In re Roman Catholic Diocese of Rockville Ctr.

• Decision Date: 09 December 2022
• Docket Number: Case No. 20-12345 (MG)
• Citation: 647 B.R. 69
• Parties: IN RE: The ROMAN CATHOLIC DIOCESE OF ROCKVILLE CENTRE, New York, Debtor.
• Court: U.S. Bankruptcy Court — Southern District of New York

647 B.R. 69

IN RE: The ROMAN CATHOLIC DIOCESE OF ROCKVILLE CENTRE, New York, Debtor.

Case No. 20-12345 (MG)

United States Bankruptcy Court, S.D. New York.

Signed December 9, 2022

JONES DAY, Attorneys for the Debtor, 250 Vesey Street, Floor 32, New York, NY 10281, By: Andrew Butler, Esq., Benjamin Rosenblum, Esq.

PACHULSKI STANG ZIEHL & JONES LLP, Attorneys for the Creditors Committee, 10100 Santa Monica Bldv., Ste 1300, Los Angeles, CA 90067, By: James I. Stang, Esq.

OFFICE OF THE UNITED STATES TRUSTEE, U.S. Federal Office Building, 201 Varick Street, Room 1006, New York, NY 10014, By: Greg Zipes.

MEMORANDUM OPINION AUTHORIZING THE DEBTOR TO "OPT-IN" TO TREATMENT AS A PARTICIPATING CHARTERED ORGANIZATION UNDER THE BOY SCOUTS OF AMERICA CHAPTER 11 PLAN

MARTIN GLENN, CHIEF UNITED STATES BANKRUPTCY JUDGE

The Roman Catholic Diocese of Rockville Centre, New York (the "Debtor" or the "Diocese") filed a motion to authorize the Debtor to "opt-in" to treatment as a "Participating Chartered Organization" under the Boy Scouts of America chapter 11 plan (the "BSA Plan") and for related relief. ("Motion," ECF Doc. # 1349.) The Debtor filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code on October 1, 2020 (the "Petition Date"). (Motion ¶ 1.) Prior to the Petition Date, the Child Victims Act of 2019 revived previously time-barred sex abuse claims, and approximately 200 lawsuits were filed by abuse claimants against the Debtor. (Id. ¶ 4.) The Debtor has sought to identify and marshal over 60 years of insurance policies to secure valuable resources of the Debtor's which may be used to compensate abuse survivors. (Id. ) In conjunction with those efforts, the Debtor's motion seeks to take advantage of a settlement agreement regarding the BSA Plan that the Debtor contends will substantially support its goals. No objections were filed to the Motion.

The Court held a hearing on the Motion on November 30, 2022. The Court granted the Motion, and an order has already been entered. (See ECF Doc. # 1498.) When it granted the Motion, the Court stated that considering the public interest in the issues presented, it expected to issue an opinion explaining the reasons for granting the Motion. Because an appeal is pending challenging the confirmed BSA Plan, the BSA Plan has not yet become effective and the Debtor and the claimants have not yet received any benefits from the BSA Plan.

I. BACKGROUND

A. The Boy Scouts of America Chapter 11 Bankruptcy Case

On February 18, 2020, the Boy Scouts of America and Delaware BSA, LLC (collectively, "BSA") filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code in the Delaware bankruptcy court for the primary purpose of addressing sexual abuse claims against the BSA.¹ On February 15, 2022, the BSA filed a plan of reorganization, which was modified and then confirmed on September 8, 2022. (Motion ¶¶ 10, 13.) The BSA Plan proposes to establish a trust for sexual abuse survivors to be funded with approximately $2.69 billion (the "Settlement Trust"). (Id. ¶ 11.) The sexual abuse claims against the BSA implicate certain partner organizations presently or formerly authorized by the BSA to sponsor or support scouting units. (Id. ¶ 8.) These organizations include many parishes within the geographic region of the Diocese, which are considered "Chartered Organizations" under the BSA Plan. (Motion ¶ 8.)

Certain of Debtor's claimants have asserted liability against the Diocese for scouting-related abuse. (Id. ) The Debtor has also been named as a co-defendant to the BSA in certain lawsuits, and certain claims filed against the Debtor in this case indicate that the claimant has also submitted a claim against the BSA. (Id. ¶ 9.) In addition, certain sexual abuse claims asserted in the Diocese's bankruptcy case implicate BSA either because (i) the alleged abuser was a scoutmaster, or (ii) the alleged abuse occurred in connection with scouting events, among other reasons. (Id. ) Based on the Diocese's ongoing review, approximately 30 sexual abuse proofs of claim filed in this chapter 11 case may relate to BSA or BSA-related activities. (Id. )

1. The Debtor Seeks Classification as a Participating Chartered Organization Under the BSA Plan

A Chartered Organization may be classified and treated as a "Contributing," "Participating," or "Opt-Out" Chartered Organization. (Id. ¶ 14.) Contributing Chartered Organizations are Chartered Organizations that choose to negotiate to make a substantial monetary contribution to the Settlement Trust and release their rights to any insurance policies in exchange for all scouting-related abuse claims against the Contributing Chartered Organization being channeled to the Settlement Trust. (Id. ¶ 15.)

