The Archdiocese of San Francisco recently announced its decision to file for Chapter 11 bankruptcy to protect itself from more than 500 lawsuits alleging child sexual abuse.
Archbishop Salvatore Cordileone explained that the Archdiocese lacks the financial means to litigate the claims:
“The unfortunate reality is that the Archdiocese has neither the financial means nor the practical ability to litigate all of these abuse claims individually, and therefore, after much consideration, concluded that the bankruptcy process was the best solution for providing fair and equitable compensation to the innocent survivors who have been harmed.”
Critics have expressed doubt that the Archdiocese of San Francisco lacks the financial means to settle the claims and have further questioned the Archbishop’s opinion that bankruptcy is the “best solution” for innocent survivors.
California’s suspension of statutes of limitation
In 2019, California introduced a law that provided a three-year opportunity, ending on December 31, 2022, for individuals to file cases related to childhood sexual abuse that would have otherwise been dismissed due to the statute of limitations. This legislation led to an influx of lawsuits, with more than 500 targeting the San Francisco Archdiocese.
Impacts and implications of bankruptcy on survivors
For organizations facing sexual abuse claims, bankruptcy can be a powerful tool.
Perhaps most notably, survivors opting for compensation through bankruptcy lose their ability to conduct discovery proceedings otherwise available through litigation. The inability to conduct discovery prevents survivors from receiving answers regarding their abuse. Moreover, survivors lose the opportunity to uncover potentially damaging information, such as the involvement of additional non-debtor parties who might have been complicit in the abuse—information that may ultimately help prevent future abuses.
“As we dramatically increase access to justice through statutes-of-limitations reform, we have more organizations going into bankruptcy because, frankly, bankruptcy law favors the organizations,” said Marci Hamilton, the founder of Child USA, a group that has advocated for laws expanding sexual abuse victims’ rights to sue.
Bankruptcy hurts survivors who haven’t filed a lawsuit or who opt out of class membership to pursue their claim individually. These individuals run the risk of competing for smaller amounts than those who choose to accept compensation through bankruptcy. When an organization files for Chapter 11 bankruptcy, the court typically appoints someone to represent “future claimants.” However, it can be difficult to estimate the number of future claims, as we learned in many of the asbestos bankruptcy cases in the 1980s.
Finally, filing a bankruptcy petition triggers an automatic stay of the commencement or continuation of any legal proceedings against the debtor. The stay remains in effect until the case is closed, dismissed, or a discharge is granted or denied. This protracted stay may prevent future claimants from acquiring evidence in a timely manner, potentially resulting in claims being barred by the statute of limitations.
Entities confronted with sexual abuse claims often pursue "non-debtor protections" for their affiliated bodies, like faith-based schools or individual congregations. These protections grant immunity to individuals and organizations from legal actions related to matters addressed in bankruptcy resolutions. As a result, these groups and individuals receive the advantages of bankruptcy without the necessity of filing for it directly.
A troubling trend
The Archdiocese of San Francisco is not the first entity to file for bankruptcy in the face of sexual abuse claims. Other Catholic organizations, including dioceses in Oakland and Santa Rosa, have also filed for bankruptcy, a testament to the larger, ongoing issue the Catholic Church faces concerning allegations of child sexual abuse.
What’s more, organizations such as the Boy Scouts of America, USA Gymnastics, and the Weinstein Company have used bankruptcy as a shield in response to mass lawsuits by victims of sexual abuse.
A glimpse into the future
The bankruptcy filing means the Archdiocese will develop a reorganization plan based on assets and available insurance to settle claims with abuse survivors. As these proceedings unfold, it's crucial to remember the broader context: the struggle for justice by abuse survivors and the Catholic Church's attempt to navigate these troubled waters.
For survivors considering their legal options, understanding the implications of an entity's bankruptcy filing is vital. Bankruptcy can complicate the process, potentially limiting the compensation available. It's always advisable for survivors to consult with legal professionals to understand their rights and potential outcomes fully.
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