Observers are speculating that the Diocese of Buffalo may file for bankruptcy protection this week as it prepares to face a barrage of lawsuits from individuals making claims of clergy sex abuse. While some experts say it could, in some ways, be a fairer way to compensate victims, it could also allow the diocese to keep secrets about child sexual abuse and its efforts to hide it.
A Chapter 11 filing would also likely frustrate victims, who might prefer a prompt and public jury trial. For those reasons and others – including a history of cover-ups – the diocese should simply face the music.
Even though bankruptcy would buy the diocese some time, it would not make the civil claims go away. In other dioceses that filed for Chapter 11, victims who proved they were sexually abused received significant financial settlements or court awards.
The Child Victims Act, which became law in February, allows for a one-year look-back period that begins Wednesday. That enables victims of childhood sexual abuse to file claims that were time-barred by statutes of limitations. Potentially thousands of lawsuits could be filed across the state against individuals and institutions such as the Catholic Church, public and private schools, the Boy Scouts of America, day care centers and others that have been named in similar suits.
The Diocese of Portland, Ore., was the first to use bankruptcy to cope with sexual abuse lawsuits, in 2004. Eighteen other dioceses and archdioceses have done the same.
Declaring bankruptcy freezes legal proceedings against an institution, meaning no jury trials occur in state court. That minimizes the pretrial discovery process in which embarrassing details could surface about efforts that were made to cover up past crimes. Far fewer such details will emerge in discovery before a bankruptcy court proceeding.
If an institution is found to be using bankruptcy merely to avoid litigation or to hide assets, the court can find its filing to be in bad faith and shut down the proceedings.
A bankruptcy process that drags on for months is more likely, which is a source of frustration for victims of alleged sex offenders. According to The Wall Street Journal, a typical diocesan bankruptcy case takes more than two years to adjudicate.
Catholic church finance expert Charles E. Zech told The News that bankruptcy can be a fairer way to compensate abuse victims than trials in state courts, which handle cases in the order in which they are filed and may favor large verdicts or settlements in the early cases.
Bankruptcy courts, said Zech, will treat all of the plaintiffs as a group and make sure that they get paid based on their degree of abuse.
Total settlements in other cities have ranged from $9.8 million in the Diocese of Fairbanks, Alaska, to $210 million in the Archdiocese of St. Paul & Minneapolis. Insurance covered anywhere from 15 to 85% of the settlements.
In 2019, the Diocese of Buffalo listed total assets of $66.5 million, including cash, investments and real estate. Its liabilities totaled $37.3 million, which includes the money it paid to abuse victims through the compensation program, leaving its total net assets at $29.2 million.
The diocese may decide its financial survival depends on bankruptcy protection. It has already moved $91 million from its main investment account into the accounts of parishes, schools, cemeteries and other Catholic entities. That was, in part, an effort to shield money in case of clergy sex abuse lawsuits, said Monsignor William J. Gallagher, a retired priest who served on the diocese’s finance council.
But choosing bankruptcy would do nothing to dispel the cover-up culture that has all too often enveloped the church and this diocese. That failure to confront the scandal forthrightly led prominent local Catholics in 2018 to call for Bishop Richard J. Malone to step down.
Avoiding jury trials would once again give the appearance of ducking responsibility for the crimes committed against children, for the lives ruined, by some bad actors who were often allowed to keep their clerical jobs or shuffled from one parish to another.
Chapter 11 proceedings may deny victims their day in court, which to many may be more valuable than any cash award they receive. If things play out that way, they’ll have to take solace in getting whatever financial compensation they are entitled to, knowing that the diocese’s admission of being “bankrupt” will apply to more than its finances.