A $274 million Buffalo Diocese bankruptcy settlement, but who is getting paid, and when?

Jay Tokasz, The Buffalo News, N.Y.Buffalo News

If the Buffalo Diocese finally emerges from Chapter 11 bankruptcy, it will be because it corralled enough money from property sales, parish contributions, insurance agreements, and other sources to fund a $273.9 million settlement of sexual abuse claims. And the settlement fund could grow larger, if some holdout insurance carriers join the settlement.

The News examined hundreds of pages of court documents, listened to a four-hour court hearing on Thursday, and spoke with five attorneys familiar with the bankruptcy cases of the Buffalo Diocese and several other dioceses to answer some frequently asked questions about what happens next in the complex case.

Bishop Michael Fisher (copy)

Bishop Michael Fisher, head of the Diocese of Buffalo, in St. Joseph Cathedral. The diocese has corralled enough money from property sales, parish contributions, insurance agreements, and other sources to fund a $273.9 million settlement of sexual abuse claims.

Who will get a share of the diocese’s $273.9 million sex abuse settlement?

Nearly 900 abuse claims were filed in the diocese’s Chapter 11 case. Unlike most bankruptcy court papers (and Child Victims Act lawsuits filed in state court), the claims are not publicly available for review, so the names of claimants and the abuses alleged in the claims remain confidential. Some of the claimants are also plaintiffs in Child Victims Act lawsuits that allege sexual abuse. Those lawsuits will be dropped as part of a confirmed settlement plan.

Will everyone who filed an abuse claim receive a settlement award?

That remains to be seen, but most likely some of the 891 claims won’t be paid out. In the diocese’s most recent disclosure statement, lawyers said there were 121 claims that were duplicates or did not allege harm that was related to abuse; 30 claims were filed after the court’s Aug. 14, 2021, deadline for filing; and 127 claims were based on alleged abuses by individuals that the diocese or its parishes did not employ or have direct control over and thus bear no legal liability for.

Two insurance carriers for the diocese that haven’t joined the settlement asked the court on Thursday to throw out claims that involve religious order priests. They argued that the insurer shouldn’t be on the hook for those cases because religious orders are separate entities that operate independently of the diocese. Judge Carl L. Bucki said the earliest he would make a ruling on the insurance carrier’s request was in mid-November.

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What’s interesting is that the diocese’s lawyers made similar motions last January for the judge to remove claims involving religious orders and then withdrew them in July after striking a deal with the Official Committee of Unsecured Creditors for $150 million of the settlement to be paid by the diocese, its parishes and related Catholic entities. Now that they have a deal, both the creditors committee and the diocese are arguing against the move by U.S. Fire Insurance Co. and Pacific Employers Insurance to have claims disallowed.

The diocese and the creditors committee are still working out an “allocation protocol” that will be part of the joint plan of reorganization, which the court needs to confirm for the diocese to exit Chapter 11.

The protocol will help determine which claimants are eligible for a payment, including whether late-filed claims and claims against order priests will be considered.

Will eligible claimants get the same amount of money?

No. While details of the allocation protocol have not yet been filed with the bankruptcy court, in previous diocese bankruptcy cases, claims typically were assigned points on a scale of 100. The points are based on factors such as the duration, frequency and severity of abuse, as well as the negative impacts the abuse had on the victim, both as a child and as an adult. In the Rochester Diocese’s allocation protocol, claims filed after a cutoff date (but before the effective date of the reorganization plan) were allowed to be considered, if the claimants submitted statements explaining why they didn’t meet the deadline. Awards for late-submitted claims were subject to a reduction of 15% to 60% under the Rochester Diocese protocol.

Claimants who filed lawsuits against the diocese before Aug. 13, 2021, participated in the Chapter 11 process, or held a leadership role in an organization dedicated to helping sex abuse victims were awarded additional points. The value of an individual point was determined by dividing total dollars available by total number of points awarded to all claims. The Buffalo Diocese plan is likely to have the same or very similar setup as the Rochester Diocese plan, according to lawyers who worked on both bankruptcy cases.

Buffalo Diocese bankruptcy settlement may include disclosure of secret files on abusive priests

The Buffalo Diocese’s $274 million plan to exit Chapter 11 bankruptcy will likely include a commitment to create a repository of abuse-related documents – including secret files on priests accused of molesting children – that would be housed at a local university and be accessible to the public.

Who will determine how many points an abuse claim gets?

A neutral third-party claims reviewer, often a former judge, will be hired and paid by the settlement trust to examine all the claims. Stephen Donato, an attorney for the diocese, told Bucki at a recent court hearing that the allocation protocol will have requirements for the claims reviewer to follow in conducting the review to ensure that any invalid claims are screened out. “The claims reviewer must find by a preponderance of the evidence that a claim is valid, meaning very well the claims reviewer could bounce claims, and it’s happened in other places,” said Donato.

According to claimants’ lawyers, most, if not all the claims will merit some type of monetary award. Claims reviewers take the claimants’ offers of proof at face value and are not investigating or corroborating the claimants’ statements, said attorney Leander James.

“In my experience, survivors are extremely honest and consistent when describing their abuse and its effects. If anything, they underdisclose because they are embarrassed or ashamed,” James said. “The rare cases I have seen where the reviewer did not compensate a claimant involved an obviously fraudulent claim, such as a claimant who was in prison who made claims in several Chapter 11 bankruptcies.” In the Rochester Diocese, the claims reviewer’s scoring decisions were final. Although, for a $425 fee, a claimant was allowed to make a request for the reviewer to reconsider his or her claim score. The reconsideration is then final and not subject to further appeal by any party, including a court.

How much longer before the settlement and plan of reorganization are finalized and claimants get paid?

It still could be a while. A next big step is for a hearing to be held on the diocese’s disclosure statement, a 116-page document that spells out its financial affairs in detail so that sex abuse claimants have enough information before they vote to approve or reject a plan of reorganization.

But there are likely to be complications before then. Already there is one brewing. In response to a push by U.S. Fire Insurance Co. and Pacific Employers Insurance Co. for claims involving religious order priests to be disallowed, some plaintiff’s attorneys have asked Bucki to remove a stay on some cases involving religious order priests. If Bucki agrees, those cases could be allowed to move ahead for discovery, depositions and potentially trial in state court, where the question of whether a bishop has direct control over religious order priests working in his diocese can be decided. Bucki is scheduled to hear arguments on the plaintiffs lawyers’ relief stay motions on Nov. 17. Bucki also noted during a hearing Thursday that the diocese’s current disclosure statement had “gaping holes” that needed to be addressed before the court could take a serious look at it.

How much money will plaintiffs’ attorneys be making from the settlement?

Collectively, quite a bit. Most, if not all, attorneys have fee agreements with their clients to receive 33% of any judgment or award. If all eligible claimants were represented by an attorney, about $91.8 million of the $273.9 million settlement would end up as attorney fees.