A federal bankruptcy judge is giving the Buffalo Diocese two months to sort out a tangled web of historical insurance coverage and determine how those policies might be affected by Child Victims Act lawsuits against the diocese and parishes, schools and other Catholic entities.
A Chapter 11 filing in February immediately stopped lawsuits in state courts against the diocese from advancing as it goes through a reorganization. That same protection does not apply to parishes, which are separately incorporated and not part of the bankruptcy.
But the diocese in May asked Chief Judge Carl Bucki of the U.S. Bankruptcy Court in the Western District to shield parishes, schools and other entities that also have been named as defendants in Child Victims Act cases.
Diocese lawyers argued that without the stay the diocese would be drawn into those cases, forcing it to incur more legal costs and potentially leading to the depletion of insurance coverage that could be used to reach an equitable global settlement with childhood abuse victims.
Diocese attorneys initially asked for a long-term injunction prohibiting Child Victims Act plaintiffs from advancing their cases in state courts until after the bankruptcy case is dismissed. They later amended the request for a stay through December, saying they need the time to clarify what insurance policies apply as the diocese tries to negotiate a settlement.
Several lawyers for plaintiffs in CVA cases objected to the diocese’s motion, and an attorney for the official committee of unsecured creditors, which consists of CVA plaintiffs, characterized the move as a “flagrant attempt to absolve” parishes and other sued Catholic organizations of any liability.
Ilan D. Scharf, the committee’s lawyer, urged Bucki to consider a temporary stay of no more than 60 days.
In 13-page decision on Thursday, Bucki described the character and status of the diocese and parish insurance policies as “murky, jumbled, questionable and uncertain” and said the diocese had failed to prove that litigation against parishes would necessarily deplete the diocese’s assets.
But Bucki also said he was “not dismissive” of the diocese’s argument that identifying insurance coverage from decades ago is “a monumental task.”
“Still we must balance investigatory challenges against the rights of victims to achieve a reasonably prompt resolution of claims involving non-debtors,” he said.
Bucki put on hold until Sept. 15 any CVA cases that had already been filed against parishes and other Catholic entities, but he refused to apply that stay to any new lawsuits that might be filed.
Bucki also said the diocese will have to show “substantial progress in the collection of evidence sufficient to prove the nature and scope of insurance coverage” before he would consider any request for an extension of the preliminary injunction beyond Sept. 15.
The diocese's lawyers this week also proposed that Bucki set a bar date of Dec. 1 for all sexual abuse claims to be submitted to the diocese on a claim form.
Plaintiffs who already have filed CVA cases would still be required to submit a claim by the bar date to be considered in the bankruptcy proceedings.