In re Roman Catholic Church of Archdiocese of New Orleans
| Decision Date | 08 February 2021 |
| Docket Number | CASE NO: 20-10846 SECTION A |
| Parties | IN RE: THE ROMAN CATHOLIC CHURCH OF THE ARCHDIOCESE OF NEW ORLEANS, DEBTOR. |
| Court | U.S. Bankruptcy Court — Eastern District of Louisiana |
This Court held a video evidentiary hearing (the "Hearing") to resolve TMI Trust Company's Motion for Order (i) Requiring the United States Trustee To Appoint a Separate Committee of Unsecured Creditors and/or (ii) Reinstating TMI Trust Company as a Member of and Reconstituting the Official Committee of Unsecured Creditors (the "§ 1102 Motion"). [ECF Doc. 521]. Upon a subsequent motion filed by TMI Trust Company ("TMI"), [ECF Doc. 546], and following the agreement of the parties, this Court bifurcated the issues raised by TMI in the § 1102 Motion and limited the matter to be considered at the Hearing to the sole issue of whether the Official Committee of Unsecured Creditors (the "Committee"), as constituted at the time of the Hearing, adequately represents the interests of all unsecured creditors of the estate, particularly commercial creditors. [ECF Doc. 574]; see generally In re McLean Indus., Inc., 70 B.R. 852, 862 (Bankr. S.D.N.Y. 1987) (). Based on the answer to that question, the Court will then decide whether to exercise its discretion under 11 U.S.C. §§ 1102(a)(2) or (a)(4) to order the appointment of an additional committee of creditors or to order the United States Trustee to change the membership of the current Committee. The Court reserved the issues raised by TMI concerning its removal from the Committee and the prospect of its reappointment for a later time. [ECF Docs. 546 & 574].
Creditor First Bank and Trust filed a joinder to the § 1102 Motion (the "Joinder"). [ECF Doc. 533]. The Roman Catholic Church of the Archdiocese of New Orleans (the "Debtor" or the "Archdiocese") filed a response in support of the § 1102 Motion. [ECF Doc. 625]. Oppositions to the § 1102 Motion were filed by the Committee, [ECF Doc. 626], and the Acting United States Trustee for Region 5 (the "UST"), [ECF Doc. 629]. TMI filed a reply brief in support of the § 1102 Motion. [ECF Doc. 644].
After the Hearing, the Court took the matter under advisement. The Debtor and TMI filed post-hearing briefs in support of the § 1102 Motion, [ECF Docs. 678, 688 & 705], and the UST and the Committee filed post-hearing briefs in opposition, [ECF Docs. 686 & 687]. Based upon the pleadings, the record in this case, the arguments of counsel, the evidence presented at the Hearing, and applicable law, this Court GRANTS the § 1102 Motion to the extent that it (i) requests a finding that the Committee as it is currently constituted does not adequately represent the unsecured creditor body and (ii) asks this Court to exercise its discretion pursuant to § 1102(a)(2) to order the UST to appoint an additional committee of unsecured commercial creditors.
This Court has jurisdiction to grant the relief provided for herein pursuant to 28 U.S.C. § 1334 and the Order of Reference of the District Court dated April 11, 1990. The matters presently before the Court constitute core proceedings that this Court may hear and determine on a final basis under 28 U.S.C. § 157(b). The venue of the Debtor's chapter 11 case is proper under 28 U.S.C. §§ 1408 and 1409(a).
This Court has considered the record in this case and the testimony presented at the Hearing from: (i) Kevin Dobrava, TMI's Managing Director; (ii) Colleen Murphy, counsel for TMI who attended Committee meetings with Mr. Dobrava; (iii) C. Davin Boldissar, counsel for the Committee; and (iv) James Adams, member and Chairperson of the Committee. The Court also reviewed the certified deposition transcripts of two other current members of the Committee, Jackie Berthelot and Patricia W. Moody, to which the parties stipulated as evidence. The Court reviewed all exhibits which were admitted into evidence at the Hearing. The parties stipulated to the admission of the vast majority of exhibits and many of the exhibits consisted of pleadings already in the record.
On May 1, 2020, the Debtor filed for bankruptcy protection under chapter 11 of the Bankruptcy Code and the Court designated the case as a "complex case" pursuant to its local rules. [ECF Docs. 1 & 2].2 The Debtor continues to operate as a debtor in possession pursuant to 11 U.S.C. §§ 1107 & 1108. It is no secret that at the time of the Debtor's bankruptcy filing, therewere 34 pending lawsuits filed in Louisiana state court between 2018 and 2020 by individuals alleging past sexual abuse by priests employed or supervised by the Archdiocese and the complicity of the Archdiocese in that abuse (the "Abuse Cases"). Upon filing for bankruptcy relief, the Debtor removed each of those lawsuits to the United States District Court for the Eastern District of Louisiana.
