Diocese of Rockville submits plan terms following failed mediation

By Sarah Lizee

Olympia, Wash., Oct. 19 – The Roman Catholic Diocese of Rockville Centre, New York told the U.S. Bankruptcy Court for the Southern District of New York that the mediation with its official committee of unsecured creditors has ended with no agreement reached between the parties.

As a reminder, the committee moved to dismiss the case in March 2023, saying the case was gridlocked. In July, the court denied the motion, but gave the diocese until Oct. 31 to file a plan.

Mediation sessions were held in September and October, but the mediators reported Wednesday that it isn’t likely that an agreement will be reached by the deadline.

“Absent a substantial movement in the positions of the committee or the debtor, those parties have reached an impasse in their efforts to have a consensual plan,” mediator Paul J. Van Osselaer said in a status report.

The diocese outlined the main terms of its plan proposal in a letter filed Thursday with the court.

Under the plan, the diocese, parishes and affiliated parties will pay $200 million in cash to creditors. Of that amount, $150 million will be paid on the effective date, $25 million will be paid after one year, $12.5 million will be paid after two years and $12.5 million will be paid after three years.

Of the $200 million amount, $150 million will be paid from non-debtor released parties through cash or loans to the diocese.

The debtor and non-debtor released parties will also contribute their third-party insurance assets to a settlement trust for creditors.

Upon consummation of the plan, the diocese would immediately pay each claimant with a lawsuit against a non-debtor contributor a minimum of $100,000, and each claimant without a lawsuit a minimum of $50,000.

The balance of the distribution would be paid to a settlement trust and allocated to creditors based on trust distribution protocols similar to those under the plan proposed by the committee, the diocese said.

“In terms of what this proposed plan means, there are approximately 500 non-duplicative proofs of claim currently on the claims register in this case,” the diocese said in the letter.

“As such, claimants, on average, will recover $400,000, in addition to all of the third-party insurance assets, which the official committee of unsecured creditors values at hundreds of millions, if not billions, of dollars.

“While the diocese believes that the committee’s views on insurance are exuberant, this cash offer, coupled with the significant insurance assets, reflects a substantially higher recovery for claimants than any other diocesan bankruptcy case in history, and a fair resolution of the claims.”

The Rockville Centre, N.Y.-based diocese filed bankruptcy on Oct. 1, 2020 under Chapter 11 case number 20-12345.

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