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Non-Creditor Was Entitled to Actual Notice of A Chapter 11 Plan’s Injunction Barring Suits Against Insurance Carriers
A person who was not a creditor of a bankruptcy estate was entitled to actual notice of an injunction that would bar the non-creditor from suing the debtors’ insurance carriers, a federal court has ruled. See In re Boy Scouts of America and Delaware BSA, No. 24-382, 2025 WL 893001 (D. Del. Mar. 24, 2025). The bankruptcy trustee had argued that the non-creditor was entitled to constructive notice, not actual notice. But the court held that both constitutional due process and the U.S. Bankruptcy Rules required actual notice.
Background
The factual background is straightforward. A person who was abused while a scout sued the Boy Scouts of America (BSA), the Heart of America Counsel (HOAC), and his abuser. The victim settled his claims against the BSA and HOAC but not the abuser. In a trial against the abuser in Missouri state court, the victim was awarded $20 million in compensatory damages and $100 million in punitive damages. A judgment was entered against the abuser.
The victim and the abuser entered into an agreement that assigned to the victim rights and claims the abuser had against certain insurance companies.
In January 2021, the victim sued the insurance companies in state court in Missouri. One of the insurance companies removed the case to federal court in the Western District of Missouri. That insurer and BSA also filed suggestions of bankruptcy, informing the court of BSA’s Chapter 11 filing in Delaware in 2020.
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