ROCKVILLE CENTRE (NY)
Buffalo News [Buffalo NY]
February 1, 2025
By Jay Tokasz
Richard Tollner knows firsthand what the people who have sex abuse claims against the Buffalo Catholic Diocese are going through as the diocese’s Chapter 11 bankruptcy case plods unresolved toward its fifth year.
Tollner filed a Child Victims Act lawsuit in 2019 accusing the Rev. Alan Placa of sexually assaulting him in 1975 when he was a 16-year-old student at St. Pius X Preparatory Seminary in Uniondale, which is part of the Town of Hempstead, Long Island. After the Diocese of Rockville filed for Chapter 11 bankruptcy protection in 2020, Tollner was appointed chairman of the Official Committee of Unsecured Creditors, helping represent more than 600 people with sex abuse claims against priests and other employees of that diocese.
Tollner said he couldn’t discuss the committee’s deliberations, but he believes one of the lynchpins to the Long Island diocese’s recent exit from bankruptcy was the threat of some abuse lawsuits reaching a trial in state court.
“The key part is exposure,” he said. “They fear exposure.”
The trials never happened. Instead, the diocese agreed in the fall to a $323 million settlement with sex abuse claimants, a plan that was confirmed by a federal bankruptcy judge Dec. 4.
Rockville Centre became the first diocese in New York with a confirmed reorganization plan, providing a potential blueprint for dioceses in Buffalo, Rochester, Ogdensburg and Albany.
It also was the first diocese case in the country to be confirmed since the Supreme Court in June blocked a path dioceses had used in previous bankruptcy cases to protect non-bankrupt parishes from lawsuits.
The nation’s highest court ruled in a case involving opioid maker Purdue Pharma that non-debtors in a bankruptcy proceeding cannot receive liability releases without the consent of all creditors, a decision that threw a wrench into current diocese bankruptcies.
A ‘prepackaged’ result
As a way around the Purdue Pharma ruling, all 136 parishes in the Rockville Centre diocese filed their own bankruptcies and agreed to contribute funds into a trust for abuse victims.
The individual parish bankruptcy filings – agreed to by the creditors’ committee and conducted in a rapid “prepackaged” form allowed under U.S. Bankruptcy Court for the Southern District of New York guidelines – made parishes additional debtors in the diocese case. As debtors, they could be released from the sex abuse claims, including any pending CVA lawsuits and potential future claims, if the state opened a second window suspending the statute of limitations in civil cases claiming childhood sex abuse.
With liability releases in bankruptcy, both the diocese and the parishes were able to sell their insurance policies back to multiple insurers for $85 million in cash that went toward the settlement trust for sex abuse claimants.
“The fact that Rockville Centre ended in a confirmed plan, given how acrimonious that case got, is encouraging,” bankruptcy expert Marie T. Reilly said. “It suggests to me, at the end of the day, making a deal, a global deal in a Chapter 11 case, makes so much more sense for the survivors, for claimants, than endless additional years of litigation with a very uncertain end.”
A prepackaged bankruptcy can happen when creditors agree in advance on a plan of reorganization prior to its filing, allowing the debtor to “go from petition to confirmation in a matter of hours,” Reilly said.
“In the background, what must have happened, is that parishes’ financial information, information about potential liability, was probably made available by the parishes and by the diocese as part of the mediation,” said Reilly, a law professor at Penn State University. “So, the creditors got to know, what would we be giving up if we take this deal that, in the end, results in a loss of our ability to sue the parishes independently and directly? It’s not a pig in a poke.”
Could the same process be applied in Buffalo and other dioceses that are still looking to emerge from bankruptcy under the restrictions imposed by the Purdue Pharma ruling?
Possibly, said Reilly.
“Once something works,” she said, “that can be a template.”
But Reilly also said that the Buffalo Diocese bankruptcy case must work through gnarly insurance coverage issues, and “that’s a sideshow that is unique to Buffalo.”
