Clergy abuse victims ask Baltimore bankruptcy judge to reconsider ban on lawsuits against Catholic parishes, schools

Frederick News-Post [Frederick, MD]

November 3, 2023

By Lee O. Sanderlin Baltimore Sun

A committee representing clergy abuse survivors is asking a federal bankruptcy judge to reconsider her order barring lawsuits against Catholic schools and parishes as part of the Archdiocese of Baltimore’s Chapter 11 bankruptcy.

Parishes and schools are technically not assets of the archdiocese, despite Archbishop William E. Lori having control over whether they can be bought or sold, but were granted protection from lawsuits because the archdiocese insures them.

In early October, U.S. Bankruptcy Judge Michelle Harner issued an interim injunction on lawsuits against entities covered by archdiocesan insurance policies (known as covered parties). Harner determined those policies are assets of the corporation that makes up the archdiocese, meaning any lawsuit would inevitably draw down on insurance monies in order to pay legal fees and settlements.

Whenever any entity files for bankruptcy it is automatically protected from lawsuits so its assets can be preserved to pay creditors. Sometimes those protections can be extended to third parties, which in this case has largely meant parishes and schools.

An unsecured creditor’s committee — a group of seven abuse victims who represent all victims who will bring claims against the archdiocese in the bankruptcy process — is asking Harner to reconsider her decision ahead of a hearing Monday where she could extend the injunction indefinitely until the bankruptcy case is resolved, which may last several years.

“If an injunction is issued, not only will the waiting and denial of justice continue against the Debtor, it will prevent Survivors from seeking acknowledgement and justice against other culpable parties,” attorneys for the survivors’ committee wrote in a court filing. “The likelihood that Survivors will die without exercising their rights will materially increase, their rights to a jury trial will be impaired, and their cases will be weakened from an evidentiary perspective.”

The Archdiocese of Baltimore filed for bankruptcy two days before a new state law, the Child Victims Act, went into effect. The filing was a sort of end-run around the act, which lifted the statute of limitations on childhood sexual abuse lawsuits and allowed people whose claims were previously blocked because too much time had elapsed from when their abuse happened to also bring cases. Church officials had likely been planning for bankruptcy for some time, having spent more than $750,000 on attorneys and consultants before filing, according to court records.

Passage of the Child Victims Act and the bankruptcy filing followed the release of a Maryland Attorney General’s Office report that detailed eight decades of sexual abuse in the archdiocese, identifying 156 clergy and lay people who are alleged to have abused at least 600 children and young adults. The report also revealed the extent church leaders worked to cover up abuse and, in some cases, enable it.

Attorneys for the archdiocese argued in court Oct. 3 that an injunction for parishes and schools would help preserve assets for victims when the time comes to reach a final settlement. The archdiocese has significant assets, including jewels, gold, oil paintings and property. Altogether, its total assets are listed at more than $200 million, which is still likely an undercount.

When bankruptcy is resolved, the debtor, which in this case is the archdiocese, is freed from future liability arising from previous misconduct. In order for that protection to extend to parishes and schools, they will have to contribute significant funds to the settlement, something diocesan lawyers indicated in court last month would be the case.

Bankruptcy proceedings in other Catholic dioceses — there have been more than 30 to seek Chapter 11 protections — have largely followed a similar path.

However, the committee’s filing pointed to two other cases, the bankruptcies in Rockville Centre and Rochester, New York, where judges declined to extend the injunction given to the diocese there to parishes and schools.

Those judges found the dioceses had not proven the insurance trusts were actually at risk, and, even if they were, the threat of lawsuits did not mean the entire trust would be depleted. The committee also argued that the Archdiocese of Baltimore had not sufficiently identified which insurance policies it was hoping to protect.

Even if the injunction were to remain, it would not necessarily prohibit all lawsuits against parishes and schools. If a person was abused at a parish in a year where the insurance may have lapsed, or at a Catholic facility that isn’t covered by the larger diocesan policy, those lawsuits can proceed because they won’t impact the asset pool that will ultimately be used to settle the bankruptcy claims.

For example, the high-profile Gallagher lawsuit, brought by one of Baltimore’s oldest Catholic families against St. Mary’s Seminary and the Society of the Priests of Saint Sulpice, can continue. That suit, filed in July, alleges negligence from the archdiocese, the seminary and the order led to the abuse of Frank Gallagher Jr., which later drove him to drug and sex addiction before he overdosed and died in 2022.