CREDITORS' COMMITTEE REPPED BY PSZJ FILES MOTION TO DISMISS DIOCESE OF ROCKVILLE CENTRE'S BANKRUPTCY

NEW YORK, March 28, 2023 /PRNewswire/ -- The Official Committee of Unsecured Creditors ("Committee"), the fiduciary for all survivors of sexual abuse ("Survivors") in the chapter 11 case of The Roman Catholic Diocese of Rockville Centre ("DRC"), took the extraordinary step of moving to dismiss the DRC's bankruptcy case. After two and half years of bankruptcy, the DRC has no likelihood of successfully confirming a consensual reorganization plan. The Committee's motion states that DRC cannot confirm the plan it has proposed and will not propose a plan it can confirm. The Committee is represented by Pachulski Stang Ziehl & Jones LLP ("PSZJ").

In January, the DRC filed its own plan without the support of the Committee. The DRC plan has a minimal financial contribution of $11.1 million from the parishes and affiliates (totaling more than 300 different entities), which receive a complete release of liability for over six hundred abuse sexual abuse claims, and largely relies on the assignment of potential insurance policy recoveries that the carriers who sold the policies are actively disputing in four separate lawsuits. The DRC's plan is "business as usual" regarding child protection measures although some of the over six hundred abuse claims arose after the reforms proposed by the U.S. Conference of Catholic Bishops. Moving forward with the DRC plan will likely cost tens of millions of dollars and will get the DRC no closer to exiting bankruptcy because the plan cannot be confirmed without sexual abuse survivor support.

The DRC appears to have an irreconcilable conflict between affiliate and creditor interests, and the Diocese has "resolved" that conflict by elevating affiliates over those of its creditors, in derogation of its fiduciary duties. Both before and during the bankruptcy, the DRC has aggressively shifted assets to affiliates and sought to protect those affiliates from Survivor claims, rather than recovering those assets and maximizing creditor recoveries. 

"The Committee moved to dismiss the bankruptcy because we believe the Diocese has abdicated its responsibility as a fiduciary to all creditors and seems more interested in protecting its enterprise than fairly compensating its victims," said Richard Tollner, Committee Chair. 

The DRC also has started objecting to Survivors' claims. This strategy is rarely employed in Catholic Church bankruptcies. Typically, claims disputes are handled by a procedure in a consensual plan that saves everyone substantial legal costs/fees and minimizes the possibility of re-traumatizing Survivors. However, the DRC is taking a scorched earth approach with the Survivors sexually abused as children. The DRC is continuing its decades-long pattern of employing "aggressive legal strategies...to defeat and discourage lawsuits even though Diocesan officials kn[o]w they were meritorious," as observed by the Suffolk County Grand Jury in 2003.

"The Diocese has adopted a litigation path that ultimately will fail and will have wasted millions of dollars. The Committee always has stood for fair compensation and transparency. The Committee filed its motion to dismiss to attempt to stop DRC's litigation tactics and to instead finally give Survivors their day in New York Courts," said James Stang of PSZJ, bankruptcy counsel to the Committee.

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SOURCE Pachulski Stang Ziehl & Jones