Long Island diocese reaches $323 million bankruptcy settlement over abuse claims

The Diocese of Rockville Centre, N.Y., has reached a preliminary settlement in what it called the “difficult ordeal” of its long-running — and at points contentious — bankruptcy case, while assuring the faithful that “no parishes are closing as a result of this process.”

In a Sept. 26 statement, the diocese announced the total proposed settlement is just over $323 million, an amount that includes “insurance contributions, Diocesan assets and sale proceeds from Diocesan property, and contributions from parishes and other related entities.”

The diocese said that it — along with parishes and other related entities — will pay the bulk of that amount, contributing $234.8 million. Insurance companies (several of which have in recent years become increasingly reluctant to cover diocesan sex abuse lawsuits) will pay “just over $85 million” and counsel for the creditors’ committee $3 million.

The diocese also said that “part of the settlement plan involves all parishes entering into an abbreviated Chapter 11 with the approval of the court and the parties to the case in order to secure a release from liability for the parishes.”

However, said the diocese, “It is expected that parish Chapter 11’s will be resolved within 48 hours of filing and will not interfere with parish work and ministries.”

Marie T. Reilly, a professor at Penn State Law and expert in bankruptcy law, told OSV News that the move is “a first” in Catholic bankruptcy cases.

Reilly speculated that the reason behind the abbreviated Chapter 11s is “to get around the U.S. Supreme Court’s recent holding (in the Purdue Pharma case) that bankruptcy courts do not have the power to confirm a Chapter 11 bankruptcy plan that includes releases for non-debtors unless all affected creditors consent to the releases.”

Reilly was referencing the Supreme Court’s June decision in Harrington v. Purdue Pharma, which said the Sackler family behind the opioid manufacturer could not be shielded from legal claims against them without the consent of those who wished to sue them for damages related to the nation’s opioid addiction crisis.

In April, the Diocese of Rockville Centre had sought to scrap its bankruptcy filing amid an impasse with abuse survivors, after a creditors’ committee of survivors roundly rejected a $200 million settlement package proposed by the diocese back in February. That offer, structured over three years, would have provided initial minimum payments of $50,000 or $100,000 to claimants, according to the terms of the diocese’s insurance at the time of alleged abuse.

In an April 12 press release, attorneys for the claimants said the creditors’ committee had “opposed the plan because it did not provide adequate compensation” and “lacked any child protection measures.” In January, the attorneys had asked for a settlement of at least $450 million.

The diocese filed for bankruptcy in October 2020, while then facing more than 200 lawsuits under New York State’s Child Victims Act of 2019, which along with the Adult Survivors Act of 2022, opened the door to hundreds of previously time-barred claims. Currently, the number of abuse suits against the diocese totals at least 500, with some media reports indicating as many as 530 cases, including cases dating back to the 1950s.

The diocese’s Chapter 11 filing did not include parishes and Catholic schools, which are separate legal entities — although some parishes were named in the look-back window lawsuits. The diocese unsuccessfully petitioned the bankruptcy court to have all of those cases stayed and brought under the settlement umbrella, leaving several to be pursued in state court.

In its April 26 objection to the diocese’s bankruptcy dismissal request, the committee accused the diocese of doing “everything it could to delay the Unstayed Cases against its diocesan-controlled parishes,” adding that some of the cases had “gained momentum,” prompting the diocese’s current move to halt the bankruptcy.

The diocese defended its decision at the time, saying in an April 29 statement that it had “participated in a long, difficult mediation with the goal of compensating survivors while allowing the Church to carry on its charitable and religious mission.

“It was hoped that a settlement would prevent a rush to the courthouse where survivors would compete in litigations, leaving many survivors with little or no compensation,” said the diocese.

The diocese also bit back in its statement at what it called the committee’s “blind pursuit” of a “scorched-earth litigation strategy” that would “recklessly attempt to close parishes, schools, and other charitable ministries on Long Island” through crippling lawsuits.

“Our goals are compensation for all survivors and carrying on the Church’s mission, not endlessly feeding attorney fees,” said the diocese.

In its Sept. 26 statement, the diocese said that its “goal has always been the equitable compensation of survivors of abuse while allowing the Church to continue her essential mission. We believe that this plan will achieve those goals.”

“For the sake of survivors and the Church’s mission on Long Island, we pray that the plan is approved and completed as quickly as possible,” said the diocese.

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