Brothers Order Seeks Ch. 11
By Matt Miller
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.