BALTIMORE (MD)
Baltimore Sun [Baltimore MD]
September 29, 2023
By Lee O. Sanderlin
America’s oldest Catholic archdiocese filed for bankruptcy Friday, a move designed to limit its liability against potential damages and conserve its assets, ahead of a mountain of soon-to-be filed lawsuits connected to its history of child sex abuse.
The filing came two days before Maryland’s newly passed Child Victims Act is set to go into effect. The law, which the legislature passed in April over the objection of the church and other organizations, will remove a statute of limitations on when childhood sexual abuse victims may sue perpetrators.
The bankruptcy declaration, filed in Baltimore’s federal bankruptcy court, was not unexpected. Archbishop William E. Lori, the highest-ranking Catholic cleric in Maryland, sent a letter Sept. 5 to the more than 500,000 Archdiocese of Baltimore parishioners saying the church was considering such a step. In a new message to Catholics released Friday, Lori emphasized the decision was made to stanch potential payouts in the future.
“If a plan is approved by the bankruptcy court, no future claims for past cases of abuse can be brought against the Church,” Lori wrote in Friday’s letter.
The archdiocese’s bankruptcy petition lists its assets as between $100 million and $500 million, and its liabilities between $500 million and $1 billion. A list of creditors is appended to the filing and includes nearly 700 unnamed survivors for whom the church states it has addresses on file.
A significant consequence for victims is that the bankruptcy filing moves ongoing legal actions against the archdiocese from the state court system to federal bankruptcy court, where they’re consolidated into one case as creditors. That means ongoing lawsuits against the diocese, like the one Frank Gallagher Jr.’s children brought earlier this summer, are halted and will be folded up into the bankruptcy case, at least for now.
If other diocesan bankruptcies serve as a guide, determining exactly what the church’s assets are may be difficult and is likely to be the subject of back-and-forth litigation in the bankruptcy process.
Declaring bankruptcy is the latest legal countermove by the archdiocese since the Maryland Attorney General’s Office completed a four-year investigation of childhood sexual abuse in the church last year. The archdiocese paid for attorneys in Baltimore to fight against a release of the full report and lobbied in Annapolis to kill the Child Victims Act.
According to the attorney general’s office, 156 clerics and lay staff abused at least 600 children and young adults (and likely far more) over a period dating back to the 1930s, and church officials systemically covered up and enabledthe abuse through the end of the 20th century.
Filing for the protection under Chapter 11 of the U.S. Bankruptcy Code, as the archdiocese has now done, means it will remain in operation while undergoing a financial reorganization in an effort to satisfy its creditors.
Ultimately, a bankruptcy judge will decide on an amount the archdiocese can afford to pay, and claimants will be awarded a percentage of that pot. Some claimants will receive far less than they might have in state court, but, as church officials argued, most if not all claimants will receive something.
The bankruptcy filing also restricts any further state lawsuits. Anyone who wishes to file a complaint from this point on must do so by a date agreed to by the archdiocese and a party representing sexual abuse victims in bankruptcy court.
Lastly, and to the concern of many victims, under bankruptcy law, any abuse-related complaints they file will be kept confidential. Victims and their advocates have said that will severely impair their ability to use lawsuits to learn more about what happened to them and how the church handled their cases.
Advocates for victims view the archdiocese’s filing as part of the church’s effort to use closed-door settlements and other measures to limit awareness of the scope of abuse in Catholic churches and schools.
“They see this as yet another abuse by the church and another opportunity to shroud secrecy around something that the attorney general and the state of Maryland determined should come out in public,” said plaintiffs’ attorney Rob Jenner, who represents a number of individuals who were prepared to sue the archdiocese. “It’s another indignity they have to endure at the hands of the church.”
Jenner referenced two would-be cases for survivors he represents: Eva Dittrich, 68, of Pasadena, and 62-year-old Kimberly Bonham-Mills. The women say they were among the victims of the notorious predator-priest Joseph Maskell. Both planned to sue the Baltimore archdiocese Sunday, when the Child Victims Act takes effect.
Potential plaintiffs can challenge the legitimacy of a bankruptcy filing.
One survivor of abuse in the Baltimore archdiocese who is now an advocate for victims, Annapolis attorney Teresa Lancaster, said she and her allies plan to do just that.
But experts say such challenges face several hurdles. Unlike individuals filing for personal bankruptcy, who must prove they would be unable to survive financially without such protection, corporations or nonprofit organizations can declare bankruptcy as a strategic move. More than 30 archdioceses and dioceses in the United States have declared bankruptcy in the face of childhood sexual abuse lawsuits, and all continue to operate.
“When you and I and the average person thinks about debt, we think about borrowing money that you might have difficulty paying back,” said Melissa Jacoby, a law professor at the University of North Carolina at Chapel Hill. “Bankruptcy laws that define what a debt and a claim are do so super broadly. People who have a legal cause of action can be considered a claimant.”
In his Friday letter, Lori pitched the decision as one rooted in equity and self-preservation.
“Staggering legal fees and large settlements or jury awards for a few victim-survivors would have depleted our financial resources, leaving the vast majority of victim-survivors without compensation, while ending ministries that families across Maryland rely on for material and spiritual support,” he wrote.
Lori did not mention the law will cap damages against private institutions at $1.5 million per suit.
David Lorenz, director of the Maryland chapter of the Survivors Network of those Abused by Priests said he was “livid” and “beside myself” at the news.
”First of all, Lori did this before he even knows how many claims there are,” Lorenz said. “Then he hides this action under the idea that he’s trying to be equitable and fair. It’s outrageous. There’s nothing about this guy that’s equitable or fair.”
While the church’s resources are not unlimited, they are substantial. In its 2022 fiscal year, the archdiocese reported having more than $108 million of unrestricted assets, according to the most recent audited financial statements it has made public.
Lori is correct that a greater number of people likely would see compensation under a bankruptcy process. Unlike lawsuits, which are decided by a jury, claims in bankruptcy proceedings are brought to settlement. Typically, a criteria are developed that determine levels of payouts for different allegations.
Awards going forward are expected to be larger than those given out previously.
The archdiocese historically settled cases through mediation with a retired judge. The Archdiocese of Baltimore has paid out the equivalent of $6.8 million in 105 settlements since 2007, according to church spokesman Christian Kendzierski. Put another way, that’s an average settlement of $65,000.
Baltimore Sun reporter Jonathan M. Pitts contributed to this article.
Originally Published: Sep 29, 2023 at 2:03 pm