Purdue Pharma appeal may delay settlement in Norwich Diocese sex-abuse bankruptcy
U.S. Bankruptcy Judge James Tancredi has suggested the Roman Catholic Diocese of Norwich’s bankruptcy case might need to be “paused” pending the Supreme Court’s consideration of the class-action lawsuit against Purdue Pharma, the OxyContin maker facing extinction in the wake of the opioid epidemic.
Both cases involve so-called non-consensual third-party releases that protect non-debtor third parties ― such as the diocese’s parishes and schools ― from lawsuits.
Tancredi, called upon to approve a plan that provides payments to more than 140 alleged victims of sexual abuse by diocesan priests and employees, raised the possibility of a delay in the case during a court hearing this week, sparking disagreements with attorneys representing the diocese and the victims.
The diocese, which is the debtor in the case, and a victims’ group known as the Official Committee of Unsecured Creditors, submitted a revised “disclosure statement” in support of a proposed reorganization plan that would require the diocese, its insurer and non-debtor third parties to contribute to a fund for settling claims against the diocese.
The plan would provide more than $32 million in payments to victims ― about $3 million more than a previous plan put forward by the diocese.
Major sources of the money include Oceania Province of the Congregation of Christian Brothers, $7 million; proceeds of the sale of real estate used by St. Bernard School in Uncasville, $6.55 million; Catholic Mutual, the diocese’s insurer, $5.3 million; diocesan parishes, $2.7 million; proceeds of a real estate transaction with Xavier High School in Middletown, $2.5 million; and $1.22 million in cash.
The plan provides for the diocese’s retention of three properties in Norwich ― the chancery office at 201 Broadway, the bishop’s residence at 274 Broadway and a vacant parcel at 7-9 Bath St. ― as well as the St. Vincent de Paul soup kitchen in Middletown and the Spanish Center at 60 Jay St. in New London.
Holley Claiborn, the U.S. Trustee representative overseeing the bankruptcy case, filed an objection to the disclosure statement, which she said “falls far short” of its obligation to provide the victims with the information they need to decide whether to support the reorganization plan. Trancredi indicated he also has problems with the statement.
But the specter of the Purdue Pharma case cast the hearing in an ominous light.
In that case, a federal district judge overruled a bankruptcy court judge’s approval of a reorganization plan with non-consensual third-party releases, including one that protected Purdue Pharma’s owner, the Sackler family, from liability related to existing and future opioid lawsuits.
In May, the 2nd U.S. Circuit Court of Appeals reversed the district court’s order, prompting the U.S. Trustee to ask the Supreme Court to intervene.
“It’s critical to this (Norwich Diocese) case, to every mass tort case,” Tancredi said of the Purdue Pharma case. “In my mind … we need to grapple with whether some aspects of this case should be put on a pause or a slower track.”
While acknowledging it could take up to a year or more for the Supreme Court to rule, he cautioned that if he confirmed the proposed reorganization plan for the diocese, the U.S. Trustee would surely oppose it, leading to prolonged litigation that could generate more than $100,000 in additional legal fees, further draining the victims’ fund.
Victims need money now
Nevertheless, Patrick Tomasiewicz, an attorney who said he spoke for the 62 clients he represents as well as New London attorney Kelly Reardon, who represents 30 others, called for the case to go forward, citing the dire circumstances of many of his clients.
“I have a number of people … that are really suffering … people that are addled with emotional difficulties, personal difficulties, financial struggles ...,” he said during the hearing. “I have people that are homeless, I have people that are hanging on by a thread. They very, very much want this over.”
Telling clients they might have to wait as much as a year for some relief “is going to be one heck of a bomb to drop on everybody,” Tomasiewicz said.
Reardon, in a phone interview Friday, said she understands Tancredi is trying to ensure any settlement in the Norwich Diocese case holds up.
“I totally understand his rationale (for potentially pausing the case) but my clients and the other claimants can’t wait,” she said. “If this settlement is delayed for months, a year or more, they will be devastated. … I don’t envy the position he’s in.”
For victims who support the reorganization plan and the payments it will afford them, the legal issue involving non-consensual third-party releases is “moot,” Reardon said.
Stephen Kindseth, the attorney for the committee, and Louis DeLucia, who represents the diocese, both expressed a desire for the case to go forward for the benefit of “the survivors.”
Judge wants diocese to deal with “humanity issue“
At another point in the hearing, Trancredi questioned DeLucia about the role of Bishop Michael Cote and his advisers in preparing the reorganization plan and the disclosure statement.
“This process has been sanitized,” he said. “I don’t need the gruesome details … but frankly the plan doesn’t deal with what I would call the humanity issue … It doesn’t deal with the non-monetary redress of the wrongs.”
In other cases of priest abuse around the country, church officials have taken such steps as meeting with claimants and issuing letters of apology, Tancredi said.
“... I have surveyed those cases … and I am a bit disappointed that we have a Catholic institution in front of us which has a history that is shameful and that the leadership of the church hasn’t taken more effort … to bring humanity to the table,” he added.
DeLucia said the bishop is “very, very aware” of the suffering of the survivors and has been involved in proposing a protocol for non-monetary consideration. It includes, he said, one-on-one meetings with each survivor.
Tancredi will hold the next hearing in the bankruptcy case in two weeks.
Some victims will get $50K soon
In a matter related to the diocese’s bankruptcy, a U.S. district court judge has approved a settlement in a class-action suit involving the inadvertent disclosure of the identities of sexual-abuse victims.
Epiq Corporate Restructuring, a firm the diocese hired to file court documents in the bankruptcy case, will issue $50,000 payments to those whose identities it mistakenly published online, according to Reardon, who filed a lawsuit against the company in February.
She said 129 people have been identified as victims of the privacy breach.
Epiq, which the diocese has replaced, has agreed to reimburse the diocese for any fees it paid the firm.
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