The only really plausible argument in favor of allowing morally broken nonprofits to use Chapter 11 is that, in preventing the organization from going totally broke, it makes it possible for victims to get paid. Ongoing lawsuits might leave nothing behind in the Boy Scouts’ coffers; hence, the arbitrary deadline by which the victims must file.
While for-profit corporations need such deadlines in order to reassure stockholders and get back to profitability, no there’s no perfect parallel for nonprofits. One way to resolve the problem in this case might be to require some funds to be set aside on a rolling basis, to be paid to any late-filing victims.
Above all, the problem with the Boy Scouts’ reorganization is the symbolic suggestion that the time has come for everyone to move on. Sexual abuse is a distinct form of moral wrong, especially when it occurs under the auspices of nonprofits that are supposed to take care of young people and make the world a better place. We shouldn’t just get past it. And we should think long and hard about allowing the economic pragmatism of Chapter 11 to send the message that we should.
Noah Feldman is a Bloomberg Opinion columnist and host of the podcast “Deep Background.” He is a professor of law at Harvard University and was a clerk to U.S. Supreme Court Justice David Souter. His books include “The Three Lives of James Madison: Genius, Partisan, President.”