Emory Bankruptcy Developments Journal


Juan Martinez


USA Gymnastics has been embroiled in highly contested bankruptcy proceedings since December 5, 2018, and the organization has been unable to confirm a reorganization plan. Prior to filing for bankruptcy, these victims filed over 100 suits against USA Gymnastics claiming that the organization failed to properly investigate claims of abuse and placed the gymnasts in an unsafe environment. Now, the victims claim USA Gymnastics is unwilling to negotiate a settlement agreement in good faith. The bankruptcy filing activated the automatic stay, putting the victims’ litigation on hold. The automatic stay is a powerful tool that is necessary to ensure the bankruptcy court’s success. However, in situations involving organizations accused of sexual abuse, the automatic stay prevents victims from delving into the organization’s role in their abuse. Bankruptcy courts are courts of equity, but they are bound by statute in their ability to remedy a wrong. Organizations like USA Gymnastics abuse the Bankruptcy Code to gain unintended benefits at the expense of abuse victims. They place victims in a difficult position; if the survivors receive compensation through bankruptcy, they lose their chance to conduct discovery proceedings otherwise available through litigation. This outcome prevents the victims from receiving answers regarding their own abuse and from guaranteeing that the abuse will not continue in the future. Further, the discovery process may uncover other sources of damages like USA Gymnastics’ officers or the U.S. Olympic and Paralympic Committee, but the victims are forced to wait until the organization is out of bankruptcy to pursue litigation. This lengthy delay could prevent victims from timely discovering evidence vital to successfully litigating their claims. Due to the statute of limitations and failure to timely uncover evidence, the delay may also prevent victims from bringing suit against any nondebtor that could be liable for their injuries. The bankruptcy process is currently inadequate to properly protect the interests of sexual abuse victims. Bankruptcy focuses on financial issues, so victims of sexual abuse will have non-financial interests negatively impacted by the bankruptcy process. This Comment argues that bankruptcy courts should borrow from other areas of law and provide special protections for victims of sexual abuse. This protection would prioritize the victims’ claims and ensure that the victims can pursue an investigation into the organization’s involvement in their abuse. This plan would allow adequate protection for sexual abuse victims and deter misuse of the bankruptcy courts by organizations.