Indiana joins others in opposing USA Gymnastics settlement plan

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USA Gymnastics filed for Chapter 11 bankruptcy in the U.S. South Indiana Bankruptcy Court in 2018, in a bid to survive hundreds of lawsuits across the country.  - Lauren Chapman / IPB News

USA Gymnastics filed for Chapter 11 bankruptcy in the U.S. South Indiana Bankruptcy Court in 2018, in a bid to survive hundreds of lawsuits across the country.

Lauren Chapman / IPB News

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The proposed settlement plan that would help USA Gymnastics come out of bankruptcy frees other organizations like the US Olympic and Paralympic Committee of all or part of the financial responsibility – a move over which several entities have expressed concern.

The state of Indiana, the US trustee and several insurance companies have filed objections to the settlement plan, specifically challenging the release of third parties.

Lynn LoPucki, a professor at UCLA Law School, said the US Trustee – a division of the US Department of Justice – has become increasingly involved over the years by opposing cases involving the release of third parties and entities such as Purdue pharma and the Boy Scouts of America.

The US House Judiciary Committee also recently passed legislation that would limit the type of action the US Trustee opposes.

“What is involved here is basically buying a discharge from bankruptcy without having to file for bankruptcy,” LoPucki said. “A person goes bankrupt. And someone else says, I’ll give you a million dollars. If you put your plan in place, I also get a discharge from bankruptcy, except I don’t have to file for bankruptcy. This is what is at issue here.

The USAG and the Survivors Committee reached an agreement for a approximately $ 400 million settlement plan a few months ago, and it met overwhelming support from creditors, including survivors of sexual abuse. However, two insurance agencies, along with the U.S. trustee and the state of Indiana, filed objections to the plan on Friday.

LoPucki said if the judge upholds the US trustee’s objections, the proposed settlement plan will be rejected. But there is still time for insurance companies, USA Gymnastics and creditors to come to an agreement.

“Now if the insurance companies don’t agree, then it’s war,” he said. “Then they call it the alternative to litigation. And they will be litigating in an extremely complicated situation with many parties having claims against other parties. “

For now, the confirmation of charges hearing is scheduled for December 13-14.

Contact reporter Samantha at shorton@wfyi.org or follow her on Twitter at @ SamHorton5.



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