One of the few absolutely true statements being made about the impact of the COVID-19 pandemic is that there is no way to know how it will impact our future, individually and collectively.
The survivors of the Larry Nassar sex-abuse tragedy could very well be looking at a different future in terms of their claims against USA Gymnastics and others, most especially if the Tokyo 2020 Olympic Games cannot be held as re-scheduled in 2021.
Here’s the situation:
● On 21 February, USA Gymnastics filed an 88-page amended plan of re-organization with the U.S. Bankruptcy Court for the Southern District of Indiana, which must be accepted by the claimants to become active.
● On the same day, the federation filed a 183-page Disclosure Statement to explain the plan, which includes an option of agreed-upon damages, and a reserve for future claims, of $217.125 million to 10 different classes of claimants, including survivors of Nassar’s abuse.
All parties have an opportunity to comment on the Disclosure Statement, which will be revised based on a hearing on specific objections, and must be approved by the Court to allow a vote on the plan to take place. That hearing has been put off indefinitely due to the inability for the arguments to be made in-person before Bankruptcy Judge Robin Moberly.
● The Disclosure Statement itself, once finally approved by the Court, offers three options for the Claimants to vote on: (1) against the plan, in which case various options are available, including dismissal of the Bankruptcy filing, a liquidation of USA Gymnastics, or assembly of a different plan; (2) approval of the plan, including the Settlement Option, in which the $217.125 million will be paid out to the claimants, or (3) approval of the plan, but with a Litigation Option, in which each claimant must file individually against USA Gymnastics and anyone else desired, in a race to see who can get the most money first.
● Attorneys for 256 or more of the 517 abuse claimants immediately signaled objections to the Settlement Election in comments to news media, and then filed for a paid “financial advisor” to examine the United States Olympic & Paralympic Committee’s “financial condition or its ability to make a contribution of its own funds as consideration for its release while maintaining viability to fulfill its mission.”
The Court dismissed the request to hire the financial advisor, but the filing showed that the ultimate goal of the attorneys for the claimants is to attack the assets of the USOPC to try and get more money at trial.
● The USOPC’s financial situation is not in much doubt at present. It’s 2018 financial statements showed $594 million in assets, including about $495 million in cash and investments. Of that total, $295 million is held in the U.S. Olympic Endowment and is the legacy of the USOPC’s share of the surplus from the 1984 Olympic Games in Los Angeles.
However, the coronavirus pandemic is changing the situation by the day.
Last Tuesday, USOPC chief executive Sarah Hirshland sent a letter to the U.S. National Governing Bodies noting cuts of 10-20% at the USOPC itself and warning that if the Tokyo Games did not take place in 2021 – for whatever reason – the impact could be enormous:
“We have to fully understand what that possibility would mean for our organization, so we certainly have considered it and evaluated it. The impact of cancellation would be devastating to our athletes, first and foremost, but also to our financial health and stability. We would survive such a scenario, but the impact would be severe.”
In an accompanying note, Hirshland explained that the U.S. Olympic Endowment money isn’t being used now, because it might be desperately needed later:
“We need to retain the ability to deal with things getting significantly more difficult, for example if there were a cancellation of the Tokyo Games.”
The USOPC asked the U.S. Congress for $200 million from the direct-payment stimulus package for athlete and NGB support, but was refused. Loan programs are available, but even the USOPC’s wealth will not be anywhere close to propping up the finances of the 50 U.S. governing bodies.
If the Tokyo Games takes place as planned in 2021, then the monies from television rights and sponsorships due to the USOPC would come as expected, but a year late. But if the coronavirus continues to pose significant problems worldwide, the decision to cancel will likely come about this time next year.
The vote by claim holders against USA Gymnastics on the plan of reorganization should come before then, but who knows how long it will be before the matter can be heard, the Disclosure Statement revised and the vote takes place? Then the Bankruptcy Court has to approve the plan and make it active.
Under the plan as proposed, the claimants in Class 6: Abuse Claims have $206.375 million on the table, rejected as wholly insufficient by attorneys for many members of the class. The offer includes payments to all 517 (non-duplicative) claims already filed:
● Class 6A: 66 elite gymnasts, who competed in USA Gymnastics events and were abused, would receive $1,250.757.58 each.
● Class 6B: 142 gymnasts, who were abused at competitions staged by others (but whose events were sanctioned by USAG), would receive $508,670.77 each.
● Class 6C: 284 claimants, some of whom are not gymnasts, who were abused in non-gymnastics settings, such as at Michigan State University, would receive $174.401.41 each.
● Class 6D: 25 “derivative” claimants, who are relatives or loved ones of individuals who were abused and are claiming injuries for themselves, and would receive $82.550.00 each.
If approved, each of the claimants would receive their damages “without the need to present evidence as to the merits of their claim or the amount of damages suffered.”
So, should the attorneys for the claimants try and delay the proceedings to see if the Olympic Games do take place in 2021? If so, the USOPC’s finances would be in much better shape.
But what if the Bankruptcy Court wants to move this matter along and forces a vote on a further-amended Disclosure Statement?
The 66 elite gymnasts who were abused by Nassar at USA Gymnastics events – about 13% of the total claims – have serious cases against the federation. But under the Litigation Election, they will have to prove their cases in court, in individual trials, and many of the verdicts will be appealed. The question of what responsibility USAG actually had and then what liability the USOPC had under the Ted Stevens Olympic and Amateur Sports Act and under other applicable laws, is sure to be strongly contested.
The other 451 claims have a much poorer chance of recovery against USA Gymnastics, let alone the USOPC. Will the spectre of a possibly cash-poor USOPC influence their vote of the settlement vs. an individual lawsuit against USAG, the USOPC and others?
The coronavirus and the fate of the Tokyo 2020 Olympic Games are now a part of this calculus.
In case you were wondering, the phrase “A bird in the hand is worth two in the bush” originated perhaps 2,000 years ago in the writings of the Greek scholar Plutarch, and in English as far back as John Capgrave‘s The Life of St Katharine of Alexandria, in 1450.
Rich Perelman
Editor
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