USA Gymnastics filed a plan of reorganization with the U.S. Bankruptcy Court for the Southern District of Indiana today that will enable it to emerge from bankruptcy. The plan offers survivors one of two options: survivors as a group may vote to accept $215 million to settle all of their claims or they may vote to continue to pursue their lawsuits and collect any judgments from insurance policies available to USA Gymnastics. Whichever option the survivors as a whole accept will apply to all members of the survivor class. If the survivors vote to accept the settlement, the insurers for Twistars will also contribute an additional $2.125 million to the settlement amount. In addition, the plan includes benchmarks that obligate USA Gymnastics to continue to enhance athlete safety and provides for payments to other creditors of USA Gymnastics.
“It has always been our goal to reach a consensual settlement agreement with all of our creditors through the bankruptcy process.” said Li Li Leung, president and CEO of USA Gymnastics. “While we do not yet have an agreement with the Committee representing the survivors, we still hope to reach an agreement. USA Gymnastics filed its proposed plan to communicate to the survivor class the two options that are currently available based on the amount of money USA Gymnastics’ insurers are willing to pay into a settlement fund.” Leung stated that “this plan allows for ongoing negotiations among the parties and we are hopeful that continued discussions will lead to an agreement that is supported by all parties in the case.”
“The USA Gymnastics board of directors made the determination to file for bankruptcy to hold our organization accountable to the survivors by enabling a resolution process that would compensate them for their claims,” said Kathryn Carson, Board Chair of USA Gymnastics. “Our strong preference remains to achieve a fully consensual settlement plan and we intend to continue negotiations with the survivors and our insurance carriers to reach that goal.”
Leung emphasized that “our top priority remains athlete safety.” Under the plan, USA Gymnastics continues its commitment to athlete safety as the organization shifts to be more athlete-centric. Recent initiatives have included:
- Appointing a Vice President of Athlete Health and Wellness, a newly-created role responsible for overseeing the strategy and execution of USA Gymnastics’ holistic athlete health and wellness initiatives, including sports medicine, psychology and nutrition services, as well as athlete-development programs.
- Releasing an updated Safe Sport Policy in June 2019. The USA Gymnastics Safe Sport Policy provides important requirements and information on mandatory reporting and Proactive Policies that empower athletes and guide athlete-coach interactions.
- Rolling out new educational initiatives focused on athlete safety in webinar form, as well as through presentations at Regional and National Congresses.
The Plan will not become effective until the creditors are given an opportunity to vote and the Bankruptcy Court approves the plan.
- The Plan gives the survivors access to the full value of the only assets available to pay their claims – USA Gymnastics’ insurance policies.
- The assets are available in the settlement approach in the form of a fund of $215 million to pay claims.
- The assets are available in the litigation approach which allows survivors to pursue their claims in court and collect from the insurance policies any covered judgments they obtain.
- If the survivors accept the settlement plan, the proceeds of the insurance policies will be paid into a trust and will be distributed to the survivors by a trustee. It is the same approach that has been followed in other abuse cases and in distributing the MSU settlement fund.
- In the litigation approach, USA Gymnastics will be named as a defendant, and the insurance carriers will be responsible for defending the cases brought by survivors and paying any judgments.
- As part of the Plan, USA Gymnastics will continue its efforts to strengthen athlete safety.
- The Plan also addresses claims by creditors other than survivors:
- General unsecured claims that are $500 or less (or claimants who agree to reduce their claims to this amount) will be paid in full.
- General unsecured claims that are greater than $500 will be paid 80% of the allowed amount, in three payments over three years.
- USA Gymnastics intends to confirm the Plan before mid-year, but it sincerely hopes that a settlement will be reached before then that can be incorporated into an amended plan.
- Upon Plan confirmation, USA Gymnastics will emerge from bankruptcy.