I have been reporting on the #METOO Movement and its collision course with bankruptcy over the last several months. Now, in addition to Mike Isabella from Top Chief and Harvey Weinstein, USA Gymnastics follows in the same footsteps by declaring Chapter 11 bankruptcy in December 2018, in the wake of multiple lawsuits being filed against it.
In a sordid affair that began unraveling in 2015, a team doctor employed by USA Gymnastics, Larry Nassar, carried out systematic sexual abuse of underage female gymnasts over many years under the pretense of medical treatment. One by one, victims of Dr. Nassar began speaking out after he was fired by USA Gymnastics in 2015.
In 2017, Nassar pleaded guilty of 10 counts of first-degree criminal sexual assault and sentenced to 40 to 175 years in prison. Since then USA Gymnastics has been inundated with lawsuits brought in multiple jurisdictions by multiple victims of Dr. Nassar.
What Does USA Gymnastics Hope to Gain By Filing Chapter 11?
A spokesperson for USA Gymnastics stated the reason for the bankruptcy filing was to adjust its debts in an effort to expedite the resolution of Nassar victims’ claims but that the organization was continuing to operate as usual and not having trouble paying its bills. Chapter 11 bankruptcy can be a convenient vehicle to resolve multiple claims in one location, especially if those claims are spread throughout numerous jurisdictions.
But the dark side of this concept is that all pre-trial discovery efforts by the Nassar victims come to a screeching halt once the Chapter 11 is filed and the automatic stay goes in to effect. This means that until a bankruptcy judge decides the automatic stay is due to be lifted as to any pre-trial discovery, the employees of USA Gymnastics are protected from having to provide testimony as to what, if any, role they may have played in suppressing knowledge of Nassar’s actions.
In addition, there is evidence that USA Gymnastics hopes to hold off a decertification of itself as the sport’s governing body by the U.S. Olympic Committee. This will be interesting to follow as the U.S. Olympic Committee wasted no time in issuing a statement that they have no plan to halt the “Section 8 complaint” intended to decertify USA Gymnastics as the governing body of the sport.
The bankruptcy judge assigned to this nationally prominent case will be tasked with finding an equitable way to ensure the female victims of Larry Nassar are not further victimized by the bankruptcy process.
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