The proposed settlement plan that would help USA Gymnastics emerge from bankruptcy releases other organizations like the U.S. Olympic and Paralympic Committee from some or all financial responsibility — a move several entities have raised concerns about.
The state of Indiana, the U.S. Trustee and several insurance companies have filed objections to the settlement plan, specifically challenging the release of third parties.
Lynn LoPucki, a professor at the UCLA School of Law, said the U.S. Trustee — a division of the U.S. Department of Justice — has been getting more involved over the years objecting in cases that included the release of third parties and entities such as Purdue Pharma and the Boy Scouts of America.
The U.S. House Judiciary Committee also recently passed legislation that would limit the type of action that the U.S. Trustee is opposing.
“What's involved here is essentially buying a bankruptcy discharge without having to file bankruptcy,” LoPucki said. “One person goes into bankruptcy. And somebody else says, I'll give you a million dollars. If you put in your plan, then I get a discharge in bankruptcy too, except I don't have to file bankruptcy. That's what's at issue here.”
The USAG and the Survivors’ Committee came to an agreement for a settlement plan of roughly $400 million a few months ago, and it was met with overwhelming support from creditors, including survivors of sexual abuse. However, two insurance agencies, plus the U.S. Trustee and the state of Indiana, filed objections to the plan Friday.
LoPucki said if the judge upholds the U.S. Trustee’s objections, the proposed settlement plan will be rejected. But there’s still time for the insurance companies, USA Gymnastics and creditors to come to an agreement.
“Now, if the insurance companies do not agree, then it's war,” he said. “Then they call that the litigation alternative. And they'll be litigating in an extremely complicated situation with lots of parties with claims against other parties.”
As of now, the confirmation hearing is scheduled for Dec. 13 and 14.