Rochester Beacon [Rochester NY]
May 23, 2022
By Will Astor
The Roman Catholic Diocese of Rochester has put forward a $147.75 million offer to settle claims filed by 475 sexual-abuse survivors in the diocese’s Chapter 11 bankruptcy.
Whether the nine-figure offer will bring a quick end to the long-stalled bankruptcy at this point seems far from certain. The offer was outlined in a filing posted with the Rochester Bankruptcy Court late Friday afternoon.
In court papers, the diocese portrays the offer as a deal that would best serve the abuse victims “by achieving certainty with respect to a very substantial insurance contribution rather than risking the cost, extensive delay, and uncertain outcome of litigation in pursuit of the theoretical possibility of a larger recovery at some point in the distant future.”
The Rochester diocese filed bankruptcy in September 2019, roughly a month after the New York Child Victims Act went into effect.
Signed into law in February of that year, the CVA temporarily lifted a seven-year statute of limitations on sexual-abuse claims. That opened a roughly two-year window for adults who had been sexually abused as children decades ago and failed to press claims then to go after their alleged abusers.
Under the CVA, more than 300 individuals have filed state court complaints accusing Rochester diocese priests and other church officials. Four hundred seventy-five people have filed claims seeking compensation for alleged sexual abuse in the Rochester diocese’s Chapter 11.
Terms proposed by the diocese’s settlement offer would see its insurance carriers contribute $107.25 million to a fund to pay abuse survivors. The diocese and its parishes would contribute $40.5 million to the fund.
If survivors accept the offer, terms call for neither the diocese, its parishes or its insurance carriers to be held liable for further damages stemming from past sexual-abuse claims.
‘Pennies on the dollar’
Despite its size, the offer—tendered nearly two and a half years into a bankruptcy whose slow-moving pace survivors have seen as frustrating—is being met with disdain by the abuse survivors it is meant to placate.
Calling the offer a high-handed attempt by the diocese to “lowball” survivors, attorney Jeffrey Anderson, who represents 175 abuse survivors with claims in the bankruptcy, dismissed the $147 million amount as “pennies on the dollar.”
Contributions offered by the diocese and its insurers are “a fraction (of) what they should be but the insurance number is shockingly nominal and mind blowing,” Anderson asserts. He estimates the diocese’s insurance coverage as totaling between $2 billion and $4 billion.
Abuse survivor Jim Cali, who chairs the bankruptcy’s official committee of creditors, is on much the same page.
After some two years of negotiations that the creditors committee was supposed to be a party to, the settlement deal was worked out solely between the diocese and insurance carriers that would bear some $107 million of the settlement’s cost with no input from survivors, Cali says.
The 12-member creditors committee was appointed by the U.S. Trustee to look out for the interests of claimants in the bankruptcy. All of its members are abuse survivors.
To Cali, the diocese’s settlement offer is an attempt “to cram a deal down (abuse survivors’) throats.”
The diocese’s offer comes some three weeks after a contentious hearing in which Bankruptcy Court Judge Paul Warren signaled that he could be inclined to let hundreds of abuse complaints against the diocese’s priests and parishes move ahead in area state courts.
Because the church has chosen to incorporate parishes and other diocesan affiliates like Catholic Youth Organizations in New York as entities legally separate from their parent dioceses, parishes and other diocesan affiliates that under church law fall under strict diocesan control do not enjoy the diocese’s Chapter 11 court protection.
To cure that omission, the Rochester diocese parishes’ state court cases had been frozen for some two years under a Bankruptcy Court agreement worked out early in the case between the diocese and the creditors committee.
That agreement unraveled in late March when the creditors committee, citing a lack of progress in the bankruptcy’s settlement negotiations, declined to renew the pact. The diocese objected and petitioned Warren to forcibly reinstate the freeze.
If the state court cases were to move ahead, the diocese and its parishes could be called on to produce records of transfers of abusive priests among parishes and internal documents detailing church officials’ knowledge of long-past abuses by priests. Parish and diocese officials including Bishop Salvatore Matano and retired Bishop Matthew Clark could be called to testify in open court.
At the recent hearing, Warren expressed sympathy for survivors’ frustration with a lack of progress toward a settlement. The judge ordered the diocese, its insurance carriers and the creditors committee to start mediation sessions some two years ago.
At the hearing’s close, Warren said he would temporarily accede to the diocese’s request to override the creditors committee and reinstate the freeze on the state court cases but would do so only to give himself time to craft a written decision.
Warren has yet to issue a ruling. Once he rules, the judge told diocese attorney Stephen Donato at the hearing, state court cases against parishes across the diocese’s 12-county territory might resume in 21 days.
Where the bankruptcy goes from here remains to be seen.
If Warren approves the diocese’s settlement offer, the diocese would have to propose a formal plan of reorganization incorporating terms laid out in the settlement offer.
Abuse survivors could counter with an alternate plan, at which point both plans would be put to a vote by creditors. Warren could approve whichever plan wins the vote or he could send the parties back to the table to hammer out a compromise plan.
At the recent hearing, Warren questioned whether he could approve any plan whose terms like the diocese settlement offer include a clause to absolve parishes and other diocesan affiliates of further liability.
The judge cited a controversy over terms of the Purdue Pharma bankruptcy still being hammered out in federal courts.
The maker of the opiate drug Oxycontin, Purdue filed for Chapter 11 protection after a number of states sued it seeking billions of dollars in damages as compensation for ills their residents and state and local governments suffered in the opioid epidemic.
A bankruptcy judge approved a Purdue Pharma plan that created a fund to compensate the states. The company and individual members of the Sackler family, which owned Purdue, would also contribute under the condition that they would be absolved of any further liability. The Sackler family has now cut its ties to the company.
Like the Rochester diocese parishes, Sackler family members were legally separate from the company they once owned. Under the Bankruptcy Code, such parties are called related third parties.
Holding that related third parties could not be absolved in a bankruptcy, several states appealed the bankruptcy judge’s decision to protect Sackler family members against future claims. A New York City district court judge agreed with the states, striking down the company’s reorganization plan. The question is now under consideration by a federal Second Circuit Court of Appeals panel.
Warren did not definitively say that he wouldn’t let parishes be protected under a diocesan reorganization plan that offered them absolution. But he cautioned Donato to bear in mind that whether he could do so is at the moment an open question legally.
Before any plan is approved, further court wrangling over how survivors’ claims should be valued is likely. All parties in the case including the diocese, its insurance carriers and the creditors committee have hired their own valuation experts.
Consultant and attorney fees in a protracted dispute over claim valuation could add as much as $10 million to the more than $6 million in administrative expenses the bankruptcy has already racked up, survivors’ attorney Anderson believes. Such expenses, which are paid by the diocese and could have been avoided had the diocese been less contentious, ultimately come out of survivors’ pockets, Anderson holds.
However the Rochester diocese case is resolved, it is likely to be a bellwether for the state’s Catholic dioceses. Under pressure from CVA claims, Rochester was the first of the state’s Catholic dioceses to seek court protection. Three others, the Buffalo, Syracuse and Rockville Center dioceses, shortly followed suit. Donato is representing the church in all four cases.