WILMINGTON, Del. (Legal Newsline) - The judge overseeing the Boy Scouts of America bankruptcy has ordered lawyers who signed thousands of abuse claims to submit to questioning from insurance companies that say many of those claims are poorly substantiated or invalid.
In hearings this week, Judge Laurie Selber Silverstein ordered depositions of plaintiff law firms including Napoli Shkolnik, Slater Slater Schulman, Eisenberg Rothweiler and others that employed “claims aggregator” firms and advertising campaigns to recruit tens of thousands of clients. Insurers led by Century Indemnity and Zurich Insurance have pushed Judge Silverstein to investigate those claims, many of which were filed in the final weeks before a November 2020 bar date in the bankruptcy.
Over the objections of the law firms, the judge ordered depositions of one lawyer per firm, which she said could be expanded if further information is needed. She rejected arguments the attorney-client privilege shielded the lawyers, reminding them she warned them more than a year ago that if they signed claim forms, they could be questioned as fact witnesses.
The judge has also ordered claims aggregators to provide information about their methods for recruiting clients and verifying claims, as part of a broader inquiry into whether the Boy Scouts’ proposed plan of reorganization is fair and reasonable. The insurers, who will foot most of the $1 billion-plus bill of the Boy Scouts reorganization, complain that a handful of lawyers intentionally flooded the case with poorly documented claims in order to obtain a voting majority and control of the case.
The current plan includes $3,500 “expedited distribution” payments to claimants who elect for a streamlined process with minimal vetting that insurers say could generate millions of dollars in fees for their lawyers.
Insurers have been arguing for months that Judge Silverstein should probe the claims that flooded her court in the final months before the bar date. Some lawyers signed hundreds of claims in a day or two, the insurers say, casting doubt on whether they verified the allegations as required under federal court rules. The judge tabled the insurers’ request that she investigate a random selection of claims, but eventually was won over to the idea the lawyers who personally signed claim forms should be questioned about their practices.
“I find discovery relevant,” the judge said during a Thursday remote hearing, which included more than 190 participants. “I have to make findings as to the reasonableness of TDPs,” or trust distribution procedures for paying claims, she said.
In that hearing, plaintiff lawyers argued it was unnecessary to question multiple attorneys at the same firm. Kelly Currie, a lawyer for the insurers, responded that they sought to depose three lawyers at the Eisenberg firm because two of them had signed more than 1,000 claim forms in the hours before the bar date and a third oversaw the activities of non-lawyers at the claims aggregator firms.
“We want to know, what was investigation that was done so the attorney could form their belief that the information (on the claim form) was true?” he said.
After further discussion the judge agreed with plaintiff attorneys that one lawyer could speak for each firm, although she said she might order more depositions if necessary.
The Boy Scouts filed for bankruptcy in February 2020, when the organization faced several hundred formal legal claims of sexual abuse by scout leaders and others affiliated with the group. That number quickly escalated to 95,000 and is now around 80,000, after thousands of duplicated claims were eliminated.
The Eisenberg firm alone filed 18,000 claims and the Slater firm 15,000, while another affiliation of firms calling themselves Abused in Scouting filed thousands more. In May, a former employee of a firm that processed Boy Scouts claims said recruiters were offered bonuses to sign up claimants and sometimes changed their forms to make the claims more viable. A founder of the firm called those allegations “completely unbelievable.