The Buffalo Diocese was still considering seeking bankruptcy protection Thursday after the neighboring Rochester Diocese took that route to deal with a landslide of lawsuits over its handling of clergy sexual abuse of children.
The Rochester Diocese became the first Catholic diocese in the state to file for Chapter 11 bankruptcy protection.
Nineteen of the 20 largest unsecured claims it listed in the court papers filed in U.S. Bankruptcy Court were lawsuits brought against the Rochester Diocese under the Child Victims Act.
While the Buffalo Diocese already faces three times as many lawsuits as the Rochester Diocese, it has fewer net assets than its neighbor to the east, according to financial statements of both dioceses.
Buffalo Bishop Richard J. Malone said last week that he felt like he was “at a crossroads” over whether to file for Chapter 11 reorganization or to litigate cases filed under the Child Victims Act.
“We’re looking at both of those very, very closely and carefully,” Malone said. “I have not yet made a decision. People argue both positions.”
The new Child Victims Act suspended the statute of limitations for one year, beginning Aug. 14, on civil claims in childhood sex abuse cases. More than 40 cases have been filed in Monroe County in the past month against the Rochester Diocese, which encompasses 12 counties and has more than 300,000 Catholics.
The Buffalo Diocese, which already has paid out about $17.5 million to 106 victims in 2018 under a voluntary compensation program for childhood victims of clergy abuse, is the subject of more than 120 lawsuits in Erie County so far under the Child Victims Act.
The Buffalo Diocese, which includes eight counties and more than 600,000 Catholics, was still analyzing the extent to which parish insurance policies from years ago might cover some abuse cases, said Malone.
Diocese spokeswoman Kathy Spangler said Thursday that no decision had been made on whether to seek bankruptcy protection.
“Like every diocese in the state of New York, the Diocese of Buffalo is consulting financial experts, insurance carriers and working with our Finance Council to review the options available to fairly address the lawsuits filed by survivors and to continue our mission as a Diocese,” Spangler said in an email.
Rochester was the 20th diocese in the country since 2004 to file for bankruptcy, a strategy that has helped the Catholic Church pay victims of abuse while warding off jury trials and limiting the amount of damaging information about abuses and cover-ups that otherwise would surface during protracted litigation.
“This was very predictable and, really, expected,” said attorney Michael T. Pfau of Seattle-based law firm Pfau Cochran Vertetis Amala.
Pfau called bankruptcy a “legal tactic” used by dioceses “to avoid jury trials, to avoid having their secret archives exposed and their priests being deposed.”
Pfau’s firm represents several plaintiffs in cases against the Rochester and Buffalo dioceses.
Attorney Jeff Anderson of Jeff Anderson & Associates called the filing a disturbing and disappointing attempt by Rochester Bishop Salvatore R. Matano “to prevent the truth from being revealed.”
Anderson’s firm represents more than 100 clients in cases against the Rochester and Buffalo dioceses.
Both Pfau and Anderson previously have represented clients against other dioceses that filed for bankruptcy.
One of Anderson’s clients, Peter Saracino of Phelps, in Ontario County, said the diocese’s decision was an effort to rob victims of their quest for transparency and accountability.
“We don’t give a hoot about the money,” said Saracino, 66. “They have something they are squandering that’s much more precious than any amount of money they can have and that’s their moral authority.”
Child Victims Act cases against the Rochester Diocese now will be put on hold in state court and likely transferred into U.S. bankruptcy court for adjudication. The bankruptcy court will set a date by which all claims against the Rochester Diocese must be filed – and that date could be sooner than the close of the Child Victims Act window in August 2020, Pfau said.
The court will establish a creditors committee that includes abuse survivors to represent the interests of all claimants in developing a distribution plan.
“Theoretically, they could be tried in federal district court, but what has happened in the 18 [previous diocese bankruptcy] cases is very few cases have been tried and the cases usually are resolved through a negotiated settlement and claims distribution process,” Pfau said.
Bankruptcy experts said the court usually appoints a trustee or a panel of experts to determine the validity of claims and establish settlement amounts.
The bankruptcy filing will put the Rochester Diocese’s finances under a microscope and likely will set off a major clash over what assets are available for settlements.
“They’ll have to open up their books. Their finances will be public and that’s something the Catholic Church doesn’t like to do,” Pfau said. “We will aggressively pursue all avenues of recovery. We will leave no stone unturned in determining what assets are available to make the abuse survivors whole.”
In court papers, the Rochester Diocese estimated its assets at $50 million to $100 million. It also said it had 200 to 999 creditors and liabilities of $100 million to $500 million.
The Rochester Diocese’s latest audited financial statements showed total net assets of $55.4 million, while the Buffalo Diocese listed total net assets of $29.2 million in its most recent audited financial statements.
Rochester's bishop consulted earlier this week with the diocesan finance council and the College of Consultors, a group of adviser priests.
"This is a very difficult and painful decision. But after assessing all reasonable possibilities to satisfy the claims, reorganization is considered the best and fairest course of action for victims and for the well-being of the Diocese, its parishes, agencies and institutions," Matano said in a letter to parishioners. "We believe this is the only way we can provide just compensation for all who suffered the egregious sin of sexual abuse, while ensuring the continued commitment of the Diocese to the mission of Christ."
Matano said the bankruptcy filing would provide a fairer and quicker way to "negotiate reasonable settlements" with victims, and the diocese's goal was to conclude the Chapter 11 process as soon as possible. He also told parishioners that the ministries and operations of parishes and other entities, such as Catholic Charities, should not be impacted by the filing.
Settlements in previous diocese bankruptcy cases have ranged from a low of $9.8 million in the Diocese of Fairbanks, Alaska, in 2010 to a high of $210 million in the Archdiocese of Saint Paul & Minneapolis in 2018. Insurance covered as little as 15% of settlements to as much as 85%, depending on the diocese.
Many of those dioceses had to lay off employees and sell assets, such as stocks, bonds and real estate to compensate victims through bankruptcy. Parishioners also have been asked in some instances to contribute to settlements. But no diocese so far has been forced out of business due to sex abuse lawsuits.
Anderson, of Jeff Anderson & Associates, said dioceses have insurance that covers much of the cost of abuse settlement claims and past bankruptcy cases have not led to the shutdown of any of the good work done by Catholic parishes, schools, charities and hospitals.