The Roman Catholic Diocese of Rochester on Friday objected to nearly 100 claims filed by sexual-abuse survivors in its ongoing Chapter 11 bankruptcy, a move that could shave tens of millions off any payout it makes in the case.
The objections come late in the nearly three-year-old case and long after the claims were first filed. They also come as tensions between survivors and the diocese build as both sides joust over a settlement offer that survivors scorn as too little, too late.
In the offer, the diocese proposes to pay survivors a total of $145.75 million, with its insurance carriers covering $105 million of that amount.
Scorning the claim objections as raised on legal technicalities and a contradiction of Rochester Diocese Bishop Salvatore Matano’s professed concern for survivors, an attorney representing survivors in the case vowed to vigorously fight the objections.
Such objections in diocesan bankruptcies are “unheard of and a pretty big deal in my opinion,” says Leander James, an attorney representing 76 abuse survivors in the Rochester Diocese bankruptcy.
In a statement, the diocese says that it does not question the veracity of survivors’ claims but maintains that it is not responsible for acts committed by parties not legally tied to the diocese, and thus needs to object to the claims as part of its “fiduciary responsibility.”
As of July 22, the diocese had filed 97 claim objections. If all were to be disallowed, it would reduce the diocese payout by as much as $30 million.
Each of the 97 claim objections cites an affidavit filed by Rochester Diocese chancellor Rev. Daniel Condon. The filing lists various schools, diocese-affiliated organizations and Catholic teaching orders as legally separate entities and maintains that the diocese is not responsible for offenses committed by employees or officials of such unrelated parties.
Noting that under church law all Catholic organizations operating in diocesan precincts serve under the authority and at the pleasure of diocesan bishops, James rejects the diocese’s stance as disingenuous but virtually certain to add significant costs to a bankruptcy that has already racked up more than $7 million in expenses.
In New York, parishes, schools and other affiliates of the states Catholic dioceses are legally registered as separate corporations. The bishop of each diocese is named as the head of each parish corporation.
If all the late-filed bankruptcy claim objections were litigated, says James, each would add many billable hours to fees charged by lawyers representing the diocese as well as expenses tied to discovery requests for documents and records, amounts that add to the $7 million that the diocese has so far spent on the bankruptcy and would further reduce damages recovered by survivors.
Rather than independently litigating hundreds of claims against diocesan affiliates, James says survivors are seeking to reach a global settlement in the bankruptcy in which such related parties would contribute along with the diocese and its liability carriers.
In pursuing the claim objections, the diocese maintains in its statement that it seeks to resolve “this matter justly, charitably and in a timely manner.”
The diocese asked for Chapter 11 court protection in September 2019, a month after New York’s Child Victims Act went into effect. Signed into law in February of that year, the CVA took effect in August 2019.
The law opened a roughly two-year window in which adults who suffered abuse decades ago as children but failed to file a claim within the seven-year statute of limitations could seek damages from their alleged abusers. The CVA opened a floodgate, sending hundreds of such claims against the Rochester Catholic Diocese and affiliated organizations like parishes in the diocese’s 12-county region.
The diocese currently faces 475 claims by sex-abuse survivors in the Chapter 11. Rochester Diocese parishes and other church affiliates in the diocese are fighting some 300 separately filed sex-abuse claims in area state courts.
The Rochester Bankruptcy Court has set a Jan. 27 court date for a hearing to be held on the diocese’s $146 million settlement offer. The length of the timeline seems to suggest that the court, which ordered the diocese, its insurers and the case’s official creditors committee into a still-ongoing mediation nearly two years ago, would like to see the dispute settled without further litigation.
The bankruptcy’s official creditors committee is a body made up of survivors and appointed by the U.S. Trustee to look out for survivors’ interest in the bankruptcy. It has filed objections to the settlement, complaining that it is financially inadequate and was arrived at in negotiations between the diocese and its liability carriers with no input from survivors.
One of the diocese’s insurance carriers, the Continental Insurance Co., last week filed an answer to the creditors committee, asserting that the diocese’s insurance coverage is less than the creditors committee claims and that it actually owes nothing. Also filing a brief last week, maintaining that survivors would be better off to accept the settlement, was diocese liability carrier Lloyds of London.
The recent offer came months after Bankruptcy Judge Paul Warren rejected a $35 million diocesan offer, which survivors also disparaged as having been arrived at without their input.
The diocese, insurers and the creditors committee have been involved in the mediation since 2020. Survivors have voiced frustration with the talks, complaining that they have too long been stalled with no results.
Warren ordered the mediation after insurers asked him for leave to file a state court case in which they planned to avoid responsibility for covering for at least some sex-abuse claims against the diocese.
As the mediation continued to bog down, in late March the creditors committee pulled out of a Bankruptcy Court agreement inked early in the case that had kept state court claims against parishes and other legally separate diocese affiliates frozen pending the outcome of the bankruptcy.
The resumption of several hundred long-dormant state court claims against diocesan affiliates, which are proceeding on separate tracks from the diocese’s Chapter 11, puts new pressure on the parties to reach a mutually acceptable agreement. Whether any such agreement will materialize before the Jan. 28 settlement-offer hearing is not clear.
Earlier this month, Warren appointed a second mediator, an expert in insurance law, who is to serve alongside the Nevada bankruptcy judge who has been overseeing the mediation since its start two years ago.
Two new mediation sessions are slated to be held this week at the Perinton offices of Harris Beach PLLC on July 27 and 28.
The diocese’s statement cites the upcoming sessions as “a continuing effort to arrive at a consensual plan of reorganization that will provide fair compensation for those who have been harmed.”
Insurers have agreed to participate in this week’s sessions but are not committed to any further talks beyond those two, Warren’s order states.