New York diocese, abuse victims file competing bankruptcy plans

Donald L. Kohles recites the rosary outside the Cathedral of Our Lady of the Angels in Los Angeles
REUTERS/Mario Anzuoni
  • Sexual abuse victims seek larger contribution from individual parishes
  • Rockville Centre diocese seeks to resolve 600 sexual abuse claims in bankruptcy
  • Competing bankruptcy plans are relatively rare in Chapter 11 cases

(Reuters) - A Roman Catholic diocese on Long Island, New York, proposed a bankruptcy plan on Friday, moving to retake control of its Chapter 11 case after a committee representing sexual abuse victims filed a competing restructuring proposal.

The Diocese of Rockville Centre, one of the largest in the United States, said in a statement Friday that the proposed aggregate payment and the payment each abuse victim would receive under its proposed plan are "well in excess of any other Diocesan Chapter 11 plan in history."

The diocese filed for Chapter 11 bankruptcy in New York in October 2020, citing the cost of lawsuits filed by childhood victims of clergy sexual abuse. The state’s Child Victims Act, which took effect in August 2020, temporarily enabled victims of child sexual abuse to file lawsuits over decades-old crimes.

The diocese's efforts to reach a comprehensive settlement with more than 600 sexual abuse claimants stalled over its two years in bankruptcy.

The breakdown in discussions caused the official committee that represents creditors, including abuse victims, in a rare move to propose a restructuring plan without input from the diocese on January 19.

The committee's plan would require the diocese to pay $41 million to abuse victims, plus additional payments from the sale of property and future insurance proceeds. Parishes and other non-bankrupt affiliates could opt into the settlement for an aggregate $200 million contribution.

The Diocese "refuses to negotiate with the Committee and is attempting to bully survivors into submission,” committee attorney James Stang said in a Friday statement.

The diocese responded Friday with a plan of its own, proposing to give abuse survivors between $185 million and $200 million in payments, plus the right to pursue additional recovery from the diocese's insurers.

The biggest difference between the two plans is their treatment of individual parishes in Rockville Centre, which are not bankrupt themselves and which may also be liable for sexual abuse claims. The Diocese's plan proposes that parishes would be released from liability and only pay $11.1 million toward a sexual abuse settlement, instead of the $200 million proposed by creditors.

Bankrupt Catholic dioceses have faced creditor-proposed plans in a few past cases, and creditors voted to support one such plan in the bankruptcy of the Archdiocese of Saint Paul and Minneapolis, Stang said. The judge in that case ultimately did not approve either the diocese's plan or the creditors' plan, and the two sides reached a new settlement that was ultimately approved in court, Stang said.

The case is The Roman Catholic Diocese of Rockville Centre,

New York, in the U.S. Bankruptcy Court for the Southern District of New York, No. 20-12345.

For Rockville Centre: Corinne Ball of Jones Day

For the creditors committee: James Stang of Pachulski Stang Ziehl & Jones

Read more:

Special Report: Boy Scouts, Catholic dioceses find haven from sex abuse suits in bankruptcy

Bankrupt New York diocese reaches $55 million sexual abuse settlement

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