In contrast, Participating Chartered Organizations—the designation the Debtor seeks—are Chartered Organizations that are not Contributing Chartered Organizations and that (a) do not object to confirmation of the BSA Plan, (b) do not inform BSA's counsel in writing that they do not wish to be Participating Chartered Organizations, and (c) are not debtors in bankruptcy. (Id. ¶ 16.) A Chartered Organization that is a debtor in bankruptcy as of the BSA Confirmation Date, as the Debtor is here, will be a Participating Chartered Organization only if it advises BSA's counsel in writing that it wishes to make the election to be a Participating Chartered Organization. (Id. ¶ 16.) Although the parishes within the Diocese's jurisdiction, as non-debtors, are treated as Participating Chartered Organizations by default, the Diocese must elect to opt-in to treatment as a Participating Chartered Organization. (Id. ¶ 24.)

2. Treatment as a Participating Chartered Organization

The BSA Plan provides that all scouting-related abuse claims against a Participating Chartered Organization which occurred (i) after 1976, and (ii) before 1976 for which there is qualifying insurance to be channeled to the Settlement Trust in exchange for the Participating Chartered Organization's release of rights to related insurance policies. (Id . ¶ 17.) Specifically, the BSA Plan provides for Participating Chartered Organizations to be treated as follows:

a. Protection from Direct Abuse Claims: All 1976-forward Abuse Claims against Participating Chartered Organizations, as well as all pre-1976 Abuse Claims against Participating Chartered Organizations for which there is insurance issued by a Settling Insurance Company, will be channeled to the Settlement Trust, and abuse survivors will release the Participating Chartered Organizations for such claims. Abuse survivors will not be able to assert Scouting-related Abuse Claims that are channeled to the Settlement Trust directly against Participating Chartered Organizations. This does not impact claims against Participating Chartered Organizations that are unrelated to Scouting. The Plan also provides that all Participating Chartered Organizations will receive the protection of a twelve-month injunction from prosecution of Abuse Claims beginning on the Effective Date (subject to further extension) to afford Participating Chartered Organizations an opportunity to negotiate an appropriate contribution with the Settlement Trust to become a Contributing Chartered Organization.

b. BSA and Local Council Insurance: In exchange for all 1976-forward Abuse Claims against the Participating Chartered Organizations being channeled to the Settlement Trust and abuse survivors releasing the Participating Chartered Organizations for such claims, the Participating Chartered Organizations will voluntarily release their rights to any insurance policies issued to BSA or Local Councils by the Settling Insurance Companies, and the Plan may assign or otherwise provide for the Settlement Trust to sell those policies back to the Settling Insurance Companies. Similarly, because all Abuse Claims (pre- and post-1976) covered by policies issued by a Settling Insurance Company will be channeled to the Settlement Trust, Participating Chartered Organizations will release any rights to coverage under any insurance policies issued by a Settling Insurance Company for such Abuse Claims. Otherwise, Participating Chartered Organizations will retain whatever rights they previously had (if any) in all pre-1976 BSA and Local Council insurance policies. Participating Chartered Organizations also must assign, among other things, any causes of action against non-settling insurance companies related to Abuse Claims that first occurred on or after January 1, 1976.

c. Chartered Organization Insurance: Abuse Claims against Participating Chartered Organizations will be released and channeled to the Settlement Trust if a Settling Insurance Company issued a liability policy (other than an automobile policy or director's and officer's policy) that does not specifically exclude abuse or molestation to a Participating Chartered Organization, and a claimant alleges abuse during the period of that policy. In exchange for the benefits of this release and Channeling Injunction, Participating Chartered Organizations will voluntarily release the Settling Insurance Companies from these Abuse Claims. Participating Chartered Organizations retain all rights for abuse claims unrelated to Scouting under policies issued by Settling Insurance Companies. Participating Chartered Organizations also retain all rights for any claims (both related and unrelated to Scouting) under independent insurance policies issued by non-settling insurance companies. d. Indirect Abuse Claims: In exchange for the protections of the channeling injunction, all Indirect Abuse Claims are voluntarily waived.

(Id. (quoting BSA Plan).)

B. The Roman Catholic Ad Hoc Committee's Settlement

The Roman Catholic Ad Hoc Committee (the "RCAHC"), an ad hoc committee of Roman Catholic Entities, objected to confirmation of the BSA Plan, challenging the BSA Plan's treatment of Chartered Organizations. (Id. ¶ 21.) The RCAHC and its individual members subsequently...