The clock is ticking for the Diocese of Rockville Centre bankruptcy case

“I hope people are working hard, because October 31 will be upon us before we know it.””

James Stang, attorney, Committee of Unsecured Creditors

The Roman Catholic Diocese of Rockville Centre has 100 days to reach an agreement with more than 600 people who have come forward with claims of child sexual abuse.

Judge Martin Glenn, of the U.S. Bankruptcy Court for the Southern District of New York, informed the diocese on Tuesday that it must come to terms with the Committee of Unsecured Creditors and their attorneys on an amended reorganization plan or settlement by Oct. 31.

Attorney James Stang, the committee’s bankruptcy counsel, told the Herald that the group has since reached out to the diocese and its parishes in the hope of coming to a consensual resolution of the case.

“We’ve been in communication with the mediators and the diocese and are waiting for them to respond,” Stang said. “I hope people are working hard, because October 31 will be upon us before we know it.”

Sean Dolan, the diocese’s director of communications, said in a release that the diocese is grateful that the court has denied a motion to dismiss the bankruptcy case.

“This decision recognizes that the only reasonable path forward is to reach a global settlement through mediation that fairly compensates survivors and allows the Diocese and parishes to continue their missions,” Dolan stated. “As it has throughout the Chapter 11 process, the Diocese will continue to seek and work towards that settlement. The Diocese appreciates the timeframe set out for all parties by Judge Glenn and will continue to work toward a consensual settlement.”

In April, representatives of the committee requested a motion that the case be dismissed, due to the unlikelihood of reaching an agreement.

“This case poses the unique challenge that the (diocese) refuses to negotiate with the Committee and is attempting to bully survivors into submission,” Stang said in a statement at the time. “The Committee filed its motion to dismiss to attempt to stop (the diocese’s) litigation tactics and to instead finally give survivors their day in New York Courts.”

According to Newsday, however, Glenn ruled on Tuesday that the attorneys for the survivors could not substantiate that it would not be possible for the diocese to reach a deal within a “reasonable amount of time,” and rejected the motion to dismiss the proceedings. He further extend the proposed deadline from 30 to 100 days, to allow the diocese to try to reach an agreement, while echoing the sentiment of the committee and its lawyers, saying, “The survivors deserve an opportunity to be heard by a jury of their peers. They’ve been held off too long.”

The diocese initially filed for bankruptcy in October 2020, as a result of the hundreds of lawsuits that were filed when former Gov. Andrew Cuomo approved the state Child Victims Act in 2019, extending the statute of limitations on sexual abuse claims.

In the nearly three years since the two groups have been unable to reach a consensus on a reorganization plan.

In January, attorneys representing more than two dozen of the claimants presented the diocese with two potential reorganization plans, both of which it turned down. Under the first, the diocese would settle all of the claims for $450 million in restitution. The second plan involved the diocese and its parishes, which the committee’s attorneys say they believe have “substantial assets” and should be made to provide “fair compensation to the children they hurt.” Under both options, survivors would be able to continue to pursue abuse claims in state court.

The diocese made a counter-offer, proposing that it, along with its parishes, co-insured parties and other ministry members, contribute between $185 million and $200 million to a settlement, not including insurance payouts.

The committee and its attorneys described the diocese’s offer as “business as usual,” stating that it would provide only a minimal contribution from its parishes and affiliates despite the hundreds of claims against it, and that it largely relied on potential insurance payouts that are being disputed in four separate lawsuits.

In June, Glenn denied the diocese’s request to extend a stay on litigation that would further stall state courts’ actions against parishes and other entities that do not name the diocese.

Following a two-day hearing last month, Glenn acknowledged that the back-and-forth negotiations between the diocese and the committee have only delayed survivors’ rights to pursue claims against the parishes, which are separate entities that are not beholden to the diocesan bankruptcy case.

In declining the diocese’s request for a preliminary injunction, Glenn expressed skepticism of the likelihood of confirming a plan and ultimately concluded that this factor was “neutral at best for the Debtor” — the diocese.

Glenn said that every day of an injunction would not only prevent the survivors from pursuing recovery of their claims but also weaken their ability to prove their underlying case.

“For many survivors, allowing time to pass means that they simply may not be able to recover, either because the evidence for their case is lost or because they themselves do not live long enough to press their claims,” the judge said. “It is clear that these harms to the survivors become more significant with each passing day in this case.”