Judge gives Catholic diocese a temporary reprieve

In a hearing marked by heated exchanges between lawyers representing abuse victims and the Roman Catholic Diocese of Rochester, Bankruptcy Judge Paul Warren temporarily let stand a freeze on state court sexual-abuse cases targeting dozens of the diocese’s parishes. 

However, Warren appeared to be leaning toward the abuse survivors’ plea to let the cases proceed.

The diocese asked for the hearing in hopes of persuading Warren to undo a move by the bankruptcy’s official creditors committee that ended a roughly two-year-old freeze on hundreds of state court cases targeting individual parishes, priests and other diocese-affiliated officials and organizations that are not part of the diocese’s Chapter 11 case.

In the April 27 hearing, diocese bankruptcy lawyer Stephen Donato argued that letting the state court cases proceed would unloose “a barrage of litigation,” throwing the bankruptcy into chaos and harpooning ongoing negotiations between the diocese and the insurance carriers. The diocese hopes insurers will bear most of the cost of what church officials predicted could be a settlement totaling $100 million or more.

Quite the contrary, countered official creditors committee lawyer Ilan Scharf. 

The creditors committee is a 12-member body appointed by the U.S. Trustee to look out for the interests of creditors in the case. Committee members are all self-declared survivors of childhood abuse at the hands of priests and other church officials. 

Letting the state court cases move ahead would light a fire under the diocese, inducing it to finally conclude a deal in negotiations that have shown virtually no sign of resolving since they began more than two years ago, Scharf maintained.

“To get parties to the table, we may have to go forward with the state court cases,” added Amy Keller, a Buffalo attorney representing survivors in the Rochester and Buffalo diocese’s bankruptcies.

In the timeline Warren is considering, the state court cases could be revived in roughly two months. 

At that point, lawyers pursuing claims of men and women who as children were sexually abused by Rochester diocese priests, nuns and other church officials would start seeking documentation to back up their clients’ claims. 

Such documentation could include the diocese’s records of transfers of alleged abusers to other parishes and priests taken out of active service to retire to what the church calls “a life of prayer and penance.” Officials like Rochester Bishop Salvatore Matano and former Bishop Matthew Clark or accused priests could also be required to give sworn testimony in depositions or called to testify in court.

According to a 2012 listing published in the Catholic Courier, nine Rochester diocese priests then determined by the church to have been abusers were assigned to a life of prayer and penance. The cases of five more alleged abusers were then still being canonically resolved. Five such cases were unresolved because the accused priest had died after being accused or were posthumously accused, the diocese publication reported.  

The filing and stay order

The Rochester diocese filed a Chapter 11 bid for court protection roughly a month after the New York Child Victims Act took effect.

Signed into law in February 2019, the CVA took effect in August of that year. The law opening a two-year window for adult survivors of childhood sexual abuse to civilly pursue abusers who otherwise would have been protected by a seven-year statute of limitations. 

As of the August 2020 bar date for claims in the bankruptcy, 485 individuals seeking compensation for past sexual abuse had filed claims in the diocese Chapter 11. According to Donato’s April 27 courtroom testimony, Rochester parishes and other diocese affiliates currently face 392 state court sexual-abuse complaints.

In November 2019, a group of the diocese’s insurance carriers asked Warren for permission to sue the diocese in state court in an attempt to avoid part or all of any payouts to settle sexual-abuse claims. Warren put the insurers off and instead ordered the diocese and the carriers into mediation in early 2020. 

Standing Bankruptcy Court orders called automatic stays halt any civil actions against debtors while the debtors are in bankruptcy. Rochester diocese parishes and other affiliates targeted in the state court lawsuits are separately incorporated under state law and thus are not entitled to the diocese’s automatic stay protection. 

To resolve that difficulty, the creditors committee and the diocese agreed to halt state court cases against parishes and other affiliates. Warren memorialized their pact as a stipulation in a court order subject to periodic renewal. That order was first issued more than two years ago. Before the committee’s March 28 refusal to renew the agreement, the parties had agreed to extend the pact 11 times. 

