In a strongly worded legal brief, abuse survivors with claims in the Roman Catholic Diocese of Rochester’s bankruptcy have replied to the diocese’s bid to halt state court cases accusing priests and other church officials of sexual abuse.
The survivors’ message is unmistakably clear: We have waited far too long for our complaints to be resolved by this long-stalled bankruptcy. Let the state court cases proceed.
“The diocese’s failure to marshal its assets and insurance to provide a fair settlement underscores the need for (separate) litigation (against parishes and other diocese affiliates) at this time,” the survivors’ brief contends.
In the filing, survivors go on to accuse the diocese of bad-faith negotiating in a nearly three-year-old Bankruptcy Court mediation between the diocese and its insurers by “negotiating by attrition … to wear down survivors in an effort to get them to accept an unreasonable settlement.”
The survivors’ filing came virtually on deadline last Friday, days before Bankruptcy Judge Paul Warren is slated to hear oral arguments for and against the diocese’s April 6 bid to reinstate a freeze on state court cases individually targeting parishes, parish priests and other church officials.
In the state court actions, aging survivors accuse priests, nuns, deacons, camp counselors and other church officials of sexually abusing them as children decades ago and accuse the church of knowingly letting abuse go on.
Those slumbering state court complaints were frozen in time some two years ago under an agreement between the bankruptcy’s official creditors committee and the diocese. Warren memorialized the pact in a court order as a stipulation subject to periodic renewals.
The Rochester diocese’s bankruptcy’s creditors committee is a 12-member body appointed by the U.S. Trustee and made up of abuse survivors. The committee and the diocese had previously agreed to renew the stipulation 11 times.
On the date meant to be the stipulation’s 12th extension, March 28, one party declined to renew the pact. That started a 45-day countdown for 86 parishes and other diocese affiliates like Catholic Charities of the Diocese of Rochester, the diocese’s Catholic Youth Organization and Camp Stella Maris to respond to the state court lawsuits.
The state court lawsuits were already filed and had been awaiting action when the diocese sought Bankruptcy Court protection in September 2019.
In the April 6 filing, the diocese’s chief bankruptcy attorney Stephen Donato, lays the blame for stipulation’s expiration entirely on the creditors committee, writing that “the diocese has requested that the stipulation and order be further extended, however the committee has refused to consent to a further stay of litigation against the (parishes, priests and other diocese affiliates).”
In the answer to the April 6 complaint, creditors committee attorney Ilan Scharf takes Donato to task for allegedly violating an agreement to maintain silence on details of the mediation.
“The diocese’s actions towards survivors have been aggressive, including the rhetoric it uses in its injunction motion—in which it violates the mediation privilege by wrongfully accusing the committee of being the reason there is no resolution to this case,” Scharf asserts in the answering papers.
“The Diocese is not the victim here,” he adds. “The diocese’s own failures to protect children are the cause of its liability.”
Pleading that paying settlements that could total $100 million or more to settle scores of abuse complaints would outstrip the entirety of its assets, the Rochester diocese filed its Chapter 11 case a month after the New York Child Victims Act took effect.
Signed into law by former Gov. Andrew Cuomo in February 2019, the CVA temporarily lifted a seven-year statute of limitations, creating a roughly two-year window for adults sexually abused as children to civilly pursue their alleged abusers. A total of 485 men and women have filed abuse claims in the Rochester diocese bankruptcy.
In an early meeting with creditors, Rochester diocese chief financial officer Lisa Passero testified that the diocese expected insurers that wrote its liability policies during a roughly 20-year span beginning in the 1950s to pay for most of the cost of any settlement with abuse victims.
Insurers balked, however. Roughly a month into the case, a dozen insurers proposed to the Bankruptcy Court that they be given permission to pursue litigation in state court seeking to reduce or entirely avoid payouts to settle abuse claims.
The diocese objected, asking for a Bankruptcy Court trial. Instead of granting the request, Warren put the dispute on hold, ordering the insurance companies and the diocese to settle their differences in mediation. Survivors contend that after nearly three years of talks, that mediation shows no signs of yielding any agreement.
In the April 6 complaint, Donato maintains that “there is every reason to expect that the diocese will successfully reorganize. Indeed, the parties have been, and continue to engage in, active mediation and negotiation with the assistance of Judge (Gregg) Zive to accomplish that collective goal.” Zive is the court-appointed mediator.
Not so, counters Scharf, maintaining in the survivors’ response that “the diocese has done nothing meaningful to get its insurers to fund an appropriate settlement. The only action the diocese took against its insurers was to object to stay relief and file a complaint (in an adversary proceeding that was promptly stayed) more two years ago.”
Restarting the state court cases will add costs and confusion to the already costly bankruptcy, Donato maintains. In a recent filing, the diocese recorded its costs to pay lawyers, accountants and consultants working on its bankruptcy as totaling just over $6 million so far. Costs continue to mount in six-figure increments each month.
“Litigating the CVA Cases during this critical stage of the Chapter 11 case will be burdensome and time consuming and will disrupt and delay the ongoing mediation and negotiations toward a plan of reorganization for the Diocese, to the detriment of all creditors,” Donato asserts in the April 6 complaint.
To the contrary, maintains Scharf in the survivors’ answering papers, “continued prosecution of the CVA Cases will facilitate rather than hinder global settlement negotiations toward a consensual plan of reorganization, by providing incentives for the insurers and (parishes) to make a contribution to fund a settlement trust as part of a consensual plan. At present, there is no proposed plan and no indication that the (parishes) are going to make a substantial contribution to fund a plan in order to obtain releases.”
The dispute arises because of a disjunction between the way this state’s Catholic dioceses and affiliates like parishes are organized under New York law and the way they are organized under the church’s legal code, which is known as Canon Law.
Under Canon Law, parishes and other diocesan affiliates are part of a diocese and fall firmly under the control of that diocese’s bishop. Despite that feature, the Rochester diocese and other of the state’s Catholic dioceses are registered under state law as separate corporations. Bishop Salvatore Matano is president of each parish corporation in the 12-county Rochester diocese and is the titular head of other diocese affiliates. The same arrangement holds true in the state’s other Catholic dioceses.
Under standing Bankruptcy Court orders known as automatic stays, all civil litigation against debtors is halted while a bankruptcy works its way through the courts. The provision is meant to give debtors breathing room to work out a plan of reorganization or make a plan to liquidate assets. In most bankruptcies, stays halt actions like mortgage foreclosures and contract disputes.
Because the Rochester diocese’s parishes are legally separate, the diocese’s automatic stay is not extended to them. The stipulation was supposed to solve that problem, giving the diocese, its creditors and the diocese’s insurers time to work out a global settlement in Bankruptcy Court acceptable to all.
The outcome of the Rochester diocese dispute is likely to be closely watched around the state.
After the CVA took effect, Rochester was the first of the state’s Catholic dioceses to seek Bankruptcy Court protection. Also facing CVA claims, dioceses in Buffalo, Syracuse and on Long Island shortly followed suit.
Several months ago, a Buffalo bankruptcy judge ordered the Buffalo diocese and its balking insurers into mediation. Many of the insurance companies involved in the Syracuse, Buffalo and Long Island diocesan bankruptcies are the same as those in the Rochester diocese case. Donato also represents the Syracuse, Buffalo and Long Island dioceses.