Creditors’ vote will decide the fate of the Diocese of Rockville Centre's Ch. 11 bankruptcy plan

The Roman Catholic Diocese of Rockville Centre has made a $200 million offer to settle more than 600 claims of child sexual abuse filed by a Committee of Unsecured Creditors, in the hope of finding its way out of Chapter 11 bankruptcy.

Judge Martin Glenn, of the United States Bankruptcy Court for the Southern District of New York, approved the diocese’s financial disclosure statement — which outlines the terms of its settlement for creditors — at a hearing on Feb. 15.

To proceed with the plan, the church is required to receive the approval of 75 percent of the creditors. Otherwise, representatives of the diocese say, the court will dismiss the Chapter 11 case, forcing roughly 40 percent of the cases back to state courts. Based on the court documents, the deadline for creditors to submit their ballots is March 22.

According to a recent article in Law360, Glenn told the diocese and its legal counsel that with only five weeks until the ballots are due, he doesn’t see the committee dropping its opposition to the plan.

“If you stand on what you’ve got, I’d be really, really surprised if you get a 75 percent vote in the affected classes,” Glenn said.

Sean Dolan, communications director for the diocese, said that accepting its offer would provide the claimants with significant upfront payments and opportunities to seek additional amounts through a settlement trust. He added, however, that dismissing the plan would “put survivors in the position of competing” for settlements, which, should the diocese’s parishes become insolvent or seek relief of their own in bankruptcy court, could further delay or prevent judgments against them.

In the proposed Chapter 11 plan, the diocese would pay out $150 million in a claims trust, if creditors approve it. An additional $25 million would be added to the trust on the first anniversary of the date of the agreement, followed by an additional $12.5 million on the second and third anniversaries.

The funding would comprise $81.6 million on behalf of the diocese’s 136 parishes and 39 schools, $32.9 million from the diocese, $45 million from cemetery maintenance funds, $7 million from Catholic Charities of Long Island, $16 million from the Seminary of the Immaculate Conception, $15 million from the Ecclesia Assurance Company, and a $2.5 million rebate in legal fees, the sum total of which would release diocese parishes, schools and contributors from liability.

“The Diocese, along with the parishes and related parties, has sold and encumbered assets and cut budgets to the bone to provide the best possible offer it can in good faith,” Dolan said in a statement. “The goal has always been to provide a fair and equitable resolution for all claimants while allowing the Church, her schools, and her charitable work to continue. Throughout this process, the Diocese, parishes, schools and related ministries have continued to operate without interruption. While seeking a resolution for the survivors, we must also continue our ongoing Catholic mission of providing spiritual, educational, and charitable support to all those in need on Long Island.”

The diocese would also set aside an additional $9.9 million to pay any abuse claims in the next five years, after which the money would revert back to the institution.

The diocese, the eighth-largest in the nation, filed for bankruptcy in late 2020, after hundreds of lawsuits were filed against it following Gov. Andrew Cuomo’s approval of the Child Victims Act in 2019, which extended the statute of limitations on sexual abuse claims.

Representatives of the creditors’ committee presented its potential reorganization plan in January 2023, proposing to settle all claims for $450 million in restitution.

In response, the diocese put forward the $200 million counter-offer, with contributions to be made by the diocese, its parishes, co-insured parties and other members of the ministry, not including insurance payouts.

James Stang, an attorney representing the creditors’ committee, said that after three years of litigation, the proposal from the diocese remains substantially less than what they were asking for.

“We expect the plan of reorganization to go out for voting early next week,” Stang told the Herald. “It will include a letter in which we recommend that people vote ‘no.’”

The letter also includes a list of non-monetary concessions to improve abuse protections and promote healing for survivors who are not part of the Chapter 11 plan.

Corrine Ball, a lawyer representing the diocese, argued that several suggestions on the list be trimmed, according to Law360, saying that Bishop John Barres had already met with the claimants, and that the diocese had already instituted abuse-prevention procedures. Ball also said that demands to include a memorial at the diocesan headquarters and remove the names of alleged abusers from church-owned properties are moot, since the diocese sold its headquarters to pay for the trust and that, to its knowledge, there are no existing buildings named after any of the accused.

Stang argued, however, that the provisions sought by the committee are still relevant to future decisions by the church.