v. Scharffenberger, 248 F.3d 110 (3d Cir. 2001) confirmed that
This distinction between this case and Energy Future Holdings may, at first blush, appear needlessly formalistic. But there are important differences: First, where a
Separately, and even more critically, the Lujan and D&V Claimants’ appeal does not challenge the sale of the insurance policies, it challenges a separate facet of the Confirmation Order—its approval of non-consensual third-
Congress could not have intended for
What happened here goes far beyond what
We need not fear, the majority says, because the “vast majority of challenges, no doubt” will escape
Finally, some of the Settling Insurers’ agreements included provisions that their sales will not be completed unless and until there is a successful appeal. As such, the Lujan and D&V Claimants’ appeals are not statutorily moot as applied to those sales. As the majority acknowledges, the Plan provides: “Notwithstanding anything to the contrary and for the avoidance of doubt, the Abuse Insurance Policies . . . shall be sold by the Debtors to the applicable Settling Insurance Companies . . . on the Effective Date on the terms and as provided in the applicable Insurance Settlement Agreement.” Maj. Op. 39–40 (emphasis added) (quoting App. 975). While the Century and Chubb and Clarendon Insurers’ settlement
No matter, the majority says, because ”
The reversal or modification on appeal of an authorization under subsection (b) or (c) of this section of a sale or lease of property does not affect the validity of a sale or lease under such authorization to an entity that purchased or leased such property in good faith, whether or not such entity knew of the pendency of the
appeal, unless such authorization and such sale or lease were stayed pending appeal.
The majority is right that
Equitable mootness is a discretionary principle that the circuit courts have unanimously adopted. As it arises out of courts’ discretion to fashion equitable relief, it is to be narrowly applied, or not applied, as the Article III reviewing court deems appropriate. See Maj. Op. 56 (citing In re Trib. Media, 799 F.3d at 287 (Ambro, J., concurring)). Even where it is applied, the reviewing court has discretion to address the merits of the appeal if it wishes. See In re Trib. Media, 799 F.3d at 290 n.2 (Ambro, J., concurring) (citing In re Metromedia Fiber Network, Inc., 416 F.3d 136, 144 (2d Cir. 2005)); In re One2One, 805 F.3d at 449–50 (Krause, J., concurring). By contrast, statutory mootness operates essentially as an “on-off” switch: if a party challenges a plan provision that affects the validity of a
For these reasons, I see not only error, but mischief, in the majority‘s approach. Accordingly, I concur in the result, but
Notes
Future Claimants Representative Answering Br. 44–45.For example, if the Trust obtains a judgment from a Non-Settling Insurer for $1 million, and the Non-Settling Insurer obtains a ruling that a Settling Insurer was responsible [for] $250,000 of that liability, to prevent any potential prejudice to the Non-Settling Insurer, the Plan requires the Trust to reduce its judgment against the Non-Settling Insurer by the amount of the Settling Insurer‘s share of the liability. The result is that the Non-Settling Insurer only has to pay $750,000.