‘Caught in the middle’

In an April 6 Bankruptcy Court complaint, the diocese asked Warren to forcibly reinstate the parish stay.

Portraying the diocese as “caught in the middle” between balking insurers and abuse survivors clamoring for a settlement, Donato argued last week that reviving the state court cases would upend ongoing mediation between the diocese and insurance carriers. 

“We have an absolute right to finish the mediation,” Donato insisted, maintaining that the diocese and insurers might come to terms in as little as three months.

“Let’s get one thing out of the way, the diocese is not the victim here. It is not caught in the middle. It is responsible for the abuse that caused this trouble,” creditors committee lawyer Scharf objected. 

Aging survivors in their 50s, 60s, 70s and 80s “have already waited decades” for the church to make right for abuse they suffered, Scharf said. Prolonging the already stalled bankruptcy would unfairly delay their hopes of closure. 

While Warren did not directly state that he would rule in the creditors committee’s favor, he broadly hinted that he is leaning more toward the survivors than toward the diocese.

“The parishes have been enjoying the stay for three years,” the judge scolded Donato at one point.

At the hearing’s close, Warren said he would take two to three weeks to craft and hand down a written ruling. While not saying outright that he would favor the creditors committee, he said that he would entirely disallow one basis on which Donato argued the stay should be reimposed and would consider only partially granting other of the diocese’s lawyer’s requests. 

In the diocese’s complaint seeking to reimpose the parish stay, Donato asked that the stay be reimposed for a period extending to 90 days after the diocese submits a plan of reorganization.

Since no such plan is in sight, such a stay would likely keep the parishes out of court for at least a year and quite possibly longer, Warren told Donato.

In the hearing, Donato scaled back the diocese’s request for the length of a stay reimposition, suggesting a four-month duration.

Warren said he would instead likely grant an extension of the stay for 21 days past the date on which he hands down a decision. Survivors’ attorneys pressing the state court claims appear to be coordinated in their response, so the chaos Donato predicted if state court cases are revived would likely not ensue, the judge concluded.

If the resumption of state court complaints against parishes does, as Scharf predicts, spur a resolution to the long-stalled Rochester diocese bankruptcy, the shape it might take remains to be seen. Speculation Warren raised during the April 27 hearing could provide a hint.

A possible template

What impact might a recently announced settlement between the New Jersey Diocese of Camden and some 300 abuse survivors there have on the Rochester diocese bankruptcy, the judge wondered at one point in an aside unprompted by any hearing participant’s testimony.

In the Camden bankruptcy, survivors rejected a settlement in which the diocese proposed to pay $60 million and insurance carriers agreed to chip in $30 million to create a fund that would pay survivors’ claims over a 10-year span. The survivors instead agreed to have the Camden diocese and its parishes pay $87.5 million using their own money to create a fund that would pay claims over four years. 

As part of the settlement, the New Jersey diocese agreed to assign to survivors the right to pursue claims against its insurers, who are not contributing to the $87.5 million settlement. That pact has yet to be approved by the Camden Bankruptcy Court.

That model could be a template for diocesan settlements around the country including Rochester’s, attorney Jeffery Anderson predicted in an interview on the eve of the April 27 hearing here.

Anderson represents approximately a third of the Camden diocese abuse claimants and 175 claimants in the Rochester diocese bankruptcy. 

Faced with the prospect of big payouts in states that have passed laws like New York’s CVA, insurance carriers are taking ever harder-line stances in settlement negotiations, he said. 

Settlements like the Camden deal would provide the church with a possible path to put abuse scandals behind it. And survivors independently suing carriers could win as much as $1 million apiece or more, Anderson believes.

Speaking at the April 27 hearing, Anderson told Warren that the Rochester diocese has more assets and better insurance coverage than the Camden diocese and maintained that Donato’s prediction of chaos on resumption of the state court cases “is absolutely incorrect.” 

Will Astor is Rochester Beacon senior writer. The Beacon welcomes comments from readers who adhere to our comment policy including use of their full, real name.