NEW YORK, April 12, 2024 /PRNewswire/ — Today, in a landmark victory for victims of sex abuse (“Survivors”), the Roman Catholic Diocese of Rockville Centre (“Diocese”) announced that Survivors overwhelmingly rejected its reorganization plan, which was opposed by the Creditors’ Committee. According to the Diocese, a “supermajority” of Survivors rejected the Diocese’s reorganization plan. The Creditors’ Committee (“Committee”), which opposed the plan because it did not provide adequate compensation for Survivors and lacked any child protection measures, is represented by Pachulski Stang Ziehl & Jones LLP (“PSZJ”) and Burns Bair LLP.
On April 12, the Diocese filed a motion to dismiss its own bankruptcy because the Survivors rejected its plan. The hearing on the motion to dismiss is scheduled for May 9.
“The Diocese repeatedly threatened Survivors that it would seek dismissal of the bankruptcy if Survivors did not accept a woefully inadequate plan that included non-consensual releases for parishes and affiliates. In rejecting the plan, Survivors demonstrated strength and unity and demonstrated that they would not be intimidated by the Diocese. The Diocese chose the bankruptcy forum ostensibly to provide fair and equitable compensation to those who were abused as children. Now, because the Diocese could not have its way, it wants to turn the clock back to where it started four years ago having paid its bankruptcy professionals nearly $60 million dollars,” said James Stang, Partner at PSZJ.
The landslide rejection of the Diocese’s plan is unprecedented in the history of chapter 11 abuse cases as the choice for Survivors was between the Debtor’s plan and the Debtor’s threat to dismiss the bankruptcy case. In other chapter 11 cases in which a diocese has proffered a non-consensual plan, survivors had a choice between the diocese’s plan and their own plan. In this case, the Survivors rejected the only plan on the table demonstrating that they would not be cowed into accepting an offer that was inadequate by any measure of the Diocese, parishes and affiliates’ ability to fairly compensate Survivors.
Their vote also demonstrated a selfless commitment to child protection measures as essential to any effort to garner Survivors’ support, a point made by Chief Bankruptcy Judge Glenn at a disclosure statement hearing. Notwithstanding the Court’s suggestion that proposing such measures might enhance the possibility of Survivors’ acceptance of the plan, the Diocese plan glaringly omitted any such provisions.
“The Survivors have sent a strong message to all debtors around the country who are using bankruptcy to avoid accountability before state court juries. The message is: If your plan does not have the support of the survivors’ creditors’ committee, your reorganization plan will fail,” said Richard Tollner, the Committee chair. He added “In this case, the Committee repeatedly warned the Diocese that unilateral solicitation of its plan without Committee support was a fool’s errand; it nonetheless stubbornly proceeded at great expense of time, as well as tens of millions of dollars, an unnecessary waste of resources that could have gone to compensate Survivors.”
SOURCE Pachulski Stang Ziehl & Jones
