Diocese of Rochester reaches agreement with creditors' committee - Catholic Courier

Diocese of Rochester reaches agreement with creditors’ committee

The Diocese of Rochester and the Committee of Unsecured Creditors have reached a Restructuring Support Agreement that could pave the way for the diocese to emerge from bankruptcy, possibly as soon as the third quarter of 2023.

The diocese filed a motion for approval of the RSA by the U.S. Bankruptcy Court’s Western District of New York the evening of Nov. 3, 2022.

Hammered out through nearly three years of negotiations with the creditors’ committee representing abuse survivors, the agreement would establish an abuse-survivors’ trust funded by $55 million from the diocese, its parishes and related Catholic entities.

According to a diocesan Frequently Asked Questions document on the RSA filing, the trust also is expected to receive “potential additional recovery for the benefit of survivors” from insurers that covered the diocese, parishes and related Catholic entities at the time abuse occurred.

If U.S. Bankruptcy Judge Paul R. Warren approves the RSA, the diocese will submit a reorganization plan first to be voted on by the creditors, then for approval by the court.

“We believe that this Restructuring Support Agreement represents the fairest approach for the survivors and most viable path forward for the Diocese and its related Catholic entities to continue our shared mission of healing and reconciliation.”

— Bishop Salvatore R. Matano

The Nov. 1 Restructuring Support Agreement marks a milestone in the diocese’s protracted bankruptcy proceedings. It includes an agreement by the creditors’ committee and its members to solicit support for the plan and reorganization “from all holders of Sexual Abuse Claims.”

The creditors’ committee further agreed to “support and cooperate with the Diocese in obtaining an order of the Court staying all Abuse Actions against the Participating Parties through and including the Effective Date of the (reorganization) Plan.”

An outline for diocesan reorganization plan

Among the key terms and conditions of the reorganization plan, as outlined in the RSA, are the following points:

  • A trust created for the exclusive benefit of the holders of sexual-abuse claims. A trust advisory committee, initially comprising members of the creditors’ committee, also would be formed.
  • The $55 million contribution to the trust by the diocese, parishes and other related “participating parties” to fund the payment of sexual-abuse claims.
  • Diocesan and related-party contributions to the trust supplemented by insurance settlements, claim proceeds, litigation awards and other sources.
  • A “channeling injunction” directing state-court sexual-abuse cases against diocesan parishes and affiliated Catholic entities to the trust “as the sole and exclusive remedy for all holders of channeled claims.” In September, attorney Timothy P. Lyster told the Catholic Courier that such a channeling injunction would relieve parishes and other related Catholic entities from ongoing exposure through litigation in state court.
  • A permanent injunction staying prosecution of sexual-abuse claims against the diocese, the parishes and affiliated Catholic entities.
  • Creation of a protocol for the allocation of the sexual abuse claims settlement fund consistent with the terms of the RSA.

The diocesan FAQ document noted that several steps remain in the process. “(H)owever, it is our hope that we can complete the steps necessary and ultimately emerge from Chapter 11 mid-summer to early fall of 2023,” around the fourth anniversary of the bankruptcy filing.

Reducing costs, maximizing survivor recoveries

In a declaration supporting the motion for the RSA, diocesan Chief Financial Officer Lisa M. Passero noted that approval of the RSA would save the diocese from “significant uncertainty, delay, and significant administrative and litigation costs” that would reduce funds available to fund the trust for abuse survivors. “Therefore, the proposed terms of a Chapter 11 plan pursuant to the RSA, in my opinion, will maximize recoveries to survivors, and provide a clear path for the Diocese to exit chapter 11,” she wrote.

Passero said counsel for abuse survivors in cases in state court “participated extensively in the mediation sessions that resulted in the formation of the RSA.” Noting that state court counsel represents over 70% of the sexual-abuse claimants, she said “the Diocese believes that the (reorganization) plan to be filed in accordance with the RSA will generate broad support from the State Court Counsel and the Sexual Abuse Claimants.”

Bishop renews apology to survivors of abuse

In a Nov. 3 letter to the faithful announcing the agreement, Bishop Salvatore R. Matano renewed his “deep apology to the survivors of sexual abuse. The history of sexual abuse of children in our Church has caused tremendous pain, hardship, alienation, and understandable anger” affecting “survivors, their families, our priests and others in diocesan ministry who had no part in these egregious acts,” he wrote.

“This chapter in the life of our Church has also impacted everyone who has felt their own faith shaken by those who violated a sacred trust to protect the vulnerable and live according to the teachings of Jesus Christ,” the bishop continued.

In his letter, Bishop Matano recalled that in 2019 he had hoped parishes and related entities would not be directly affected by the diocesan bankruptcy. But lawsuits that commenced in state court against parishes and other Catholic entities put them at “substantial risk of direct liability to claimants in individual state court actions,” he wrote. As a result, parishes and other Catholic entities “will benefit from their participation in this Agreement by obtaining a ‘channeling injunction’ which will channel all existing and future claims to the Trust.”

Fairest, most viable path forward

“We believe that this Restructuring Support Agreement represents the fairest approach for the survivors and most viable path forward for the Diocese and its related Catholic entities to continue our shared mission of healing and reconciliation,” Bishop Matano wrote.

“As a community united in faith, we firmly believe that Jesus Christ, as our Simon of Cyrene, will carry us over the threshold to a time of renewal and restoration, lifting the burden of bankruptcy and, most importantly, bringing consolation to the suffering of so many, especially the survivors, and transforming the darkness of Golgotha into the joy of the Risen Christ,” the bishop concluded.

Tags: Diocesan Bankruptcy Updates
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