New hope for abuse survivors

As the Roman Catholic Diocese of Rochester’s bankruptcy nears its fifth year and continues to rack up costs that now top $13 million, a break signaling the first big step in resolving the hard-fought case occurred last week.

It came in the form of Bankruptcy Judge Paul Warren’s announcement that he will allow rival plans of reorganization to go to a vote. The judge’s statement was eagerly awaited.  

It follows years of squabbling between the diocese and insurance companies that the diocese hoped would bear much of the burden of a multimillion-dollar payout to aging survivors of sexual abuse at the hands of priests and other church officials. Most recently, months have been spent on talks over the wording and form of the disclosure statements.

Scores of abuse survivors filled every available courtroom seat at the April 16 hearing. Dozens more spilled into an overflow courtroom that also was filled to capacity.

“This is like flying Jet Blue. You thought you had a seat reserved, but you didn’t,” Warren joked at the start of the hearing.

Attendance by so many abuse survivors at such hearings is highly unusual, says Leander James, an Idaho-based attorney representing 76 survivors with claims in the Rochester bankruptcy who attended the hearing.  

In more than a dozen diocese bankruptcies he has participated in across the country, few survivors have generally attended court sessions, preferring instead to have their lawyers keep them abreast of developments.

Diocese bankruptcies are always emotional roller coasters for survivors, James says. But because the Rochester case has dragged on so long, it has become even more emotionally charged for its frustrated survivors.

Hoping to see a break in the long-stalled proceeding, many were drawn to the April 16 hearing as well as to one held several weeks earlier.

Attendees were not disappointed.

Former Rochesterian Bernardo Benitez, a survivor who had traveled from Texas, where he currently lives, hailed Warren’s announcement as “a big victory.”

James concurs. After nearly five years of stalemate, he predicts, the case “is going to move forward. Now, it starts chugging along.”

Next steps

Though Warren’s announcement marks the first definitive step resolution, a final settlement is likely to be months away, possibly stretching into 2025.  

Disclosure statements lay out details of plans of reorganization in Chapter 11 cases. Reorganization plans spell out how creditors are to be paid. Creditors in the diocese bankruptcy are the 485 abuse survivors with claims in the case.

While plans of reorganization are typically filed only by debtors like the diocese, survivors in the diocese case will choose between two plans: one filed the diocese, the other by the Continental Insurance Co.

Also known as CNA, Continental took the highly unusual step of filing a rival plan last year after four other insurers and the diocese reached agreement on sums they would contribute toward a payout to survivors.

In balloting slated to conclude by July 29, survivors can choose either the CNA or the diocese plan, approve both plans or reject both. To win approval, plans must be deemed acceptable by 75 percent of survivors.

Whichever plan or plans pass muster must then be confirmed by the court. A confirmation hearing is slated for early September.

At the April 16 hearing, Warren and attorneys agreed that a number of tweaks to either plan would be needed before they could be confirmed. How long it might take for parties to agree on what revisions might be needed is not clear.

The judge announced his intention to let the rival plans go to a vote early on. He used the rest of hearing as an opportunity to school survivors on how the Chapter 11 sausage, in cases with as many moving parts as the diocese bankruptcy, must be made.

For the rest of the more than two-hour hearing, the judge and the gathered lawyers—representing the diocese, a committee charged with looking out for survivors’ interests in the bankruptcy, CNA, and the U.S. Trustee—debated the tweaks that might needed before final versions of the rival disclosure statements are sent to survivors.

Such discussions would normally take place in chambers with only himself and lawyers present, with every detail not necessarily entered into the record, Warren explained. He noted that similar talks had gone on over the last 90 days following his rejection of initial drafts of both plans in  February.

While survivors might find such time-consuming attention to detail frustrating and the media might dwell on the case’s molasses-like pace, the judge explained, extreme care is needed to avoid district court challenges that could further delay a resolution for as much as a year.   

The shape of the chief revisions that might be needed may become clear only after the U.S. Supreme Court issues rulings expected to come at the end of June. One concerns how parishes and other so-called related third parties that are legally separate from the diocese can be treated. Another high court ruling could bear on insurance payouts.

A five-year journey

The diocese first sought court protection in September 2019, a month after New York’s Child Victims Act took effect.

The act opened a temporary window for adult victims of abuse suffered as children to pursue abusers who would otherwise been protected by a statute of limitations. By the time the window closed, 485 survivors had filed claims in the diocese bankruptcy.

For survivors, progress in the case has been achingly slow. Diocesan officials declared early on that they expected the diocese’s liability carriers to bear much of the cost of what they expected to be a payout of $100 million or more.

CNA balked, however, asking Warren for permission to take a case for denying some diocese claims to state court. Warren refused.

Instead, he ordered the diocese, its insurance carriers and the committee representing survivors into mediation.

Those talks, which began in 2019, did not progress quickly. Insurers balked, while the diocese remained committed to not using parish funds to pay survivors. Survivors grew antsy at the lack of progress.

Three years into the case, Bishop Salvatore Matano reversed the diocese’s position on withholding parish funds, apologizing to parishioners in a November 2022 letter. Despite his earlier promise, the bishop said, circumstances had changed.

The Rochester diocese plan calls for a $126.35 million trust to be created to pay survivors’ claims. The diocese and its parishes would put $55 million into the trust. Survivors collecting payments from the trust would be free to individually sue the non-settling insurer, Continental, to collect extra amounts.

CNA’s plan largely mirrors the diocese plan but proposes to add $75 million to the trust as CNA’s contribution and thus indemnify the company against further legal action.

CNA had earlier struck a deal with the diocese in which the insurer agreed to pay $63.5 million to settle its share of claims. Survivors committee lawyer Ilan Scharf rejected the offer, complaining that the committee was not consulted and the $63.5 million amount was insufficient.

The insurer subsequently maintained that the diocese owes it an unstated sum to cover administrative expenses it racked up to work out the $63.5 million deal.

Warren is slated to consider CNA’s claim in an August trial. His ruling in that dispute could affect confirmation of a final plan. If the judge finds, for example, that CNA and the diocese entered into an enforceable contract, CNA might pull back its $75 million offer, reverting the $63.5 million figure.

Another possible scenario, however, is that survivors will shoot down CNA’s plan while accepting the diocese plan, an eventuality that could lead CNA to up its $75 million offer rather than face scores of state court cases, each of which could result in seven- or eight-figure judgments.

During last week’s hearing, survivors committee attorney Scharf confidently predicted that in the upcoming balloting “CNA’s plan will be crushed.”

CNA lawyers disagreed. In its plan, CNA asserts its $75 million contribution would provide survivors with the comfort of a final settlement and save them from having to face further court proceedings.

Benitez says that after the April 16 hearing, in a closed-door session in a courthouse conference room attended by 70 to 80 abuse survivors and their lawyers, sentiment overwhelmingly favored the diocese plan.

While CNA portrays its bird-in-the-hand offer as one that would relieve survivors of the burden of further court hearings, many survivors who spoke out at the session saw the possibility of facing the insurance company in court as less a burden than an opportunity.

“People were saying, ‘Bring it on,’” Benitez recalls. “They were saying, ‘I want to go to court. I want to tell my story.’ That’s how I feel too. I want to tell my story.”

Will Astor is Rochester Beacon senior writer. The Beacon welcomes comments and letters from readers who adhere to our comment policy including use of their full, real name. Submissions to the Letters page should be sent to [email protected].