The Immediate Legal Impact of USA Gymnastics Filing for Bankruptcy

Former Michigan State University and USA Gymnastics doctor Larry Nassar listens during the sentencing phase in Eaton, County Circuit Court on January 31, 2018 in Charlotte, Michigan. The number of identified sexual abuse victims of former USA Gymnastics doctor Larry Nassar has grown to 265, a Michigan judge announced Wednesday as a final sentencing hearing commenced. Prosecutors said at least 65 victims were to confront Nassar in court, in the last of three sentencing hearings for the disgraced doctor who molested young girls and women for two decades in the guise of medical treatment. / AFP PHOTO / JEFF KOWALSKY

USA Gymnastics (USAG), it seemed, was already in jeopardy of losing its status as a national governing body in the sport in the wake of the Larry Nassar sexual abuse scandal. Now, USAG has filed for bankruptcy.

According to the Wall Street Journal, the legal impact of filing for Chapter 11 protection will be immediately felt:

The filing will put an automatic stop—perhaps permanently—to depositions and discovery related to USA Gymnastics in lawsuits filed by Mr. Nassar’s victims. It also could disrupt formal efforts to revoke USA Gymnastics’ status as the sport’s official governing body, a process the U.S. Olympic Committee initiated last month.

With Chapter 11, the debtor “usually proposes a plan of reorganization to keep its business alive and pay creditors over time.” This filing would effectively halt lawsuits filed against Nassar by his victims.

Chair of the USAG Board of Directors Kathryn Carson said in a statement, “We owe it to the survivors to resolve, fully and finally, claims based on the horrific acts of the past and, through this process, seek to expedite resolution and help them move forward.”

John Manly, a lawyer representing 180 victims Nassar allegedly abused, said the Chapter 11 filing was the “inevitable result of the inability of this organization to meet its core responsibility of protecting its athlete members from abuse.”

Nassar was sentenced to up to 175 years after a hearing in Ingham County, where he faced more than 100 women and girls who claimed that he abused them during medical treatments while he worked for MSU and USA Gymnastics. He was sentenced to up to 125 years in a separate but related case in Eaton County.

Both MSU and USA Gymnastics have been sued by hundreds of former patients who allege that they suffered abuse because the institutions failed to act. The school has already agreed to pay $500 million to settle claims.

USOC CEO Sarah Hirshland suggested in early November that a brand new organization other than USAG might be necessary in the future.

“This is a situation in which there are no perfect solutions. Seeking to revoke recognition is not a conclusion that we have come to easily,” said she said in a statement. “In the short-term, we have to work to ensure that USAG gymnasts have the support necessary to excel on and off the field of play. We are building plans to do just that. In the long-term, it will be the critically important responsibility of the recognized Gymnastics NGB, whether the existing organization or a new one, to lead gymnastics in the United States and build on the supportive community of athletes and clubs that can carry the sport forward for decades to come. We are prepared to identify and help build such an organization.”

Alberto Luperon contributed to this report.

[Image via Jeff Kowalsky/AFP/Getty Images]

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