Insurance carriers potentially facing staggering losses as a result of the Boy Scouts of America bankruptcy are claiming in court documents that groups of plaintiffs lawyers from across the country have filed thousands of unvetted—and in some cases potentially fraudulent—civil claims against the organization, in part as a way to wield greater bargaining power during the proceedings.
The motions, filed in late January by Century and Hartford insurance carriers, are asking the bankruptcy court in Delaware to allow for additional discovery into the methods attorneys used to process and submit claims into the bankruptcy litigation, including the attorneys’ use of lead generation and litigation funding companies. Several additional insurance companies have since joined the discovery requests.
Currently, the BSA, which is involved in Chapter 11 bankruptcy, is facing more than 95,000 civil claims from men claiming they were sexually abused by scout leaders. According to plaintiffs attorneys, the exposure for the carriers reaches into the billions.
The carriers’ motions seek discovery from attorneys based in Pennsylvania, New York, Texas and elsewhere. The lawyers, many of whom say they plan to file a formal response soon, have countered that the carriers’ allegations are inaccurate and an attempt to distract away from the abuse their clients suffered because of the BSA.
Similar disputes over plaintiffs firms’ use of litigation funding and lead generation companies have arisen over the past few years, most often in the mass tort context, with allegations arising in the Xarelto, Taxotere, and pelvic mesh litigations. However, it remains to be seen whether courts will become interested in digging into funding and lead generation issues. So far courts by and large have been able to avoid ruling on the issues.
Lindsey Simon, a professor at the University of Georgia Law School who focuses on bankruptcy, said she has not seen similar allegations being raised in a bankruptcy dispute before. But the BSA bankruptcy is somewhat unique, she said, given the prominent role law firms have taken in organizing and representing the claimants. She noted that the court previously got involved in a dispute over attorney advertising in the case, and said it is possible the court might look into the latest clash.
“I suspect that the court will, one way or another, need to address these claims at a hearing to get to the bottom of the conflict (if, for no other reason than to facilitate the negotiation process that could be held up on these infights),” she said in an email.
However, she said that, given the way bankruptcies work, the dispute is also a bit of a sideshow since simply representing more claimants is unlikely to impact the trajectory of the litigation.
“At core, the estate will pay some sum into a trust structure that all of these claimants will have to share,” she said. “Perhaps the number of claimants (and respective [dollar] amount of potential claims) will impact how much money goes into the trust, but that’s about the extent of the negotiation power at play here.”
The insurance carriers’ motions focuses in large part on two groups of firms, one called the Coalition of Abused Scouts for Justice and another called Abused in Scouting. The groups are aimed at representing thousands of claims collectively in the bankruptcy proceedings, with individual attorneys representing the claimants individually.
According to the carriers, the groups, with the Coalition at the forefront, “engineered an aggressive, nationwide campaign to generate claims that channeled respondents to a website with information that encouraged the presentation of seemingly plausible claims” in an effort to flood the docket and gain control of the bankruptcy. The move, they said, resulted in the number of civil suits swelling from 1,400 to 95,000.
“To accomplish this objective, a handful of Coalition lawyers signed thousands of proofs of claim (‘POCs’) in the days just before the bar date, and a dozen lawyers each signed hundreds of POCs in one day,” the carrier said. “Astonishingly, members of the entity that holds itself out as Abused in Scouting—a fictitious firm acting as a front for three separate firms, two of which are one-man shops and the other a nine-lawyer outfit—filed almost 19,000 POCs alone.”
One attorney from Missouri, Adam Krause of Krause and Kinsman, signed 809 proofs of claim in one day, the carriers alleged.
“Assuming an eight-hour workday with no breaks, Mr. Krause apparently executed one POC every 32 seconds,” the carrier said.
Krause did not return a call seeking comment.
In another instance, the carriers said a marketing firm submitted 400 forms for a law firm that, while purporting to be from different clients, all bore the same signature.
“This goes beyond sloppiness and suggests outright fraud, or at least a complete disregard for checking the veracity of the submitted claims and the oath given in signing them,” the motion said.
Brown Rudnick attorney David Molton, who is representing the Coalition, however, sent a statement on behalf of the group, saying the insurance carriers’ “modus operandi … has been misdirection and attack.”
“Misdirection to remove focus from the horrible abuse inflicted on boys, and attack on those survivors and their advocates, their lawyers,” Molton said in the statement. “We are confident that this latest attack by the insurers against survivors and their advocates will fail as our Coalition continues to seek fair and equitable treatment and compensation for all survivors.”
Abused in Scouting includes attorneys from Philadelphia’s Eisenberg, Rothweiler, Eisenberg Winkler & Jeck, as well as Houston, Texas-based attorney Timothy Kosnoff.
Stewart Eisenberg, a principal at Eisenberg Rothweiler, issued a similar statement saying the carriers have engaged in numerous attempts to distract and delay during the proceedings.
“The predators that infected the Boy Scouts for decades created a population of tens of thousands of sexual abuse survivors, resulting in billions and billions of dollars of liability for which we believe Boy Scouts and their insurers are responsible,” he said in the statement.
The carriers’ motion cited numerous times to an email from Kosnoff in which the attorney said counsel for BSA was “wasting their time” talking to the bankruptcy’s tort claims committee, and that his group should not do anything to “help grease the gears for [the counsel for the tort claims committee] and the dimwits including speeding up the insurance analysis.”
The carriers argued that the email showed the attorneys’ motives were to inflate the number of claims as a way to wrestle control from the tort claims committee, which typically guides the civil liability aspects of the bankruptcy.
In an interview, Kosnoff said the email was only intended for his group of attorneys, but he had accidentally replied all, which meant the email was inadvertently send to a broad swath of attorneys involved in the proceedings. Although the email included “salty language,” Kosnoff said, it did not cast doubt on the validity of the claims Abused in Scouting filed.
The tort claims committee, he said, was formed before the bulk of the cases were filed and so the groups with the most claimants don’t have a proportional say regarding how the litigation should be steered. The disagreement that lead to the email, Kosnoff said, stemmed from the committee not seeking to recover assets from local chapters of the Boy Scouts of America, which, Kosnoff said, could unlock many more assets for the claimants.
“That’s the frustration. And they say Kosnoff is just going to go out and building power by signing up clients. Yeah, what else is there to do?” he said. “It matters how many clients you represent because how many clients you represent determines the influence. Hell yes I wanted to be in that position. Does that mean my clients are invalid? No. It just means I was playing by the rules of the game.”
When it came to the allegations about claims being invalid and potentially fraudulent, Kosnoff said he is not a mass torts attorney, but has focused on abuse litigation for decades. The cases his group handled, he said, were vetted at multiple levels.
“I don’t want to be lumped in with these mass tort lawyers. It’s not what we did, and it stinks, and I don’t like it, but that’s a discussion for a different day,” Kosnoff said. “I would say Abused in Scouting did it the right way.”
Kosnoff further said that most of the issues the carriers raised, such as questions about the client’s signature, were trivial, and that, when faced with a client losing their rights to sue, attorneys should err on the side of their clients.
Tancred Schiavoni of O’Melveny & Myers, who is counsel for Century, and Philip Anker of Wilmer Cutler Pickering Hale and Dorr, who is representing Hartford, each did not return a call seeking comment.