BUFFALO (NY)
Buffalo News [Buffalo NY]
October 24, 2023
By Jay Tokasz
The Buffalo Diocese is offering up to $100 million to settle child sex abuse claims in its federal bankruptcy case.
As much as half of that would come from parishes, schools and other Catholic entities, while the diocese would also need to sell its Catholic Center on Main Street, the former Christ the King Seminary campus in the Town of Aurora and other properties.
More than three years since the claims were filed, none of the abuse victims has been compensated as the diocese, its parishes and insurance carriers attempt to negotiate a settlement with abuse victims.
Those details were revealed in court papers filed late Monday in which diocese lawyers sought a preliminary injunction to keep all sex abuse lawsuits against parishes and schools grounded while mediated negotiations in the diocese bankruptcy case continue.
Court papers said the $100 million does not include insurance funds, while suggesting that insurance companies additionally could contribute “perhaps even hundreds of millions of dollars” to a settlement.
Ilan D. Scharf, lead attorney for the Committee of Unsecured Creditors that represents about 850 abuse claimants in the Buffalo Diocese bankruptcy case, declined to comment Tuesday on the numbers unveiled by the diocese lawyers.
The Buffalo Diocese faces more pressure to make a deal with child sex abuse survivors after Catholic dioceses in Rochester and Syracuse recently took major steps toward exiting their Chapter 11 bankruptcy proceedings.
But some plaintiffs’ lawyers on Tuesday accused the diocese of trying to “silence survivors” in its motion to halt the lawsuits.
“The Diocese wants its affiliated entities to have the protection of bankruptcy without the legal responsibilities of bankruptcy,” attorney Steve Boyd said in a statement. “It’s time to let juries decide these cases.”
The Buffalo Diocese settlement offer appears to be very similar to the pending Chapter 11 reorganization plan the Syracuse Diocese announced in July.
Syracuse Bishop Douglas J. Lucia at the time said that the diocese had reached a deal with its creditors committee in which it would pay $50 million to a settlement trust, while its parishes would contribute $45 million, and $5 million would come from other Catholic entities. The full plan could be filed in court as early as next month.
The Syracuse Diocese filed for bankruptcy protection on June 19, 2020, about three months after the Buffalo Diocese filing. It received about 400 claims, fewer than half the number Buffalo faces.
Lucia said in a video statement that most parishes and other entities in the Syracuse Diocese faced “significant risk of direct liability” that would be resolved most efficiently through the bankruptcy settlement.
“By contributing to the victims trust, parishes and other entities will have their individual claims settled in the same way as the diocese, through what is called a channeling injunction,” the Syracuse bishop said. “More importantly, as a Catholic family, it is our moral obligation to provide reparation and share a role in bring healing and reconciliation to the survivors.”
Legal and professional fees paid by the Buffalo Diocese have ballooned to $12.5 million, prompting the federal judge overseeing the diocese’s Chapter 11 bankruptcy case to remark that he was puzzled over how the diocese was able to afford such costs.
Buffalo Diocese lawyers also described as “quite perplexing” that no settlement had been reached yet in Buffalo – not even a deal between the “Catholic Family” and the creditors’ committee, such as the one in Syracuse.
The Rochester Diocese, which in 2019 became the first Catholic diocese in the state to file for Chapter 11 protection, also is nearing a potential exit from bankruptcy. Its amended reorganization plan, filed in September, includes a payment to abuse victims of $55 million in cash from the diocese and parishes, and $71 million from four insurance companies. The plan would settle about 485 abuse claims.
The Buffalo Diocese’s bankruptcy filing automatically stayed, or put on hold, any litigation against the diocese in state courts. That automatic stay does not apply to parishes and other “non-debtor” Catholic entities, which are separate nonprofit corporations.
Because many parishes and other entities also were sued in state court under the Child Victims Act, the diocese in 2020 negotiated a deal with the creditors committee to extend the same stay protections to parishes. As part of the deal, the creditors’ committee received church documents on clergy abuse, finances and other matters.
The agreement, known as a stipulated stay, had been extended a dozen times for more than two years, most recently through Sept. 30. The creditors’ committee declined to extend it further, the diocese said in court papers.
Without a stipulated stay in place, lawyers for plaintiffs with Child Victims Act cases against Catholic parishes, schools and other entities might soon be able to resume litigation in those cases.
On Monday, diocese lawyers asked Chief Judge Carl L. Bucki of the U.S. Bankruptcy Court in the Western District of New York to order that the state court cases remain stayed.
“Notwithstanding the progress that the Diocese has made in mediation, the Committee has now refused to extend the Stipulated Stay, ostensibly because the Committee believes allowing litigation to move forward against the Related Entities will create pressure on the Catholic Family and the Insurers to put more settlement money on the negotiating table,” the diocese lawyers argued in their motion.
Allowing sex abuse cases to move ahead in state courts would rapidly deplete the diocese’s main asset, insurance coverage, the lawyers argued.
“The Diocese has reason to believe that its insurers will pay many millions of dollars (perhaps even hundreds of millions of dollars) to settle their potential coverage exposure,” court papers said. “Allowing the Abuse Actions to move forward risks findings that could support Insurer defenses to coverage and therefore impair or even eliminate the possibility of any such future settlements.”
Bucki will hear arguments Nov. 28 on the motion by diocese lawyers, who asked the judge for a preliminary injunction to pause litigation through April 15, 2024.
Bucki previously had ruled against allowing “piecemeal litigation against some parishes,” saying it would “further entangle an already knotty situation” and could impair efforts for a global resolution of claims.
The diocese maintained in court papers that mediation, while still in its relatively early stages, was yielding “productive discussions,” and the multiple parties involved were not at an impasse.
Diocese lawyers also said they were optimistic mediation would result in a consensual reorganization plan.
Just last week, the diocese and the committee were in lockstep on a separate bankruptcy matter, in which the committee asked Bucki to force insurance companies to turn over their records of policies issued for the diocese prior to 1972.
While insurers opposed the request and said it could damage mediation talks, chief diocese attorney Stephen A. Donato told Bucki he had no issue with it.