Bankruptcy judge rejects jury petition and insurance settlement

On July 9, the U.S. Bankruptcy Court dismissed a petition from the Official Unsecured Creditors Committee that would have allowed 21 sexual abuse lawsuits against the Diocese of Rochester to proceed in state court. The petition was filed on June 8 by attorneys representing the committee, which was appointed by the United States Office of the Trustee and includes several survivors of child sexual abuse who had filed complaints against the diocese under of the New York State Child Victims Act.

Also during the hearing, the court rejected the diocese’s petition for approval of a $ 35 million settlement with several insurers involved in its bankruptcy case, which began in September 2019.

After dismissing both motions, Judge Paul R. Warren of the United States Bankruptcy Court, Western District of New York, ordered all parties involved to resume mediation through face-to-face discussions.

the movement to approve the insurance settlement had been filed on May 27 by diocesan lawyers, who sought approval of the $ 35 million agreement with underwriters of Lloyd’s of London, certain companies in the London market, Interstate Fire & Casualty Co. and National Surety Corp. According to a statement released by the diocese shortly after filing the petition, the proceeds of the settlement were intended to be the initial contribution to a compensation fund for survivors of sexual abuse.

“Although the funding provided under this settlement is only part of the possible ‘Survivors’ Fund’ to be established to settle these claims, it is significant and substantial funding,” the statement said. of the diocese.

During the July 9 hearing, Stephen A. Donato, an attorney representing the Diocese of Rochester, said the settlement would likely result in an average clawback of $ 220,000 per survivor. This is “a large sum of money,” he said, noting that the recovery amounts requested by the creditors’ committee had been unreasonably high.

Ilan Scharf, a lawyer representing the creditors’ committee, argued that the lifting of the automatic stay of the bankruptcy case and the authorization of the 21 cases – which he said in a court file are representative of more than 475 sexual abuse complaints filed in Chapter 11 case – Obtaining jury verdicts following trials in state courts would help set values ​​for all survivor claims.

But Warren ruled that, among other reasons, lawyers for the creditors committee had failed to prove sufficient cause to allow the 21 cases to go to state courts. Earlier in the hearing, he also approved a motion to employ The Claro Group, a consulting firm that lists assessment among its areas of expertise, to provide expert advice on the assessment of cases of sexual abuse.

After rendering his rulings on both motions, Warren had strong words for counsel for all parties, ordering them all to participate in mediation in Reno, Nevada before the Honorable Justice Gregg Zive, a federal bankruptcy judge. for the district of Nevada which mediates in the Rochester case. Zive has served as mediator in the case since 2020, when Warren appointed him with the agreement of all parties involved.

On July 9, Warren reminded lawyers that this case is all about people, not money. He read parts of a decision written by U.S. bankruptcy judge Robert R. Kressel to parties in a similar case involving the Archdiocese of St. Paul and Minneapolis in December 2017.

In the memo, Kressel pointed out that while lawyers from various parties “fought for victory,” real people were suffering. Not only were the survivors of sexual abuse suffering – some of them dying before the case was resolved – but the cost of the case and the compensation of the victims would fall on a completely different group of people than those who did. perpetrated or exacerbated the abuse, most of which took place decades before the case even began, Kressel wrote.

“It rests with current employees, including retired priests, teachers, coaches and school librarians and others who have worked for the archdiocese and parishes and earned modest pensions. The cost may fall on Catholic school students and their parents. It will fall on thousands of parishioners. And the cost will be borne by the beneficiaries of charity and other good works of the archdiocese and parishes. So for all the talk about “the archdiocese,” “the creditors’ committee,” “the parishes,” “the insurance companies,” it’s really a people business, ”Kressel wrote.

In order to resolve the matter, he wrote, all parties involved had to put aside their desire to win and work together to come to a deal that was fair to everyone.

Warren echoed Kressel’s words when he spoke to lawyers involved in the Diocese of Rochester bankruptcy case on July 9.

“Put aside the desire to win and instead focus on finding a way to come up with a resolution that is fair, reasonable and acceptable to everyone involved and affected by it,” Warren said just before ordering everyone. the parties to return to mediation. board.

“You should not go to mediation with your old position in hand and try to rehash that position with Judge Zive,” he said. “On the contrary, you must wipe the slate clean and participate in the mediation with new eyes. … I will not accept any excuse for not participating in mediation with Judge Zive.

The diocesan representatives had previously expressed the desire to continue the mediation.

“The diocese has acted in good faith during several mediation sessions and is committed to continuing these negotiations in good faith with its insurers and the creditors’ committee,” said a diocesan statement released in early June. “The Diocese believes that an ongoing dialogue and negotiation between the Diocese, its insurers and the creditors’ committee, guided by reasonable and realistic expectations on the part of all parties involved and a dedication to a swift and fair resolution for them. survivors, is the best and the right way forward to benefit survivors.

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