In re Diocese of Camden

• Docket Number: Case No. 20-21257 (JNP)
• Decision Date: 29 August 2023
• Citation: In re Diocese of Camden, 653 B.R. 309 (Bankr. N.J. 2023)
• Parties: IN RE: DIOCESE OF CAMDEN, NEW JERSEY, Debtor.
• Court: U.S. Bankruptcy Court — District of New Jersey

653 B.R. 309

IN RE: DIOCESE OF CAMDEN, NEW JERSEY, Debtor.

Case No. 20-21257 (JNP)

United States Bankruptcy Court, D. New Jersey

Signed August 29, 2023

Jeffrey Robert Anderson, Jeff Anderson & Associates, St. Paul, MN, Connor Dalton, Cool Spring Meeting House, Wilmington, DE, Brenda Harkavy, Raynes & Lawn, Philadelphia, PA, Peter William Smith, Peter W. Smith Law LLC, New York, NY, John Baldante, Levy Baldante Finney & Rubenstein, P.C., Haddonfield NJ, Certain Abuse Survivor Claimants, for Creditor Committee.

Lauren Bielskie, DOJ-Ust, Newark, NJ, Jeffrey M. Sponder, Office of U.S. Trustee, Newark, NJ, for U.S. Trustee.

Jessica Caterina, Schlam, Stone & Dolan, New York, NY, Rasmeet Kaur Chahil, Lowenstein Sandler, Roseland, NJ, Michael A. Kaplan, Lowenstein Sandler LLP, Roseland, NJ, Lowenstein Sandler LLP, Roseland, NJ, John S. Mairo, Porzio, Bromberg & Newman, P.C., Morristown, NJ, Jeffrey D. Prol, Lowenstein Sandler, Roseland, NJ, Colleen Restel, Lowenstein Sandler LLP, Roseland, NJ, Kenneth A. Rosen, Lowenstein Sandler, Roseland, NJ, for Official Committee of Tort Claimant Creditors (Creditor Committee).

Richard D. Trenk, Trenk Isabel Siddiqi & Shahdanian P.C., Livingston, NJ, Trenk Isabel, PC, Livingston, NJ, Warren A. Usatine, Cole Schotz P.C., Hackensack, NJ, for The Diocese of Camden, New Jersey (Debtor).

MEMORANDUM DECISION DENYING CONFIRMATION OF EIGHTH AMENDED PLAN

JERROLD N. POSLUSNY, JR., United Stated Bankruptcy Judge

The Diocese of Camden, New Jersey (the "Debtor"), and the Official Committee of Tort Claimant Creditors (the "Committee," and with the Debtor, the "Plan Proponents") seek confirmation of their jointly proposed eighth amended plan of reorganization (the "Plan") along with the accompanying agreement creating a trust (the "Trust Agreement") and trust distribution procedures (the "TDPs"). Dkt. Nos. 1724, 1725. The only objection to confirmation was filed by certain insurers.¹ For the reasons discussed below, the Court will deny confirmation of the Plan.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

The Court HEREBY FINDS, DETERMINES, AND CONCLUDES as follows:

The findings and conclusions set forth herein and in the record of the Confirmation Hearing constitute the Court's findings of fact and conclusions of law under Federal Rule of Civil Procedure ("Federal Rule") 52, made applicable by Federal Rule of Bankruptcy Procedure ("Rule") 7052, and 9014. To the extent any of the following conclusions of law shall be determined to be a finding of fact, it shall be so deemed, or any of the following findings of fact shall be determined to be a conclusion of law, it shall be so deemed.

Jurisdiction

The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1334 and 157(a) and (b)(1), and the Standing Order of the United States District Court dated July 10, 1984, as amended September 18, 2012. Venue is proper in this Court pursuant to 28 U.S.C. § 1408. Consideration of the Plan constitutes a core proceeding under 28 U.S.C. § 157(b)(2)(A), (L), (M), and (O).

The Debtor is eligible to be a debtor under section 109 of Title 11 of the United States Code (the "Bankruptcy Code") and the Plan Proponents are proper proponents of a plan under section 1121(a) of the Bankruptcy Code.

Background

The Debtor is a nonprofit religious corporation formed on June 17, 1938, under N.J.S.A. §§ 16:15-9 to 15:15-17. PP-0266 ¶ 56.² Under N.J.S.A. § 16:15-10, the five trustees of the Debtor are the Bishop, the Vicar General, the Chancellor, and two priests of the Diocese. Id. The Debtor is an ecclesiastical district within the Catholic Church comprised of the southern six counties of New Jersey — Camden, Gloucester, Atlantic, Cape May, Cumberland, and Salem counties. Id. ¶ 25. The Diocese encompasses approximately 480,000 Catholics across 62 Parishes. Id. ¶¶ 25, 27, 55.

There are four Missions within the Debtor's district: three are organized and operated as nonprofit corporations in accordance with Title 15A of New Jersey Law although their respective corporate governance structures mirror that of a Title 16 parish; the fourth is a non-profit membership corporation of which the Debtor is the member. Id. ¶ 58. The Debtor operates or is affiliated with twenty-two elementary schools, a pre-school daycare, and five high schools. Id. ¶¶ 63-65. Three of the five high schools are separately incorporated as Title 15A non-profit corporations. Id. ¶ 65.

