Court sets trial date in diocese settlement offer

The Rochester Bankruptcy Court has set a late January date for a trial on the Catholic Diocese of Rochester’s $147.75 million offer to settle claims of nearly 500 survivors of sexual abuse by priests and other church officials.

Put forward by the diocese in May, the settlement offer came nearly three years into the Chapter 11 bankruptcy the diocese filed in September 2019 as scores of abuse survivors filed state-court claims and claims against the diocese itself seeking compensation for alleged past sexual abuse.

So far, the bankruptcy has been an uncomfortable stand-off between the diocese and increasingly restive abuse survivors, who are not welcoming the new settlement offer.

Attorneys representing survivors have characterized the proposal, which would on average pay survivors some $310,000 apiece, as too little, too late. That offer came nearly a year after the diocese unsuccessfully floated a $35 million settlement proposal, which Bankruptcy Judge Paul Warren rejected.

Like the earlier offer, the new, $147.75 million proposal was worked out between the diocese and insurance carriers it hopes will bear much of any settlement’s cost with no input from survivors. Terms call for insurers to pay approximately $107 million of the total and for the diocese to come up with some $40 million.

In court papers, the diocese portrays the offer as a boon that would help abuse victims achieve “certainty with respect to a very substantial insurance contribution rather than risking the cost, extensive delay, and uncertain outcome of litigation in pursuit of the theoretical possibility of a larger recovery at some point in the distant future.”

Abuse survivors see those words as empty, however, says Leander James, an attorney representing 76 of the 475 survivors with claims in the bankruptcy. James is pressing those claims in state court cases.

While they view the nine-figure offer as insufficient, says James, survivors see the fact that neither the insurers nor the diocese made any attempt to include them in negotiations leading up to the offer as reason enough to reject it.

Ilan Scharf, an attorney representing the bankruptcy’s official creditors committee, echoes James’ complaints. Appointed by the U.S. Trustee to look out for the interests of creditors in the diocese’s Chapter 11, the committee is made up entirely of abuse survivors.

In papers filed late last month, Scharf argues that the settlement proposal is a sub rosa plan, and as such cannot be approved by the court. The Bankruptcy Code defines a sub rosa plan as one imposed on creditors by a debtor without the creditors’ consent.

Like James, Scharf argues that the amount offered is insufficient, maintaining in the court filing that, as proposed, the offer would “expose the diocese and its (parishes and other related organizations) to litigation risk because sexual abuse claimants and the committee will look to them to fund the substantial shortfall.”

The Bankruptcy Court docket entry setting a Jan. 27 date for the settlement proposal to be heard states that a court hearing will take place only “as needed.”

That proviso would seem to point to the court’s hope that the diocese, its insurers and the creditors committee, which have sporadically engaged in talks in a court-ordered mediation since early 2020, might come to terms before the trial is slated to take place.

Survivors have complained that the mediation appeared to be stalled for much if not all of the time that talks took place. Participants in the now nearly three-year-old mediation have steadfastly declined to publicly say what has or has not been discussed or how often the parties have met.

Warren’s decision in May that let survivors’ previously long-frozen state-court cases against individual Rochester Diocese parishes resume could spur the diocese to settle on terms more amenable to survivors.

In New York, the church has chosen to register diocesan parishes, including Rochester’s, as legally separate entities from their parent dioceses. That protects the parishes from legal claims against the dioceses but it also means the court protection a Chapter 11 provides to a diocese does not extend to parishes or to other church-related organizations like Catholic Charities of Rochester’s Catholic Youth Organization or Camp Stella Maris.

For much of the bankruptcy’s progress, some 300 state-court complaints filed against individual parishes, parish priests and other church-related persons and organizations were halted under an agreement inked between the diocese and the creditors committee early in the case. That halt led Rochester Diocese Bishop Salvatore Matano to assure parishioners that their churches would not be disrupted by the bankruptcy, which only involves the diocese itself.

Frustrated at what it saw as a lack of progress in the mediation, the creditors committee withdrew its support for the freeze on state court cases in late March. Subsequently, Warren turned down the diocese’s bid to have him forcibly reinstate the freeze.

The state court cases have since resumed, says James, noting that he and other attorneys representing survivors in state court are now filing requests to have the church produce records detailing transfers of abusive priests among parishes and are asking to depose church officials.

State court trials could see officials called to testify in open court and make public details the church might prefer not to see aired, he believes.

In the state court actions, an attorney representing the Rochester Diocese parishes has filed answers maintaining that parishes should not be held legally liable for harms abuse survivors suffered. Attorneys representing Camp Stella Maris are seeking to have state abuse claims thrown out.

James says detailed public airing of the old abuse claims could be avoided if a settlement agreement acceptable to survivors is reached that spells out contributions by the diocese, its insurers, parishes and other related third parties. He has no insight as to how likely such an agreement might be.

If that doesn’t happen before Jan. 27, notes James, costs in the already costly bankruptcy will mount further and be added to by parishes and other related parties’ expenses to defend themselves against state court claims.

In the Chapter 11 alone, the diocese, as of May 31, has spent $7 million to pay attorneys, consultants and others working on the bankruptcy. Fees collected to pay such professionals come out of what’s known as the bankruptcy estate, the pot of a debtor’s money and assets that ultimately is tapped to pay its creditors, a group that in the diocese’s case is made up of abuse survivors.

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.