US judge considers ending stalled New York diocese bankruptcy

Reuters [London, England]

July 11, 2023

By Dietrich Knauth

  • Summary
  • Law Firms
  • Rockville Centre diocese seeks to resolve 600 sexual abuse claims in bankruptcy
  • Talks broke down over how much parishes should pay in settlement

July 11 (Reuters) – A U.S. judge said Tuesday that he would consider dismissing the bankruptcy of a New York Roman Catholic diocese if the church cannot build more support among sexual abuse victims who have sued the church and its parishes.

U.S. Bankruptcy Judge Martin Glenn said during a court hearing in Manhattan that he was not eager to be the first judge to kick a Catholic diocese out of bankruptcy. But if the Diocese of Rockville Centre cannot make progress toward a comprehensive settlement of sexual abuse claims, it would be unfair to prevent abuse survivors from resuming their lawsuits in other courts, Glenn said.

“The survivors deserve an opportunity to be heard by a jury of their peers,” Glenn said. “They’ve been held off too long.”

The diocese filed for Chapter 11 bankruptcy in New York in October 2020, citing the cost of lawsuits filed by childhood victims of clergy sexual abuse. New York’s Child Victims Act, which took effect in August 2020, temporarily enabled victims of child sexual abuse to file lawsuits over decades-old crimes.

At least 20 other dioceses have filed for bankruptcy in response to New York’s law and similar laws passed in other U.S. states.

The diocese has estimated that its bankruptcy plan would provide between $185 million and $200 million in value to abuse survivors.

Approximately 600 people have filed abuse claims in the Rockville Centre bankruptcy, and settlement negotiations have broken down over the diocese’s effort to resolve claims against its parishes and other related parties that have not filed for bankruptcy.

The diocese’s proposal would allow the non-bankrupt parishes to settle claims against them in exchange for an $11 million contribution to a broader sexual abuse settlement fund, while attorneys for abuse victims argued that the parishes should contribute as much as $200 million.

James Stang, an attorney who represents sexual abuse survivors in the case, urged Glenn to dismiss the bankruptcy as a failure.

“This debtor is incapable of confirming a reorganization plan that gets them the releases they want,” Stang said.

Rockville Centre’s attorney Todd Geremia told Glenn that negotiations still have a chance to succeed.

“The sticking point is solely the parish contribution,” Geremia said.

Glenn said he was not sure how long the impasse could last before he decided that the bankruptcy had no chance of success. But he said he would not allow the diocese to keep abuse survivors in bankruptcy “until you beat them down and they finally relent.”

Glenn also said he did not have enough evidence on the value of claims against the parishes, or the parishes’ ability to pay those claims.

“You’ve presented a framework, but I have no idea whether it is reasonable,” Glenn told Rockville Centre’s lawyer.

The case is In re The Roman Catholic Diocese of Rockville Centre, New York, U.S. Bankruptcy Court for the Southern District of New York, No. 20-12345.

For Rockville Centre: Corinne Ball and Todd Geremia of Jones Day

For the creditors committee: James Stang of Pachulski Stang Ziehl & Jones

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