LANE ONE: Bankruptcy judge’s order to Nassar survivors, USA Gymnastics, USOPC and insurers: settle this case!

The U.S. Bankruptcy Court for the Southern District of Indiana

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A possibly decisive turn in the long-running drama surrounding the Larry Nassar abuse cases, USA Gymnastics and the United States Olympic and Paralympic Committee came during a remote hearing last Wednesday.

As a result of a remotely-held, Pre-Trial Conference before the U.S. Bankruptcy Court for the Southern District of Indiana, Judge Robin Moberly issued a short, two-page order which opens the door to a possible settlement. There were three main points:

(1) The Court reiterated its prior order, allowing three depositions to be taken of USOPC staff not later than 12 July 2020.

(2) USA Gymnastics will be filing a new version of its re-organization plan, which will include options for settlement or litigation and a new Disclosure Statement to be voted on by the claimants. A hearing on this plan is expected by 19 October 2020.

(3) And then the bell-ringer:

“The Committee of Abuse Survivors, the USOPC, the insurance carriers and the Debtor [USA Gymnastics] are ordered to participate in a remote mediation with the mediators to occur on a date and time set by the mediators but to occur between July 27, 2020 and August 14, 2020. Ten (10) days prior to the mediation date, the Committee of Abuse Survivors, the USOPC, and the insurance carriers shall submit a confidential and meaningful settlement offer on the same date to the mediators. The mediators shall not disclose, other than to one another, neither the substance nor the amounts of the settlement offers provided confidentially by each of the parties.” (Emphasis in the original.)

This could be the major turning point in this case:

● Up the this point, the Survivors Committee has simply sniped at the USA Gymnastics offer ($217.125 million) and made clear its additional target is the USOPC. Now it is being required to submit specific – and “meaningful” – terms on which it would settle the case, and it has a little more than a month to do so.

● For its part, the USOPC and the insurers have asked that, for their contributions to the settlement offer, that all claims will be extinguished going forward. There is no doubt that this requirement will be carried forward, but this is an invitation – actually, a directive – for all of the insurers and the USOPC to come forward with a better offer.

● USA Gymnastics is a party to the mediation, but it has repeatedly stated – and the Court apparently agrees – that it has no funds to contribute to the settlement beyond what its insurers can supply.

The offer in the to-be-amended plan previously submitted by USA Gymnastics included a settlement that allowed these amounts to be distributed to the 517 plaintiffs without the requirement to prove their cases in court:

Subclass A (66 Elite Gymnasts), offered $1,250,758 each;
Subclass B (142 Non-Elite Gymnasts), offered $508,671 each;
Subclass C (284 Other Claimants), offered $174,401 each;
Subclass D (25 Claimants), offered $82,550 each.

In reality, the two sides facing off here are the Survivors’ Committee and the insurers and USOPC. The insurers’ liability is already outlined by the limits of the policies purchased by USA Gymnastics and the USOPC, and/or their willingness to separately litigate up to 517 cases individually. That leaves the USOPC.

And that puts both the Survivors’ Committee and the USOPC in a difficult position, thanks to the ongoing coronavirus pandemic.

While the Survivors Committee contends that the USOPC is partly to blame for the Nassar attacks and must contribute millions to any settlement, the committee is already under pressure because of the pandemic. During last Thursday’s news conference following the latest USOPC Board of Directors meeting, chief executive Sarah Hirshland was asked if “worst-case scenario planning” had been done if the Tokyo 2020 Games is canceled:

“The answer is we have done planning , but have not implemented any of the plans because, obviously, right now, we are preparing and planning to go to Tokyo. But we do have work done and plans in place should those Games be cancelled. It will require additional and significant financial cuts to the organization.

“We are also putting ourselves in a position to understand what ability we have to look at, you know, debt – loans for the organization – to get us through that period of time, and are putting those things in place. So, we are preparing for that scenario, not yet implementing because we are not there yet but we are absolutely putting ourselves in a position to weather that incredibly unfortunate storm if it were to happen.

“Should the Tokyo Games be cancelled, we would have to make deeper cuts, yes.”

Asked further if the already-implemented 12.5% cuts are expected to get the USOPC through the 2020-2023 quadrennial, she replied:

“Based on what we know today, and the predictions and projections that we have in place today it is our belief that that 12.5% reduction is sufficient for the quadrennial. Clearly, we all are aware that the environment is changing on a pretty regular basis, so we will and are ready to adapt as we need to adapt.

“The optimist in me says that if we have revenue that is greater than we’re projecting, we’ll be able to make deeper investments than we’re planning. However, as we all know, if revenue doesn’t match our expectations, then obviously we’ve got to adjust our expenses to match the revenue we generate. So, we will adapt and adjust, but based on what we know today and what we believe to be true, we’ve made the reductions we need to make for the quadrennial cycle.”

Now, the question will be raised in Colorado Springs about what to do about the Nassar case. As of the end of 2018 – the last period for which financial statements are available – the USOPC showed $217.9 million in cash and investments for its own accounts, and another $246.8 million in the U.S. Olympic Endowment, a fund begun with the surplus generated by the Los Angeles Olympic Organizing Committee from the 1984 Games and which has some restrictions on its use.

But its finances are eroding because of the postponement of the Tokyo Games and the possible cancellation of not only Tokyo 2020 but also the 2022 Beijing Winter Games would devastate the operations of the USOPC and many of the National Governing Bodies which manage individual sports on the Olympic and Pan American Games program.

Judge Moberly’s order requires the USOPC to figure out what it can contribute in cash to the settlement pool, but is also a caution to the Survivors Committee to take into consideration the USOPC’s ongoing responsibilities. It could very well be the case that a dollar given to survivors would be a dollar which literally does not go to current athlete support … including some of the survivors still competing.

Let’s see if the two sides actually get serious … or if Moberly feels a need to impose more discipline on the parties. We should know in August.

Rich Perelman

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