Sex Abuse Claimants Pursue Their Own Plans for Bankrupt Dioceses

Clergy sex abuse claimant groups seeking compensation from the Catholic dioceses in Oakland and Baltimore are pushing their own bankruptcy exit proposals for the institutions, the latest example of abuse survivors trying to shed light on settlement talks and ensure higher payouts.

This week, the Oakland claimants’ committee must submit amended disclosures for its proposed plan, which aims to establish a $314 million trust to compensate abuse survivors. The diocese, meanwhile, has offered $180 million—up from $143.5 million last year—under its own proposal. If a judge is satisfied with the committee’s amendments, the two competing plans will be sent to creditors for a vote.

Competing plans are uncommon in traditional, corporate Chapter 11 cases. But it’s become more popular in the slew of diocese bankruptcies filed over the past decade, especially following the passage of child victim legislation starting in 2019 across the country, which increased the number of sex abuse claims against the dioceses.

The sensitive nature of the diocese bankruptcies—which require settlement discussions between insurers, abuse claimants, and the Catholic institutions—mean they can take years before formal proposals are filed, leaving claimants in the dark about whether a settlement will be reached, how much they might receive, and when the payouts will occur.

The Oakland and Baltimore cases have each been proceeding for three years.

In the Baltimore case, the archdiocese and its claimants’ committee are waiting for a court ruling on the institution’s plan to merge or consolidate 61 of its 153 parishes. In the meantime, the committee has proposed a $541.3 million trust for survivors. The archdiocese indicated during an April 16 hearing that it plans to file a reorganization proposal shortly.

Dueling plan proposals allow claimants, and occasionally insurers, to try to force the process forward out in the open, rather than in private mediation. But they can only do so after the exclusive period for the bankrupt entity to file a plan expires—and that can last for nearly two years after the proceeding begins.

When a committee files a competing plan, it’s usually because the parties don’t agree on the feasibility of the diocese’s initial proposal, said Nancy Rapoport, a UNLV William S. Boyd School of Law bankruptcy professor.

“So there’s something that’s stuck, and after the clock for exclusivity runs out, the choices are get it unstuck with a competing plan or watch the case go down the drain,” Rapoport said.

The outcome is often a joint plan proposal between the diocese and the claimants’ committee that incorporates a sex abuse litigation settlement. As such, committees have significant influence: The dioceses haven’t succeeded in obtaining court approval of a bankruptcy exit plan without claimants’ support.

Higher Payouts

While the majority of court-approved bankruptcy exit plans in these cases have been jointly filed, the Oakland and Baltimore abuse claimants aren’t the first in recent years with competing proposals.

Diocese bankruptcies became more contentious after the uptick in child victim legislation prompted insurance companies and claimants to clash over the dioceses’ policy coverage and how much insurers are on the hook for.

“The issue is often how to use insurance and/or sell non-religious property,” former Nevada bankruptcy judge Bruce Markell, now a Northwestern Pritzker School of Law professor, said in an email. “No plan will be confirmed on its original terms.”

Final settlement terms in the diocese bankruptcies are consistently higher after a competing plan is proposed. The Rockville Centre, N.Y., diocese filed its plan just eight days after its abuse claimants’ committee submitted its own version in January 2023. The four-year-old case ultimately was resolved in December 2024 with a claimant-backed plan, which included a $320 million settlement—at least $120 million higher than the initial proposal.

The Norwich, Conn., diocese had two rounds of competing plans over more than two years. The committee, the diocese, its parishes, and its main insurer reached a resolution and gained court approval last June to end the case, which began in 2021, with a $31 million settlement that was about $11 million higher than the diocese’s first offer.

The Rochester diocese, which filed Chapter 11 in 2019, secured court approval of a joint plan with its committee last September, although a CNA Financial Corp. subsidiary had submitted an opposing plan. The insurer and the diocese reached a $120 million settlement, bringing the total to $246 million—$170 million higher than where the initial proposal started.

Access

Complications arise with competing plans because committees and insurers typically don’t have access to the diocese’s financial information.

Mediation privilege often cloaks the parties’ positions, making it difficult for the court and individual claimants to know where the settlement talks stand, personal injury attorney Christopher Love of Pfau Cochran Vertetis Amala PLLC said.

“One advantage of filing a competing plan is it brings sunshine to those positions that the court can literally see for itself,” Love said.

There have been 43 Catholic churches that have filed bankruptcy since 2004, according to a Penn State Dickinson Law database.

The 20 cases filed before Congress reauthorized the Victims of Child Abuse Act in January 2019 typically resolved in three years or less. The Milwaukee Archdiocese, which filed in 2011, took nearly five years and was one of the first cases to involve significant challenges from insurers and the Catholic institution to the validity of claims made by survivors, industry professionals said.

Competing plans in more recent cases became a way for survivors and others not directly involved in mediation to know what’s happening, said Jason Amala of PCVA.

“Survivors get to take a look and see what’s being proposed and why,” he said. “Seems pretty fair to make sure people know what’s going on, including a judge.”