ROCHESTER (NY)
Rochester Beacon [Rochester NY]
August 21, 2024
By Will Astor
Parties in the Roman Catholic Diocese of Rochester’s Chapter 11 bankruptcy have asked to put off a previously scheduled hearing for the court to consider confirmation of the diocese’s plan of reorganization.
Plan confirmations by Bankruptcy Court judges are a final step in Chapter 11 cases before creditors can be paid. Creditors in the diocese case are more than 400 survivors of childhood sexual abuse by priests and other church officials.
Parties say they need time to revise the current reorganization plan to accommodate a June 27 U.S. Supreme Court ruling.
How much plan revisions might further delay a conclusion to the now five-year-old case is not clear.
The diocese asked for court protection in 2019 a month after New York’s Child Victims Act took effect. The act opened a two-year window for such survivors to pursue abusers who otherwise would have been protected by a statute of limitations.
The diocese’s reorganization plan was jointly submitted last April by the diocese and the official creditors committee, a body appointed by the U.S. Trustee to look out for abuse survivors’ interests in the bankruptcy.
In an Aug. 20 Bankruptcy Court filing, the diocese, along with the abuse survivors committee and attorneys representing the Continental Insurance Co., asked Bankruptcy Judge Paul Warren to postpone the Sept. 3 hearing to an unspecified date.
The parties are asking for the postponement to give the diocese and the committee time to amend their plan to accommodate the U.S. Supreme Court’s June 27 ruling in the Purdue Pharma bankruptcy.
Continental Insurance, also known as CNA, is considering submitting a rival plan, the Aug. 20 filing states.
Survivors overwhelmingly approved the diocese plan in a vote this year and in the same vote equally overwhelmingly rejected a rival plan submitted by Continental Insurance.
The diocese plan proposes to create a $127.3 million trust fund to pay survivors’ claims in the bankruptcy. The diocese and its 86 parishes would jointly contribute $55 million with the balance coming from several of the diocese’s liability carriers. CNA would not contribute to the trust but instead would have to face survivors in future state-court CVA cases.
A lone holdout among the diocese’s insurers, CNA could not come to terms with the survivors committee, which rejected a CNA offer to add $63.5 million to the trust. CNA’s voted-down rival reorganization plan mirrored the diocese’s and committee’s plan, adding a proposal to up CNA’s contribution to $75 million and in exchange be excused from future liability.
Survivors committee attorney Ilan Scharf has portrayed both CNA offers as unacceptably below what other insurers are willing to pay on a per-survivor basis. CNA would be responsible for covering more than 300 of the bankruptcy’s more than 450 survivor claims.
Warren had long warned that a Purdue decision would be likely to upend the diocese case.
The high court’s ruling bars Bankruptcy Court judges from excusing parties not directly involved in bankruptcies from liability. As currently written, the diocese plan would excuse the diocese’s 86 parishes from future liability in exchange for their financial contribution to fund to compensate survivors.
Though parishes are considered part of their home diocese under church law, Catholic parishes in New York are registered as separate corporations.
The Aug. 20 filing gives no hint as to how the parties might resolve the Purdue issue or how soon they might do so.
Also yet to be resolved is CNA’s claim that the diocese owes it an unspecified sum for backing out of the $63.5 million deal. The insurer contends the diocese breached a contract when it called off the deal. The diocese maintains no contract was concluded. A substantial judgment in CNA’s favor would add another complication to the case’s already tangled settlement negotiations.
Warren presided over a two-day trial on the CNA claim last month. He issued no ruling at the trial’s July 31 conclusion but gave CNA 30 days to submit a post-trial brief.
As of May 31, the diocese had spent $14 million to pay lawyers, accountants and consultants working on the bankruptcy. Such expenses continue to mount in six-figure sums monthly while the case continues.
Will Astor is Rochester Beacon senior writer. The Beacon welcomes comments and letters from readers who adhere to our comment policy including use of their full, real name. Submissions to the Letters page should be sent to Letters@RochesterBeacon.com.