The WSJ headline about the recent USA Gymnastics’ filing is spot on.
At first blush, when anyone with multiple lawsuits files bankruptcy, there seems to be a rush to judgment that the debtor is seeking to evade and avoid litigants. The filing is viewed with cynicism and often, criticized as some kind of scam. Those more sophisticated in the bankruptcy process will understand why that is not the case, and the article is a must-read primer in why.
There is a long history of using bankruptcy as a centralized forum to deal with a deluge of claims. Imagine being on the receiving end of that kind of chaotic atmosphere, with its inherent “race to the courthouse” and the grabbing of whatever assets are available. A filing actually helps everyone. No one alleged Nassar victim should have first dibs ahead of another equally deserving victim, just because they raced to the front of the line.
The history of asbestos cases, airline disaster cases, catholic diocese cases, product liability cases, and others creates the roadmap for how these types of cases function. In the USA Gymnastics case, there are already over 300 victim lawsuits and other law enforcement investigations. There are “unknown claimants” – those who may not have stepped forward yet. The Chapter 11 will create an organized and thorough process to provide notice to anyone and everyone who may have a claim, and force them to come forward to participate or be forever barred from future claims.
While our attorneys so often hear from clients and prospective clients about their desire to not be in a bankruptcy setting, sometimes it does have its advantages. This is one such circumstance: without it, USA Gymnastics would be hopelessly mired in litigation until whatever value it does have is totally gone, paying its own lawyers to attempt to put out multiple fires with no chance of an end game.
About DelCotto Law Group
DelCotto Law Group is Kentucky’s asset protection law firm known for its commitment to the lifetime success of its clients. With offices located in Lexington, Louisville and Danville, DLG serves Kentuckians with complicated financial matters, especially in the areas of bankruptcy, complex litigation, and estate planning. For more information about filing bankruptcy or DelCotto Law Group, please call (859) 231-5800 or email [email protected].