New York Catholic Diocese Bankruptcies Put Abuse Claims in Limbo

By Alex Wolf
Bloomberg Law
February 12, 2021

https://news.bloomberglaw.com/bankruptcy-law/new-york-catholic-diocese-bankruptcies-put-abuse-claims-in-limbo

New York-based Roman Catholic dioceses that filed Chapter 11 to address child sex abuse lawsuits are fueling tensions by asking bankruptcy courts for a victims’ claim filing window that’s shorter than what survivors were given under a recently enacted state law.

New York’s Child Victims Act, signed into law by Gov. Andrew Cuomo (D) in 2019, has spurred a flood of abuse lawsuits against the church and other organizations. Victims have filed more than 4,800 lawsuits against alleged abusers and institutions that harbored or concealed them, state court records show.

Four of New York’s eight local dioceses—Syracuse, Rochester, Buffalo, and Long Island’s Rockville Centre—have filed Chapter 11, allowing them to ease the burden of litigation by consolidating victims’ lawsuits against them and negotiating with claimants as a single class.

That means child sex abuse victims with claims against those dioceses could face a filing window shorter than the state law intended. Dealing with shortened deadlines could cause stress for victims and suppress their legal rights in emotionally charged, controversial cases, victims’ proponents say.

“It’s hard to put what happened to them in writing, sometimes for the first time,” said Ilan Scharf of Pachulski Stang Ziehl & Jones, an attorney representing claimants in the Rochester Diocese case.

Conflicting Deadlines

The New York law allows child sex abuse victims to sue at any time before they turn 55 and creates a temporary window—until Aug. 14, 2021—to file claims that previously were blocked by the statute of limitations.

The bankruptcy code, on the other hand, allows debtors to give as little as 21 days’ notice of an upcoming deadline to submit claims in a bankruptcy proceeding.

None of the dioceses in Chapter 11 have argued for that bare minimum. But they all say the bankruptcy court shouldn’t align the notice period with the CVA’s expansive time frame.

Bankruptcy judges have recognized the unique nature of sex abuse-related cases.

“This case is not like a typical commercial filing, in which the debtor can readily identify from its books and ledgers all of the actual and disputed trade creditors,” Judge Carl L. Bucki of the U.S. Bankruptcy Court for the Western District of New York observed in a September opinion in the Buffalo diocese’s case.

By reopening the statute of limitations, New York “expressed a policy decision that deserves the respect of this court,” he said.

Extending the claims filing window “will likely add significantly to the administrative expenses of this case and may negatively impact the recovery for victims and the diocese’s ability to continue to fulfill its ministries,” the Roman Catholic Diocese of Syracuse said in an October court filing.

But sticking with bankruptcy law’s tighter deadline “will cause significant emotional distress,” said Jeffrey Prol of Lowenstein Sandler LLP, who represents a sex abuse claimants’ committee in the bankruptcy case of the Roman Catholic Diocese of Camden, located in New Jersey.

“We believe there are many victims who have that date circled on their calendar,” he said.

Judges in the bankruptcy cases have analyzed the deadlines differently, resulting in varying claims filing dates for victims.

Victims with claims against the Syracuse diocese have until mid-April to come forward, while the opportunity for those in Rochester passed last August. The bankruptcy deadline to bring claims in the Buffalo and Rockville Centre dioceses currently mirrors New York’s CVA.

Complicating matters, New York twice extended the CVA’s claim deadline to accommodate Covid-19 court closures, creating a moving target that some bankruptcy courts say deserves less deference.

Judge Shelley C. Chapman of the U.S. Bankruptcy Court for the Southern District of New York concluded that the bankruptcy claim filing cutoff in the Rockville Centre diocese case should match the CVA’s Aug. 14 deadline. But she said that cutoff won’t change if the state again extends the window.

“The Court is not persuaded that the COVID-19 pandemic, even with all of the tragedy, mayhem and upheaval caused by the virus, is cause to support a blanket extension of the claims bar date here,” Judge Paul Warren of the U.S. Bankruptcy Court for the Western District of New York wrote in a July 2020 opinion in the Rochester diocese case.

‘We Don’t Work for the State’

Bankruptcy judges are “perfectly fine saying ‘we don’t work for the state of New York,’” said Penn State Law bankruptcy professor Marie T. Reilly.

When a diocese files for Chapter 11, “it provides an equitable way to deal with as many people that were affected by clergy sexual abuse that they can,” she said.

The dioceses recently have argued that the claim filing period in diocese bankruptcy cases lasts about 140 days on average. So even if a bankruptcy noticing period ends before the state civil claim window, abuse victims still get a reasonable amount of time to assert their claims, they said.

But attorney Jeff Anderson of Jeff Anderson & Associates PA, a nationwide practice representing childhood sexual abuse plaintiffs, said cutting the claim deadline short of the state law window undermines the purpose of the legislation.

“It’s not only wrong, but it’s legally questionable,” Anderson said. “As a matter of law they have a right to assert their claims.”

The issue is cut and dry for claimants’ attorney Prol. Shortening the claim notice window is an effort to “tamp down the number of claims that will ultimately be filed,” he said.

To contact the reporter on this story: Alex Wolf in New York at awolf@bloomberglaw.com

To contact the editors responsible for this story: Laura D. Francis at lfrancis@bloomberglaw.com; Roger Yu at ryu@bloomberglaw.com