Sacred Heart Cathedral in Rochester, New York by Daniel Penfield / Wikimedia Commons
CV NEWS FEED // A recent U.S. Supreme Court ruling in a pharma case could have major effects on a New York diocese’s negotiations for bankruptcy and clergy sex abuse settlements.
The Rochester Beacon reported that the Diocese of Rochester filed for bankruptcy nearly five years ago in response to New York’s Child Victims Act, which removed the statute of limitations on childhood sexual abuse cases for two years.
The Act resulted in roughly 485 claims in the Diocese’s bankruptcy from people who maintained they were sexually abused by clergy or other Church officials when they were children.
Since filing for bankruptcy, the Diocese has been involved in years of negotiations and discussions to settle the child sex abuse claims, but a June 27 U.S. Supreme Court case that blocked OxyContin maker Purdue Pharma’s bankruptcy plan could affect how the Diocese proceeds with its own bankruptcy reorganization plans to settle the claims.
According to the Rochester Beacon, the Supreme Court case dealt with members of the Sackler family, who founded, owned, and ran Purdue Pharma—and also pushed OxyContin on doctors to the extent that some say the company created a nationwide opiate crisis. When several states sued the company, it went bankrupt.
“Under a deal worked out in the bankruptcy, the Sacklers agreed to contribute $6 billion to a fund set up to help states deal with their opiate problems. In exchange, the bankruptcy court gave the Sacklers immunity from further lawsuits,” the Rochester Beacon reported.
After the U.S. Trustee sued and argued that the bankruptcy court could not grant immunity, the case went through two more courts and finally arrived at the Supreme Court. The majority ruled that the bankruptcy court could not indemnify third parties like the Sacklers.
According to the Rochester Beacon, the Diocese’s two bankruptcy reorganization plans also include immunity for third parties in exchange for financial contributions.
Two reorganization plans for settlement have emerged this year, giving childhood sex abuse survivors the option to pick one, both, or neither.
The first plan was proposed by the Diocese and a committee representing the 485 claims. The second was proposed by one of the Diocese’s insurers, the Continental Insurance Co. (CNA Insurance). Both plans give individual parishes and parochial schools immunity, though they legally aren’t part of the Diocese bankruptcy.
The plan with the majority of approvals will go to bankruptcy judge Paul Warren, who has reportedly suggested that the Supreme Court ruling will affect the Diocese’s bankruptcy case.
For example, some lawsuits have already been filed against individual parishes by childhood sex abuse survivors. Under the two reorganization plans, if the same survivors also accept a bankruptcy settlement from the Diocese, the parishes would be protected from their lawsuits, which seems to go against the Supreme Court ruling.
Warren has the option to either approve or reject the final plan, which he could do at a confirmation hearing scheduled for early September.
The Rochester Beacon reported that attorney Leander James, who represents 76 claimants, said it’s more likely that Warren will keep the final reorganization plan, as too much time and effort has already gone into the negotiations.
Prior to the Supreme Court’s ruling, the Diocese’s reorganization plans had already faced more setbacks when CNA Insurance sued the Diocese last year for breach of contract.
CNA worked with the Diocese to come up with a settlement of $65 million, but an attorney representing the survivors committee said that both parties failed to consult with the survivors before agreeing to the deal. The attorney also said that the settlement was inadequate.
When the Diocese pulled out of the deal, CNA sued in bankruptcy court and claimed the Diocese owes the company millions of dollars to compensate for the work of putting together the original settlement. The bankruptcy judge will hear CNA’s complaint on July 29.
