Baltimore Sun [Baltimore MD]
September 5, 2023
By Jonathan M. Pitts and Jean Marbella
When Teresa Lancaster learned the Archdiocese of Baltimore could file for bankruptcy in the face of an anticipated deluge of lawsuits over its history of child sexual abuse, the news only strengthened her resolve.
Lancaster, a victim of childhood sexual assault in the 1970s and an attorney based in Annapolis, is a prominent voice for fellow abuse survivors. She helped wage the political battles that got Maryland’s landmark Child Victims Act passed in April.
So, if America’s first and oldest Catholic diocese does file for Chapter 11 ― as a chain of internal emails obtained by The Baltimore Sun suggested it could and that Archbishop William E. Lori conceded in a Tuesday night letter to parishioners that he is considering — she said she and her allies will do whatever they can to halt the effort in its tracks.
“They’re going to be in for a hell of a fight,” she said Tuesday.
The Sun reported Friday that archdiocese officials were actively discussing that same day what actions to take when and if they filed in federal court for bankruptcy protection in light of a spate of lawsuits expected to be filed on or after Oct. 1 in Maryland.
In an email Lori sent late Tuesday to the area’s half-million Catholics, he acknowledged that one “approach under consideration” is “seeking relief through a bankruptcy reorganization.”
That would meet what he called the archdiocese’s two goals: “the healing of victim-survivors who have suffered so profoundly from the actions of some ministers of the Church” and continuing “the many ministries of the Archdiocese that provide for the spiritual, educational and social needs of countless people — Catholic and non-Catholic — across the state.”
Oct. 1 is the date the Child Victims Act — a law passed by the General Assembly and signed by Democratic Gov. Wes Moore in April — takes effect. The law removes constraints around when sexual abuse survivors can file lawsuits against those they say victimized them as children.
Christian Kendzierski, a spokesman for the archdiocese, said in an emailed statement Friday that church officials are “preparing for the impact of the new law” and “considering how to best respond to it.”
The archdiocese did not respond earlier Tuesday to The Sun’s requests for further comment. It released Lori’s letter, the first official comment by the archdiocese on the question of bankruptcy, after 6 p.m.
The email chain showed Kendzierski, Auxiliary Bishop Adam J. Parker and Sean T. Caine of Caine Communications, a former spokesman for the archdiocese, discussing how best to time a public announcement of a bankruptcy filing with the archdiocese’s final fundraising campaign for the year, which is ongoing.
The passage of the Child Victims Act was the latest major development in a yearslong battle over when childhood sexual abuse survivors can file lawsuits against those they say were their perpetrators. The law is designed to end statutes of limitations around such lawsuits, making Maryland one of the few states without such restrictions.
That is expected to expose the historic Baltimore archdiocese to far greater financial liability than it has faced. It’s also one reason survivor advocates say they’re not surprised church officials are discussing the move.
Thirty-five dioceses in the United States have done so, and those who have studied the cases say the action can confer a range of benefits.
Dioceses that otherwise could have ended up on the hook for hundreds of millions of dollars in settlements have seen their risks moved en masse into federal courts, where bankruptcy judges set amounts they could afford to pay. Meanwhile, survivors who seek payments may not learn as much about their cases as they would have under discovery in state court.
The church has long made the case that bankruptcy protection means safeguarding at least some payments for all eligible legitimate plaintiffs. But Lancaster and others say that if the archdiocese does file, it would violate the spirit of bankruptcy law, which Lancaster says is designed to “protect companies that have no possible way to pay out the bills that are owed.”
Lori asserted in his letter that the archdiocese’s resources are not “unlimited.”
“With the passage of the new law, there is a high likelihood that the Archdiocese will face multiple lawsuits, the number of which is hard to predict,” he writes. “Litigating them individually would potentially lead to some very high damage awards for a very small number of victim-survivors while leaving almost nothing for the vast majority of them. The Archdiocese simply does not have unlimited resources to satisfy such claims.”
Lancaster and David Lorenz, Maryland director of the Survivors Network of Those Abused by Priests, or SNAP, are skeptical of claims other dioceses have made regarding their assets when faced with litigation.
Lorenz points to the Diocese of San Diego, which filed for bankruptcy in 2007 while facing multiple lawsuits over sex abuse. The diocese argued that it needed bankruptcy protection to continue its work. After it emerged that more than 400 church properties in San Diego County had an assessed value of nearly $500 million, though, the judge derided its arguments as “disingenuous” and dismissed the filing.
Four years later, the Archdiocese of Milwaukee took a similar tack, declaring bankruptcy just before 17 lawsuits by abuse survivors were about to go to trial in state court and creating a $55 million trust designed for the maintenance of its cemeteries. The archdiocese argued the trust should be protected against abuse claims, citing religious freedom laws. A federal judge later overruled the idea.
“The judges saw through the maneuvers in these cases. But dioceses will do things like that if people aren’t careful,” Lorenz said. “Dioceses don’t file bankruptcy because they’re financially insolvent. They do it to protect as many of their assets as possible.”
Lawyers say a Baltimore bankruptcy filing would strike at the heart of the Child Victims Act, which not only sets no time limit on filing lawsuits in child sex abuse cases in Maryland, but raises a cap on noneconomic damages against such private institutions as Catholic dioceses to $1.5 million per abuse incident — and doesn’t cap economic or punitive damages.
In bankruptcy cases, a judge generally sets a time frame for when someone can make a claim for a designated amount of funds, and the amount of those funds usually means a dramatic reduction in individual payouts.
“This would eviscerate the Child Victims Act,” said Suzanne Sangree, a Baltimore-based attorney who is representing child sex abuse survivors. “The whole purpose of the act is to lift the statute of limitations. In bankruptcy, you have to file claims within a deadline that the bankruptcy court sets.”
Rob Jenner, another attorney who represents child sex abuse victims, said the length of bankruptcy proceedings can mean some victims may never see remuneration.
“The shame of it is that these bankruptcies go on for years and years,” he said. “Our clients are older, and they don’t have years.”
Legal experts expect that October will see a torrent of lawsuits against the archdiocese, and that the archdiocese will, at that point, challenge the constitutionality of the new law. Lori addressed that in his letter, writing that “the new law’s method is … believed by many to violate Maryland’s Constitution. The Courts will need to make that determination.”
According to Sangree, a bankruptcy filing would be an acknowledgment that archdiocese officials believe the constitutional challenge will fail.
“The Catholic Church [in general] has been using bankruptcy to shield their liability for child sex abuse,” she said. “They’re going to make arguments [that] their ability to function should be preserved, so their liability for child sexual torture should be limited.”
But “they have substantial assets,” including a “large investment portfolio,” she said.
Neither the emails obtained by The Sun nor Lori’s letter specifies when the archdiocese could file for bankruptcy, but both leave open the possibility it could do so before Oct. 1.
Jenner wonders how church officials would be able to do so in advance of the law taking effect, bringing with it lawsuits that pose a threat to archdiocese finances.
“You have to be in demonstrable financial distress,” he said. “You can’t say, ‘We may have a problem in the future.’ Nothing has been filed yet under the Child Victims Act.”
He and other attorneys say they plan to move forward with the cases they have in the works, and Lancaster said members of her team, including Kathryn Robb of ChildUSAdvocacy, are lobbying to get federal bankruptcy laws changed to endow victims with more power.
In the meantime, Lancaster said she hopes for an outcome not unlike the one in the San Diego case.
“We’re hoping the judge would dismiss it altogether,” she said.