A New York Bankruptcy Court Judge issued an order which will allow alleged sex abuse victims to pursue lawsuits against parishes and other affiliates of the Roman Catholic Diocese of Rockville Centre, which has been on hold since the Long Island-based chair of the Catholic church filed Chapter 11 bankruptcy in 2020.
In his decision, Judge Martin Glenn denied the Diocese’s request to extend a stay on litigation that would further stall the state court’s actions against parishes and other entities that do not name the Diocese.
“We applaud Judge Glenn’s ruling and his recognition of the plight of the real victims in this case, the survivors,” James Stang, an attorney with the firm representing the Committee of Unsecured Creditors Committee, said in a release. “Committee Counsel, and others representing the survivors in this case, will do whatever it takes to expediently achieve justice.”
The Committee, which is comprised of more than 600 people who have filed sexual abuse claims against the Diocese are being represented by the law firm Pachulski, Stang, Ziehl, and Jones. Back in April representatives of the Committee moved to dismiss the case, due to the unlikelihood of reaching a consensus on a reorganization plan.
Following a two-day hearing, the courts acknowledged that the two and a half years of negotiations have delayed survivors' rights to pursue claims against the parishes, which are separate entities that are not beholden to the Dioceasean bankruptcy case.
According to attorneys, this is the second time a New York Diocese has failed to prolong litigation against parishes over the Committee’s objection. The Diocese unsuccessfully argued the automatic hold on litigation applied to the parishes and sought a preliminary injunction.
In declining the Diocese’s request for a preliminary injunction, the Court expressed skepticism regarding its likelihood of confirming a plan and ultimately concluded that this factor was “neutral at best for the Debtor.”
The Diocese’s arguments for an injunction because of shared insurance policies with the parishes was rejected because it was already determined that the proceeds were protected and that litigation would not put it at risk for indemnity and other factors.
It was determined by the court that the only possible harm to the Diocese from allowing parish litigation to proceed was a distraction to some of its personnel, however, it felt that this distraction would not be as severe as claimed.
“The Committee has effectively established that potential depletion of shared insurance does not necessarily implicate the automatic stay or lead to injunctive relief protecting non-debtor third parties,” Kenneth Brown, one of the attorneys representing the Creditors Committee said in a release. “This precedent is a game changer and will make it more difficult for a Diocese to shield its parishes from Survivor claims in future bankruptcy cases.”
In his decision, Judge Glenn found that the balance of harm weighed in favor of the survivors.
“On the other side of the scale is the harm to the Survivors,” Glenn states in his decision. “For every day the injunction lasts, they are not only prevented from pursuing recovery on their claims but their ability to prove their underlying case is weakened. For many Survivors, allowing time to pass means that they simply may not be able to recover either because the evidence for their case is lost, or because they themselves do not live long enough to press their claims. Importantly, these are claims they would be entitled to bring, if not for the stay in this case. It is clear that these harms to the Survivors become more significant with each passing day in this case, and in the past thirty months have eclipsed what is now a much more incidental—and certainly less consequential— harm for the Debtor, in having a limited role in participating in litigation against non-debtors.”
Sean Dolan, the Diocese’s director of communications, issued a statement following the decision to lift the stay on state court abuse lawsuits against the parishes stating, “As it has throughout the Chapter 11 process, the Diocese will continue to seek and work toward a global settlement of all claims that fairly compensates survivors and allows the Diocese and parishes to continue their missions. The stay remains in place until June 15, 2023, and the Judge continues to encourage all parties to reach a resolution through mediation.”