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USA Gymnastics – Files Chapter 11 Plan; Offers Sexual Abuse Victims Two Paths to a Share of $215mn Currently on Offer From Insurers

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January 30, 2020 – The Debtor filed their Chapter 11 Plan of Reorganization [Docket No. 905]. The Plan offers victims of sexual abuse sitting in its Class 6 two paths to a substantially identical and finite $215.0mn pot of insurance proceeds. They can, as a group, vote to accept the $215.0mn on offer or continue the prosecution of their claims in a non-bankruptcy forum, albeit with basically the same insurance proceeds on offer. There is a slight sweetener of the pot should they choose to accept to resolve their claims in bankruptcy, an additional $2.13 contribution from Twistars USA, a Michigan gymnastics club where Larry Nassar sexually assaulted gymnasts.

Early reaction to the Plan (yet to make its way into an objection) has been deeply negative, with a lawyer (John Manley) representing a group of more than 200 of Larry Nasser's victims calling the Plan "unconscionable."

On January 21st, the Debtor's Additional Tort Claimants Committee of Sexual Abuse Survivors (the “Survivors’ Committee,” which includes two gymnasts, Alexandra Raisman and Kyla Ross, represented by Manley's firm) filed a motion to dismiss the Debtor's chapter 11 case [Docket No. 892, see more below] alleging that the case is being manipulated by USA Gymnastics (“USAG”) and the United States Olympic Committee (the "USOC") in order to delay their own days of reckoning until after "their respective financial windfalls from the 2020 Summer Olympics in Tokyo, Japan."

The Plan states: "The Plan proposes that the Debtor’s CGL Insurance Policies are the only Assets the Debtor has to provide a Distribution to Abuse Claimants and Future Claimants. Through this Plan, the Debtor is making its CGL Insurance Policies and the proceeds thereof available to the Abuse Claimants and Future Claimants in one of two alternative ways. To date, certain of the Debtor’s CGL Insurers are willing to offer $215mn (the “Plan Payment”) to resolve the Abuse Claims and Future Claims. The Debtor is offering the Holders of Abuse Claims and Future Claims the choice of accepting the Plan Payment and the $2.13mn Twistars Contribution or continuing the prosecution of their Claims in a non-bankruptcy forum with recovery from the Debtor limited to the amounts available under the Debtor’s CGL Insurance Policies. The treatment for Indemnification Claims, the USOPC Claim, the FCR Claim, and Abuse Claims filed after the Bar Date will depend on whether the Abuse Claimants, who will be classified in Class 6, make the Settlement Election or Litigation Election. If the Litigation Election is selected the Twistars Contribution shall not be a part of the Plan.

General Unsecured Claims will be paid from existing and future revenues of the Reorganized Debtor over time in accordance with the Plan. The Plan permits the Personal Injury Claimant to settle her claim with the Personal Injury Insurer or prosecute a lawsuit against the Reorganized Debtor in name only in the court in which the Personal Injury Claim could have been brought, but for the automatic stay, and to recover any judgments or settlement awards exclusively from the Personal Injury Insurance Policy. For the avoidance of doubt, only the proceeds of the Personal Injury Insurance Policy are available to satisfy the Personal Injury Claim. The Debtor is not admitting liability for the Personal Injury Claim. The Allowed Other Priority Claims, the PNC Bank Claim, the Sharp Claim, and the General Unsecured Convenience Claims are unimpaired under the Plan."

The following is a summary of classes, claims, voting rights and expected recoveries (defined terms are as defined in the Plan):

  • Class 1 (“Other Priority Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan.
  • Class 2 (“PNC Bank Claim”) is unimpaired, deemed to accept and not entitled to vote on the Plan.
  • Class 3 (“Sharp Claim”) is unimpaired, deemed to accept and not entitled to vote on the Plan.
  • Class 4 (“General Unsecured Convenience Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan.
  • Class 5 (“General Unsecured Claims”) is impaired and entitled to vote on the Plan. The Holders of Allowed General Unsecured Claims will receive payment from the Reorganized Debtor of 80% of their Allowed General Unsecured Claims, payable in equal installments on September 1, 2020, September 1, 2021, and September 1, 2022; or, at the Reorganized Debtor’s discretion, in less than three installments so long as the Reorganized Debtor accelerates payment to all Holders of Allowed General Unsecured Claims.
  • Class 6 (“Abuse Claims”) is impaired and entitled to vote on the Plan.
  • Class 7 (“Personal Injury Claim”) is impaired and entitled to vote on the Plan.
  • Class 8 (“USOPC Claim”) is impaired and entitled to vote on the Plan.
  • Class 9 (“Indemnification Claims”) is impaired and entitled to vote on the Plan.
  • Class 10 (“FCR Claim (only if there is a Settlement Election)”) is impaired and entitled to vote on the Plan.
  • Class 11 (“Sexual Abuse Claims filed after the Bar Date (only if there is a Litigation Election)”) is impaired and not entitled to vote on the Plan.

Background on Motion to Dismiss

On January 21, 2020, the “Survivors’ Committee” filed a motion to dismiss the Debtor's chapter 11 case [Docket No. 892] alleging that the case is being manipulated by USAG and the USOC in order to delay their own days of reckoning until after "their respective financial windfalls from the 2020 Summer Olympics in Tokyo, Japan."

The dismissal motion provides, “Nearly five years ago, USAG/United States Olympic Committee (the ‘USOC’) Team USA gymnast Maggie Nichols reported Larry Nassar was molesting children. Since that very first day, USAG/USOC, and its revolving door of executives since, have done everything in their collective power to conceal the truth from Nassar’s hundreds of survivors, the more than 100 survivors of abuse suffered at the hands of coaches over the past several decades, law enforcement authorities, and the American public. The coordinated strategy of USAG and the USOC was, and remains to be, to delay, deflect and deny them and non-Nassar survivors justice for the horrible crimes committed upon them as children. Sadly, USAG and the USOC have used this bankruptcy proceeding as yet another tool to inflict pain upon these sexual abuse survivors – both Nassar and non-Nassar survivors – and to deny justice to these girls and women who competed for this institution and their country. The Survivors’ Committee seeks, and indeed, implores this Court to dismiss this Case and grant related relief to appropriately effectuate the dismissal for the legal reasons cited herein. The Court should also grant the Motion because it has come time for some court or institution to give these women the right to finally have their cases heard before a jury. Enough is enough.

The core of this bankruptcy proceeding has been the intent of USAG and the USOC to string both the Court and the Survivors’ Committee along, ingratiating them and the media with platitudes of change about athlete safety. However, these hollow promises of reform have been tools to buy USAG and the USOC time to delay and create a narrative that will keep their respective organizations free from scrutiny long enough for these organizations to indulge in their respective financial windfalls from the 2020 Summer Olympics in Tokyo, Japan."

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The post USA Gymnastics – Files Chapter 11 Plan; Offers Sexual Abuse Victims Two Paths to a Share of $215mn Currently on Offer From Insurers appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.


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