Diocese of Rockville and committee file competing Chapter 11 plans

By Sarah Lizee

Olympia, Wash., Jan. 27 – The Roman Catholic Diocese of Rockville Centre, New York and its official committee of unsecured creditors announced competing Chapter 11 plans on Friday.

The diocese said in a press release that it’s plan, which features a settlement with abuse survivors, is a better alternative to the “needlessly expensive litigation path” that the official committee of unsecured creditors’ plan entails.

The diocese said the continued litigation would financially erode assets of the diocese, parishes and other co-insureds that would otherwise be used to fund the settlement.

Under the diocese's plan, the estimated total contribution from the diocese, parishes, its co-insured parties, and other ministry members has a value between $185 million and $200 million.

These figures do not include the value of the diocese's substantial rights against third-party insurance companies, which are also being contributed under the plan. The diocese said it continues to press for these rights in settlement negotiations for the benefit of survivors.

The diocese noted that these settlement contributions compare “quite favorably” to other diocesan plans.

“By way of comparison, the average aggregate non-insurance contribution for dioceses that have confirmed Chapter 11 plans is approximately $21.4 million,” the diocese said.

“When non-insurance settlement contributions are coupled with the insurance rights contribution, the diocese's plan brings both the aggregate and per-claim recovery well in excess of any other diocesan Chapter 11 plan in history.”

The committee noted in a press release that the assignment of potential insurance policy recoveries are being actively disputed in four separate lawsuits by the carriers who sold the policies.

According to the diocese’s disclosure statement, priority claims will be paid in full or otherwise left unimpaired.

Holders of secured claims will receive cash equal to the claims, the return of the collateral securing the claims, or other treatment leaving the claims unimpaired.

General unsecured claimholders will receive a pro rata share of the GUC plan distribution, subject to their ability to elect convenience claim treatment.

Holders of convenience claims will receive cash equal to 100% of their claims.

Abuse claims will receive distributions from the trust. The plan provides for the release of liability for the sexual abuse claims.

The diocese will assume its participation in a lay pension plan and priest pension plan, but won’t make payments with respect to pension claims under the Chapter 11 plan.

Committee’s plan

The committee said it filed its own plan because the diocese has refused to respond to a settlement offer that was made more than two months ago.

The committee’s plan requires the diocese to contribute cash and assets to compensate over 600 survivors of child sexual abuse.

The plan offers opportunity for settlements with the diocese’s parishes and affiliates, several of which received alleged fraudulent transfers in cash and property worth hundreds of millions of dollars and many of which are individually liable for claims of survivors for hundreds of millions of dollars, the committee said.

The plan also offers opportunity for settlements with several of the diocese’s general liability carriers in amounts that are the subject of confidential mediation.

“The committee's plan is based on the committee's extensive discovery of the [diocese]'s assets and transfers designed to hide the diocese's assets from survivors,” the committee said.

The committee also noted that the diocese has started a process of objecting to survivors' claims, which strategy is rarely employed in Catholic church bankruptcies.

The committee’s plan was not available in the court docket at the time its press release had been issued.

The Rockville Centre, N.Y.-based diocese filed bankruptcy on Oct. 1, 2020 in the U.S. Bankruptcy Court for the Southern District of New York under Chapter 11 case number 20-12345.

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