Creditors reject Rockville Centre Diocese's final $200M offer

U.S. Bankruptcy Judge Martin Glenn to decide if the courts will dismiss the case


The survivors of more than 600 child sexual abuse allegations filed by a Committee of Unsecured Creditors voted “overwhelmingly” to reject the Roman Catholic Diocese of Rockville Centre’s $200 million settlement offer after more than three years of bankruptcy court proceedings, committee officials said.

The diocese made a motion to dismiss the bankruptcy case against it on April 12, after attempts to approve what church officials described as its “best and final” proposal were rejected by a supermajority of its creditors.

The plan put forward by the diocese would have paid out $150 million in a claims trust. An additional $25 million would have been added to the trust on the first anniversary of the date of the agreement, followed by an additional $12.5 million on the second and third anniversaries.

The funding would have comprised $32.9 million from the diocese, $81.6 million from its 136 parishes and 39 schools, $45 million from cemetery maintenance funds, $7 million from Catholic Charities of Long Island, $16 million from the Seminary of the Immaculate Conception, $15 million from the Ecclesia Assurance Company, and a $2.5 million rebate in legal fees. In exchange, the diocese parishes, schools and contributors would have been relieved of liability. The diocese also would have set aside an additional $9.9 million to pay any abuse claims in the next five years, after which the money would revert back to the institution.

Attorneys with the law firms Pachulski, Stang, Ziegler and Jones and Burns Bair, which represent the committee, said the creditors voted against the plan because they felt it did not provide adequate compensation for their suffering and lacked any child-protection measures.

James Stang, one of the attorneys, said the diocese repeatedly threatened to seek the dismissal of the bankruptcy proceedings if survivors did not accept the plan.

“In rejecting the plan, survivors demonstrated strength and unity and demonstrated that they would not be intimidated by the diocese,” Stang said in a statement. “The diocese chose the bankruptcy forum ostensibly to provide fair and equitable compensation to those who were abused as children. Now, because the diocese could not have its way, it wants to turn the clock back to where it started four years ago, having paid its bankruptcy professionals nearly $60 million dollars.”

The diocese, the eighth-largest in the nation, filed for bankruptcy in late 2020, after hundreds of lawsuits were filed against it following Gov. Andrew Cuomo’s approval of the Child Victims Act in 2019, which extended the statute of limitations for sexual abuse claims.

Representatives of the committee presented a proposed reorganization plan in January 2023, offering to settle the claims for $450 million. The diocese responded with its $200 million counter-offer.

Lawyers representing the committee said the landslide rejection of the proposed settlement was “unprecedented” in the history of Chapter 11 abuse cases, with survivors left to decide whether to approve the plan or drop the case altogether.

Sean Dolan, the diocese’s director of communications, confirmed that it has filed a motion to dismiss the case.

“The diocese did this after it became clear that an insufficient number of creditors have voted to approve the diocese’s plan for reorganization,” Dolan stated. “The diocese disclosed to all creditors, in connection with the proposed plan, that the diocese would move to dismiss its bankruptcy case if the plan was not approved through the creditor voting process.”

Dolan added that the Committee of Unsecured Creditors had moved to dismiss the case last April, because there was no likelihood of achieving a workable plan.

“The diocese, along with the parishes and related parties, cut budgets to the bone to provide the best possible offer they could in good faith,” Dolan said. “While the diocese worked hard to try to achieve a resolution in the bankruptcy case that would provide compensation for all survivors equitably while allowing the Church to continue its mission, the Creditors have chosen the path of litigation, one case at a time in New York State court. Regrettably, this may result in little or no compensation for many survivors, the opposite of why the Diocese entered this process over three years ago.”

Lawyers for the committee said its vote demonstrated “a selfless commitment to child protection measures” as an essential part of any acceptable settlement, a point that was made by Judge Martin Glenn, of United States Bankruptcy Court for the Southern District of New York, at one hearing.

“The survivors have sent a strong message to all debtors around the country who are using bankruptcy to avoid accountability before state court juries,” Richard Tollner, the committee’s chairman, said in a statement. “The message is: ‘If your plan does not have the support of the survivors’ creditors’ committee, your reorganization plan will fail.’ In this case the committee repeatedly warned the diocese that unilateral solicitation of its plan without committee support was a fool’s errand; it nonetheless stubbornly proceeded at great expense of time, as well as tens of millions of dollars, an unnecessary waste of resources that could have gone to compensate survivors.”

In the wake of the committee’s decision, Glenn will consider the diocese’s motion to dismiss the case at a hearing on May 9. He may send the cases back to state civil courts, or rule that the negotiations between the diocese and the committee continue.