Christian Brothers Order Seeks Ch. 11

By Matt Miller
Daily Deal
April 29, 2011

Another Roman Catholic religious order has turned to the bankruptcy court to resolve sex abuse-related lawsuits. The Christian Brothers' Institute filed for Chapter 11 on Thursday in the Southern District of New York in Manhattan because the North American branch of the originally Irish order is headquartered in New Rochelle, N.Y., but most of the alleged abuse took place in Washington state and in Newfoundland, Canada. Over the past six to seven years, 52 lawsuits were settled in Washington, with payouts totaling $25.6 million, according to Michael Pfau, a Seattle-based plaintiffs attorney who represents the victims. The Christian Brothers and the Archdiocese of Seattle jointly made the settlements.

An additional 16 suits have been filed in Washington, and 40 in Newfoundland. According to Pfau, six of the Washington plaintiffs had a court date in May and another five in July. Pfau said the order had been threatening bankruptcy for months, although he found the filing somewhat of a surprise. "I thought we were pretty close" to a settlement, he said. In its petition, the order listed assets at between $50 million and $100 million. An affidavit accompanying the petition said assets, while "substantial," are illiquid. "The debtor needs a breathing spell from this court to resolve the claims," a vice president of the order stated, "as well as to liquidate assets in an orderly fashion to satisfy legitimate claims."

One center of abuse was the Briscoe Memorial School, a now-defunct orphanage and boarding school the order ran jointly with the archdiocese in Kent, Wash., a Seattle suburb. The archdiocese owned and operated the school, while the Christian Brothers staffed it. Pfau called the school environment "highly abusive." The order ran a similarly notorious orphanage-school in St. John's, Newfoundland, called Mount Cashell.

The bankruptcy filing comes less than a month after the Jesuit order in much of the Pacific Northwest filed a $166.1 million joint plan of reorganization with more than 500 sex abuse claimants. Pfau serves as counsel for many victims in that case as well. Society of Jesus, Oregon Province, filed for Chapter 11 on Feb. 17, 2009, the first Catholic order to use bankruptcy as a mechanism to adjudicate the abuse claims, most of which involved native Alaskans.

Eight dioceses have filed for Chapter 11 since 2004, with the latest being the Archdiocese of Milwaukee, which filed Jan. 4. Unlike the Jesuits, the Christian Brothers aren't ordained priests, although the Vatican recognizes the brothers as a religious order. The order has also been singled out in Ireland in a damning report of widespread and chronic sex and physical abuse in a type of boarding school for orphaned or neglected boys called industrial schools. Thursday's filing covers Christian Brothers' North America indiscretions. As the debtor pointed out in its affidavit, Washington state has a delayed discovery rule when it comes to sexual abuse-related suits. Newfoundland, meanwhile, isn't bound by any statute of limitation. One potentially vexing legal issue, however, is how the bankruptcy court will handle any future claims in states with statutes of limitations, including New York.

The Chapter 11 petition lists Scott Markowitz, a New York-based partner at Tarter Krinsky & Drogin LLP, as debtor counsel. While Pfau doesn't have the ability to name bankruptcy counsel for the victims, he said he "hopes" the U.S. trustee will approve the appointment of James Stang, a Los Angeles-based partner at Pachulski Stang Ziehl & Jones LLP. Stang has represented the victims in most of the diocese-related bankruptcies, including the Jesuit case.