A few of the plaintiffs in the Abuse Cases mobilized quickly and participated through their state court counsel and newly retained bankruptcy counsel in the Debtor's first-day hearings on May 4 & 5, 2020. [ECF Docs. 107 & 108]. Their participation resulted in heavily negotiated first-day Orders, including those regarding payment of prepetition and post-petition wages and benefits, use of cash collateral, and requirements to file under seal certain portions of the Debtor's schedules and statement of financial affairs. [ECF Docs. 100, 173 & 177].
Attached to its Petition, the Debtor included a List of Creditors Who Have the 20 Largest Unsecured Claims and Are Not Insiders (the "Top 20 List"). [ECF Doc. 1-1]. The creditors on the Top 20 List included bondholders, employee health claimants, professional and consulting services claimants, trade claimants, and an insurance claimant. Id.
On May 20, 2020, the UST filed a Notice of Appointment of Unsecured Creditors' Committee, listing Hancock Whitney Bank,3 as Trustee for Louisiana Public Facilities Authority Revenue Refunding Bonds (Archdiocese of New Orleans Project) Series 2017 (the "Bond Trustee"), as well as six redacted names as members of the Committee. [ECF Doc. 94]. The same day, the UST moved the Court for an order granting permission to disclose the identities of those six redacted Committee members, whose names were initially redacted in compliance with theCourt's Order requiring confidential treatment of identifying information of anyone asserting abuse claims against the Debtor. [ECF Docs. 54 & 95]. According to the UST:
The U.S. Trustee has appointed a Committee of Unsecured Creditors whose members include individuals whose claims against the Debtor are premised on allegations of abuse (the "Survivor Members"). The Survivor Members, as representatives and fiduciaries to all unsecured creditors, have consented to the disclosure of their first and last names on the Notice of Appointment document filed into the record by the U.S. Trustee.
[ECF Doc. 95, ¶ 3]. After the Court granted the UST's request, [ECF Doc. 110], the UST filed an unredacted list of Committee members with their attorneys' contact information. [ECF Doc. 114]. On June 10, 2020, the UST filed a Notice of Appointment of Reconstituted Unsecured Creditors' Committee to substitute TMI as the successor Bond Trustee, replacing Hancock Whitney on the Committee. [ECF Doc. 151].
As the record in this case reflects, the Committee has participated fervently in these proceedings.
On June 4, 2020, a personal injury claimant who had named the Archdiocese as a defendant in her prepetition slip-and-fall lawsuit moved to terminate the automatic stay to allow her case to proceed to judgment in state court, proposing that any judgment be satisfied by insurance proceeds only (the "Noullet Lift-Stay Motion"). [ECF Doc. 131]. The Committee objected, asserting that insurance coverage had yet to be determined and added:
There are other creditors of this estate who may have personal injury claims and who may have recourse against applicable insurance coverage. There is currently no way to determine how modification of the automatic stay may affect other creditors. . . . Granting the Motion could favor certain early-moving creditors by diminishing or exhausting available insurance coverage that may be available to all personal injury claimants.
[ECF Doc. 343, ¶¶ 3-4]. After weighing the factors cited in In re Xenon Anesthesia of Texas, 510 B.R. 106 (Bankr. S.D. Tex. 2014), to determine whether cause exists to lift the stay, this Court denied the Noullet Lift-Stay Motion, finding that the state court lawsuit was in its infancy and not trial-ready, that insurance coverage issues may exist, and that no evidence was available to indicate that the debtor's insurance carrier had assumed full financial responsibility for defending the litigation. See Hr'g Tr. 9:10-20:18 (Aug. 20, 2020) [ECF Doc. 358]. In sum, the Court found that lifting the stay presented too great a risk that the Debtor's resources would be syphoned off, thereby negatively impacting the Debtor's reorganization efforts and other creditors' recovery, to justify allowing one creditor to jump ahead of all other similarly situated creditors and recover on her claim. Id.
On July 1, 2020, the Debtor filed an ex parte motion to set the bar date for filing proofs of claim (the "Bar Date") and to approve noticing procedures (the "Bar Date Motion"). [ECF Doc. 200]. On July 3, 2020, the Committee objected to that motion as premature in light of the Committee's contemporaneously filed Motion To Dismiss (discussed and defined below). The Committee also objected to the timing, noticing procedures, and format of the proof of claim form specifically as those...
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