The March 23 expiration of a provision in the Roman Catholic Diocese of Rochester’s ongoing bankruptcy reactivates an untold number of state court sexual-abuse claims against individual Catholic churches across the diocese’s 12-county span.
The revived state court cases were put on hold two years ago under a stipulation approved as part of the Chapter 11 case the diocese filed in 2019. The diocese filed the bankruptcy petition partly to avoid defending itself against scores of individual sexual-abuse claims.
Running parallel to the ongoing bankruptcy, the revived state court cases promise to add complications that could include substantial new legal costs for the diocese, which so far has spent nearly $6 million to pay attorneys, accountants and consultants working on the long-stalled bankruptcy.
Inked six months into bankruptcy case in March 2020, the expired agreement called a temporary halt to scores of state court lawsuits filed against individual churches and other organizations affiliated with the Rochester diocese but legally separate from it.
The stipulation stated that the stay applied to 226 Catholic parishes spread across the diocese’s Upstate New York counties; Catholic Charities of the Rochester Diocese Inc.; Catholic Charities of Rochester’s Catholic Youth Organization; Camp Stella Maris; five parochial schools in Ontario, Steuben, Cayuga and Chemung counties; and several other diocese-affiliated organizations.
With the provision’s expiration, an untold number of abuse claims that have been on hold in state courts are automatically revived as if awakened from a slumber. Attorneys representing plaintiffs in those cases need take no special action to restart them.
A total of 485 men and women have filed claims in the Rochester diocese bankruptcy seeking compensation for sexual abuse they claim to have suffered as children at the hands of priests, nuns and other church officials and employees. Many have also filed state court claims against the diocese and against individual parishes and churches.
As the bankruptcy approaches its third year with no resolution, many have grown frustrated with what they see as a lack of progress.
Now, says Leander James, an Idaho attorney representing more than 40 clients with sexual-abuse claims against the Rochester diocese in the bankruptcy and in state court, “the ball is in the parishes’ court.”
Boston attorney Mitchell Garabedian, who represents nearly 100 abuse survivors with similar claims, says he also is ready to see his clients’ long-delayed claims move ahead.
“Victims want to obtain justice through the legal process,” says Garabedian. “Justice will help survivors heal and gain a degree of closure.”
James sent letters on March 25 informing the lawyer representing the Rochester diocese’s parishes, Timothy Lyster of Woods, Oviatt Gilman LLP, that he must now file answers to his clients’ reawakened state court claims. A 45-day countdown for those filings started at midnight March 23, the letters state.
Lyster did not respond this week to the Rochester Beacon’s request for comment.
Dioceses and parishes
Filed in September 2019, the diocese’s Chapter 11 petition came a month after the New York Child Victims Act took effect.
By temporarily lifting a seven-year statute of limitations on sex-abuse crimes, the now-expired CVA opened a roughly two-year window for adults who suffered abuse as children but failed to press claims to pursue their alleged abusers. The act sparked thousands of such claims, including many against the Rochester diocese and against the diocese’s churches.
Under standing orders known as automatic stays, bankruptcy filings immediately halt any in-progress civil actions against a debtor. For Chapter 11 debtors like the Rochester diocese, such stays are meant to provide breathing space for the debtor to come up with a plan to pay creditors.
Catholic parishes might seem to a casual observer to be inextricably bound to their dioceses and thus fall under the automatic-stay provision. But under New York law, each of the Rochester diocese’s parishes are, by design of the church itself, independent entities.
In bankruptcy, persons or corporations like the diocese’s parishes that are closely tied to a debtor but legally separate from it are called related third parties.
The status of the Rochester diocese’s parishes under state law contrasts with their position under the church’s own legal code, known as canon law. Under canon law, parishes and other church-affiliated organizations fall firmly under control of whatever diocese they happen to be in.
Resolving the apparent conflict between secular and canon law, Rochester Diocese Bishop Salvatore Matano heads each of his diocese’s parishes as president of each parish’s state-registered corporation. The same arrangement is true for all New York Catholic dioceses. Bishops who head each New York diocese also head that diocese’s legally independent parishes.
For the church, such arrangements have pluses and minuses. Parishes’ legal separation from their parent dioceses could help bolster arguments against tapping parish funds to contribute to a bankruptcy settlement. But such separation also deprives parishes of automatic-stay protection.
To address the latter situation, the Rochester diocese filed a February 2020 Bankruptcy Court motion seeking a stay on state court actions targeting its related third parties,
Such a stay was needed to “aid the (diocese’s) efforts to reorganize by providing a breathing spell for all parties in interest to assess the CVA actions as well as issues relating to potential insurance coverage for any claims that may underlie the CVA actions,” the filing states.
The bankruptcy’s official creditors committee agreed to that stay, inking a March 2020 stipulation. Rochester Bankruptcy Court Judge Paul Warren memorialized the pact, signing an order enforcing the stay.
Creditors committees are appointed by the U.S. Trustee to safeguard creditors’ interests in Chapter 11 cases and typically have a big say on how cases are resolved. Most often, such committees include creditors with the biggest financial stake in the case. In the diocese bankruptcy, the creditors committee is entirely made up of claimants seeking compensation for sexual abuse.
The March 2020 stipulation’s lapse comes as mediation sessions between the diocese and insurers it hopes will shoulder most of the cost of a settlement with abuse survivors appear to be at a standstill. That mediation began nearly three years ago and so far appears to have borne little fruit.
A plan floated by the diocese last July to have some insurers contribute $35 million toward abuse survivors’ compensation was rejected by the creditors committee as insufficient. At that time, Warren had stern words for the diocese and its insurers, urging them to quickly agree to some compromise. Eight months later, no deal has been announced.
The stipulation had a series expiration dates. Before its March 23 lapse, the parties agreed to renew it 11 times. The exact how and why of its lapse now are something of a black box.
Neither the diocese’s chief bankruptcy attorney, Stephen Donato, nor creditors committee lawyer Ilan Scharf responded to requests for comment on the lapse. James and Garabedian declined to comment on how the lapse came about. Both cited pledges to stay mum on the mediation talks.
Where the Rochester diocese bankruptcy goes from here remains to be seen. The Chapter 11 could continue on a separate track while parishes individually defend themselves against scores of state court charges or it could be settled. Creditors unhappy with the case’s lack of progress could also ask that it be dismissed.
In the state court litigation, there is no guarantee that the same insurance issues that are stalling the bankruptcy would not come up. And where bankruptcy is designed to ensure equal treatment for all creditors, results in individually litigated state court claims could vary. Some plaintiffs might win large judgments while others see their cases tossed and others win lesser sums.
Whether the uncertainties accompanying a revival of state court actions would spark a Bankruptcy Court settlement also remains to be seen. If the diocese and insurers reach a settlement, some state court claimants might continue to press their claims.
However the Rochester Diocese’s bankruptcy plays out, it could be a bellwether, foreshadowing the resolution or lack of one in other New York Catholic dioceses’ bankruptcies.
The Rochester diocese was the first in the state to respond to the CVA by filing bankruptcy. Dioceses in Buffalo, Syracuse and Rockville Center on Long Island shortly followed suit. A few months ago, a Buffalo Bankruptcy Court judge ordered the Buffalo diocese and its balking insurers into mediation. Donato is the church’s chief bankruptcy lawyer in all three New York cases.