Could More Catholic Dioceses Follow Rochester into Bankruptcy Court?

By Larry Rulison and Steve Hughes
Times Union
September 12, 2019

https://www.timesunion.com/news/article/Facing-abuse-lawsuits-Rochester-Catholic-diocese-14434173.php

The Roman Catholic Diocese of Rochester filed for bankruptcy protection on Thursday in the face of mounting clergy abuse lawsuits filed against the diocese in the wake of the passage of the state's Child Victims Act.

The Chapter 11 bankruptcy filing could potentially provide a road map to the four other upstate dioceses, including the Diocese of Albany, on how to protect themselves from the sudden onslaught of abuse claims unleashed by the new law, signed by Gov. Andrew M. Cuomo in February.

The Rochester diocese, like Albany's, has been served with dozens of lawsuits alleging child sexual abuse by priests and other parish leaders reaching back decades.

In addition to facing the prospect of having to potentially pay out millions of dollars in court judgments or settlements, the church also will be facing large legal bills to defend itself from the suits and produce evidence for discovery in the cases.

The Albany diocese said at this time it has no plans to declare bankruptcy.

"Until we know the full financial scope of the CVA as it relates to the Diocese of Albany, we cannot and will not make any decisions," spokeswoman Mary DeTurris Poust said.

"We have nothing to announce, other than that we continue to respond in justice to survivors of abuse and urge anyone who has suffered such abuse to come forward," she continued. "Regardless of what happens down the road, the mission and ministries of the Diocese of Albany will continue."

The Chapter 11 reorganization petition the Rochester diocese filed in U.S. Bankruptcy Court — first reported Thursday morning by the Rochester Democrat & Chronicle — estimates it has assets valued between $50 million and $100 million. It lists far greater liabilities of between $100 million and $500 million.

Rochester is the first of the state's eight dioceses to declare bankruptcy. It serves 309,000 Catholics in 12 counties — roughly the same size as the Albany diocese.

Roman Catholic entities around the country — including dioceses in San Diego, Calif.; Milwaukee, Wis.; and Portland, Ore. — have sought bankruptcy protection amid lawsuits from victims of sexual abuse and other forms of misconduct.

Cynthia LaFave, a Guilderland personal injury attorney who has partnered with the law firm Jeff Anderson & Associates to sue the Albany diocese and other upstate dioceses, said the bankruptcy filing by the Rochester diocese is an attempt to evade the truth.

"What they're trying to do is keep us from doing legal discovery," LaFave said. "It's very disturbing. Ultimately, they are going to have to disclose the facts, but this is just another attempt to shut (the cases) down."

"The bishop's choice to use reorganization as a legal tactic is very disturbing and disappointing," Jeff Anderson said in a statement. He called the move "simply a legal tactic to protect assets and prevent jury trials, and an attempt to prevent the truth from being revealed."

One possible consequence of the bankruptcy process is a shortened timeline for people to file claims against the diocese under the CVA, which extended the statute of limitations in both criminal and civil cases of child sexual abuse.

Michelle Simpson Tuegel, an attorney who has worked with abuse survivors from USA Gymnastics and other organizations, said a bankruptcy court will typically put a stay on any state litigation and set a period for any additional claims to be filed. Once that period ends, any new plaintiffs face a high bar to see their claims addressed, she said.

"It's really important that survivors in different areas where the entity declares bankruptcy go ahead and get an attorney," Tuegel said. "I know some people are sitting on it right now, and a lot of survivors are thinking, 'Do I really want to go through this process? ... I have a year.' I think there's the potential (that) with bankruptcies, their timeline could get shorter."

In its Chapter 11 petition, the Rochester diocese's list of creditors with the 20 largest unsecured claims includes 19 plaintiffs who have filed clergy abuse lawsuits against the diocese.

Of those 19, six were filed by Jeff Anderson & Associates, which like other law firms has been busy filing clergy abuse lawsuits in response to the passage of the Child Victims Act, which on Aug. 14 opened a one-year "look-back window" in which previously time-barred sexual abuse claims can be filed.

As of Monday, 639 Child Victims Act cases have been filed statewide — at least two dozen of them naming the Albany diocese as a defendant.

The Rochester diocese values each lawsuit as a $100,000 unsecured debt as a placeholder for any potential future court judgments, although the filing notes that the suits are "contingent, unliquidated, disputed."

State Sen. Brad Hoylman, a Manhattan Democrat who sponsored the CVA, said Thursday that that the bankruptcy filing was an attempt to evade the purpose and spirit of the law.

"It's despicable that the Rochester Diocese would file a voluntary bankruptcy to shield their assets from sexual abuse survivors suing through the Child Victims Act," Hoylman said in a statement. "For decades, survivors of child sexual abuse unsuccessfully pleaded for help from the church. As a result, we passed the Child Victims Act so survivors would finally have their day in court and hold accountable their abusers and the institutions that may have harbored them."

In a corporate resolution dated Wednesday that was filed with the bankruptcy court, Rochester Bishop Salvatore R. Matano made it clear that it was the potential liability from the clergy abuse cases that prompted the Chapter 11 filing.

"In order to respond to claims stemming from the Child Victims Act in an equitable and comprehensive manner, and to reorganize the financial affairs of the diocese in order to permit it to continue to fulfill its ministries to the Catholic faithful of the diocese, the diocese shall seek relief through reorganization under the provisions of Chapter 11 (of the bankruptcy code)," the resolution states.

The largest unsecured creditor of the Rochester diocese is M&T Bank, which has a standby letter of credit with the church for workers compensation liability that is valued at $844,000. The filing does not include a detailed list of diocese property or assets.