Additionally, there are separately incorporated non-profit Catholic Ministry Entities that carry out various ministries of the Catholic Church within the territory of the Debtor, which include, among others, the Catholic Charities Diocese of Camden Inc., Diocese of Camden Trusts, Inc. ("DOCT"), Diocese of Camden Healthcare Foundation, Inc., The Diocesan Housing Services Corporation of the Diocese of Camden, Inc., The Tuition Assistance Fund, Inc., and Padre Pio Shrine Buena Borough, NJ, Inc. Id. ¶¶ 72, 74-117. DOCT is a separately incorporated non-profit institution which provides funding and long-term capital to the Debtor. PP-0266 ¶ 98. DOCT currently holds over $100 million in assets. Nov. 14 Transcript, 37:1-3. The Other Catholic Entities (the "OCE") consist of the Parishes, Missions, Schools, Catholic Ministry Entities, and all other entities listed under Article 2.2.80 of the Plan.³ Plan Art. 2.2.80.

The Debtor holds cash and investment funds on behalf of the OCE in several accounts referred to as the "Revolving Fund" at PNC Bank. Pursuant to the "Parish Trust Agreements," the Revolving Fund is held in a series of investment accounts for the benefit of the OCE, which maintains their excess funds. Dkt. No. 1724 at 23 (the "Disclosure Statement"); Nov. 14 Transcript, 13:1-6; Nov. 10 Transcript, 148:2-12. The OCE deposit funds in excess of one month's operating expenses into the Revolving Fund and are paid 3% interest on their deposits. Nov. 10 Transcript, 148:2-12. The Revolving Fund lends money to the OCE, for large capital expenditures. Id. As of November 2022, the Revolving Fund held in excess of $90 million, which funds are invested. Id. at 148:13-14. The Debtor's cash assets and receivables are approximately $37.3 million, with a liquidation value of approximately $8 million. PP-0420. The Debtor also holds real property and equipment valued at $21.15 million, with a liquidation value of $19 million. Id.

The Debtor entered into a revolving loan agreement with PNC Bank (the "PNC Loan"), the outstanding balance of which was $22,807,500 as of September 30, 2020. Disclosure Statement, at 34; see also Nov. 10 Transcript, 135:22-25. DOCT has pledged its assets as security for this loan, and pursuant to the loan agreement, must maintain a balance of 200% of the outstanding loan amount, which required approximately $46 million as of December 2022. Id.; Dkt. No. 29191 ¶ 5c.⁴

The Debtor has approximately $7.1 million in restricted cash assets and the OCE have in excess of $30 million, according to the testimony of Allen Wilen. Nov. 14 Transcript, 40:10-17.

History of Abuse

In 2002 both civil and church authorities recognized that the historic abuse and exploitation of minor children by priests was a serious problem that needed to be addressed to prevent such conduct from happening in the future. PP-0266 ¶ 46. The Debtor took steps, including entering into compacts with county prosecutors and the New Jersey Attorney General (the "2002 Memorandum of Understanding"), requiring fingerprint-facilitated criminal history background checks for every adult employee having regular contact with minors, and implementing zero tolerance policies regarding sexual abuse. Id. ¶ 7. In accordance with the 2002 Memorandum of Understanding, the Debtor reports every allegation of abuse of a minor by Diocesan priests to law enforcement authorities. Id. ¶ 48. The Debtor publicly released the names of 56 priests (which was reduced to 55 priests after further review) and one deacon of the Debtor who were credibly accused of abusing minors prior to the Petition Date. Id. ¶ 33. The Debtor offers therapeutic care to anyone who comes forward as a survivor of sexual abuse, amounting to an initial twenty-five counseling sessions per survivor with the option to request additional sessions after a panel of psychologists reviews the survivor's case to determine if more sessions are warranted. Nov. 9 Transcript, 63:21-64:11. The Debtor has paid nearly $1 million to provide these services to date. Id. at 64:1-14.

From 1990 to 2019, the Diocese reached 99 settlements to abuse survivors totaling approximately $10.1 million. PP-0266 ¶ 36.

In December 2019, the State of New Jersey passed the New Jersey Child Victims Act (the "CVA") which reopened the statute of limitations related to claims of child sexual abuse, allowing previously time barred claims of this nature to be brought for a two-year period from the passage of the CVA, through November 30, 2021, as well as expanding the statute of limitations for any such claims which were not time barred as of the date enactment. Oct. 6 pm Transcript, 67-68; N.J.S.A. § 2A:14-2a.

The IVCP

Prior to the passage of the CVA, on June 15, 2019, the Debtor along with other Dioceses in New Jersey, established the Independent Victims Compensation Program ("IVCP"). The IVCP was a voluntary out of court program to settle child sex abuse claims. The Debtor participated in the IVCP through July 31, 2020. Disclosure Statement, at 36. As explained in more detail in the 9019 Decision (defined below), the IVCP was administered by two independent experts, Kenneth Feinberg and Camille Biros (the "IVCP Administrators"), who reviewed and evaluated claims, placing each claim into a category based on the allegations, with increasing ranges of compensation for more severe allegations of abuse. See id. at 75; PP-0065-A, Claims were reviewed, and the IVCP administrators met with the claimants individually, adjusting the claim amounts as appropriate. Oct. 17 pm Transcript, 67:9-11. The Debtor...