Attorney Patrick Stoneking said he wasn’t sure how much Rockville Centre’s outcome would help Buffalo and other dioceses get to a confirmed plan, because available assets, real estate holdings and insurance coverage can vary dramatically among dioceses.
The Diocese of Syracuse, for example, is moving forward with a $100 million plan to fund a settlement trust for 411 abuse claimants with diocese and parish money, but without cooperation from insurers. Claimants may vote on the plan through Feb. 28. A confirmation date is scheduled for April 28.
Supreme Court’s Purdue Pharma ruling
Purdue Pharma, maker of the opioid OxyContin, filed for bankruptcy in 2019 amid thousands of opioid overdose-related lawsuits.
The company’s reorganization plan included up to $6 billion from the Sackler family toward a settlement fund for opioid victims and families. In exchange, the Sacklers, none of whom filed for bankruptcy, would get a judicial order releasing them from all opioid-related claims and prohibiting victims from suing them in the future.
The U.S. trustee, along with a group of Canadian creditors and some individual victims, objected to the Sackler liability releases. In a 5-4 decision, the Supreme Court ruled that the bankruptcy code does not allow for the discharge of lawsuits against a non-debtor without the consent of affected claimants, effectively stymieing the Purdue settlement and potentially giving creditors more leverage in their settlement negotiations with dioceses.
Just recently, Purdue Pharma and the Sacklers recently agreed to pay $7.4 billion to settle the opioid cases.
In Syracuse, to satisfy the requirements of the Purdue Pharma ruling, the diocese said in its disclosure statement that any abuse claimants receiving payments must consent to releases for the parishes and warned that the plan “may fail” if claimants withhold their consent.
The Syracuse plan also allows claimants to sue any non-settling insurer that may be liable for abuse they suffered, and it will transfer to the settlement trust the diocese and parish rights to insurance claims against non-settling insurers. The trust will then sue those non-settling insurers after the plan is approved to try to recover insurance funds.
Unlike Syracuse and some other recent settlements, Rockville Centre’s plan had nearly full participation from its major insurers.
Setting trial dates has spurred action
Stoneking attributes the insurers’ cooperation to the setting of trial dates in four cases in state court that a federal bankruptcy judge in 2023 had allowed to advance.
“We got trial dates for October of last year, and that corresponded with offers to settle the (bankruptcy) case a few weeks before that,” said Stoneking, an attorney with Jeff Anderson and Associates, which represented 140 clients in Rockville Centre. “Having an actual trial date and moving forward was a big thing. The more that happens in other dioceses, I think that helps push things along.”
Chief Judge Carl L. Bucki of U.S. Bankruptcy Court, Western District of New York, made a ruling in November that allows 17 Child Victims Act cases against the Buffalo Diocese to resume in state courts – a move that the diocese and insurers resisted and the creditors’ committee and plaintiffs’ attorneys had been pushing for many months.
Bucki said the pressure of litigation may force the diocese, its insurers and the creditors to a speedier negotiated settlement.
In January, Bucki appointed an additional mediator and set a deadline of Sept. 1 for the diocese to submit a disclosure statement and plan or reorganization, a pivotal step toward exiting Chapter 11.
Sense of justice deferred
Tollner, a retired banker, said he’s “rooting for Buffalo” to get its own lynchpin moment that leads to a settlement.
He said many sexual abuse survivors experience a sense of relief with a settlement, especially those whose lives have been altered and income diminished by the harm inflicted upon them when they were children.
“When you’re waiting for a very, very long time, both in personal terms or in financial terms, getting something is a relief,” he said.
At the same time, he added, too many survivors don’t see any justice or relief because of the lengthy bankruptcy process.
“Sexually abused children are now in their 60s and 70s. They’re dying before they get justice. That is some of the saddest part of all these diocesan cases,” said Tollner. “I was on the phone today with three people whose family member had died waiting for justice. They never got justice, and now the family is like, ‘There will be money coming, but who cares?’ There’s no victory. There’s no satisfaction. There’s just a check, and money isn’t going to make that much of a difference anyhow.”