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Bankruptcy Court Deems that Bishop of Camden’s Plan for Reorganization Violates Due Process

Judge recognizes plan is unconfirmable, fundamentally unfair to survivors

Fast-approaching claims bar date remains June 30, 2021

(Camden, NJ) – On Friday, March 26, 2021, in the U.S. Bankruptcy Court District of New Jersey, Judge Jerrold Poslusny stopped the Diocese of Camden’s proposed plan for reorganization in its tracks, deeming that it “did not provide sufficient information from which creditors could decide whether to vote for or against the Plan” and that it “was patently unconfirmable.” In other words, he deemed that this plan would violate the due process of survivors of clergy abuse in the Diocese of Camden that have come forward to-date and all who have yet to come forward. All survivor claims against the Diocese of Camden must be filed by the bar date of June 30, 2021. It is imperative that survivors take action by or before this date.

Our firm, together with Gianforcaro Law, represents dozens of survivors in the Diocese of Camden and in New Jersey. This effort by Bishop Sullivan and the Diocese of Camden—and every effort they have made in putting it forward—has laid tracks to salt the wounds of survivors; and if these tracks were to continue, so too would do harm to survivors.

Among the most significant issues in the Diocese’s Plan, the Court found that:

  • The Diocese could not determine the treatment of each survivor’s claim without knowing the number of claimants and the aggregate alleged amount of those claims. This could not be known until after the June 30, 2021 bar date deadline to file claims against the Diocese. (audio at approx. 2:40 in the audio file attached to the linked Disclosure Statement Order PDF, Doc. No. 530

 

  • That the Diocese’s estimate of approximately 100 claims (valued at approximately $110,000 each) did not account for how survivors would be impacted if additional claims are filed against the Diocese. The court noted that “the disclosure statement does not include a discussion related to the potential that there could be many more claims filed than the debtor estimate, nor how such an outcome could affect distribution to Class 4 creditors.” (audio at approx. 3:07 in the audio file attached to the linked Disclosure Statement Order PDF)

 

  • The Diocese’s valuation based on “resolved” claims “may be confusing to claimants” because the Diocese’s valuation is based on prior claims that were all resolved by voluntary settlement either directly with the Diocese or through the Independent Victims Compensation Program, not by trial. The Judge stated, “To my knowledge, none of those cases had been tried. So that the amounts of the proposed settlement or the average valuation of each claim may not accurately reflect the final allowed amount of any claim had it been fully litigated.” (audio at approx. 3:28 in the audio file attached  to the linked Disclosure Statement Order PDF)

 

  • Regarding insurance, the Diocese “effectively proposes to assign the policies into the Trust and wash its hands of any involvement even though that course of action could be a severely detrimental outcome to the very creditors that it claims it is trying to assist through this plan.” (audio at approx. 4:12 in the audio file attached to the linked Disclosure Statement Order PDF)

 

  • The Diocese’s discussion of assets and its liquidation analysis is inadequate because the Diocese failed to list the values of any of the 50 parcels of real estate that it owns. The Court held that Disclosure Statement “provides no information on the value of those properties or how the value of those properties could affect the proposed distribution.” (audio at approx. 7:00 in the audio file attached to the linked Disclosure Statement Order PDF)

 

  • The Diocese’s plan regarding unknown tort claimants does not protect their due process rights. The Court noted that the Diocese “proposes to force these unrepresented and unnotified claimants to release the debtor and the covered parties” in exchange for a maximum of $250,000 without providing information about why that amount is adequate, how the Diocese came up with that amount, or how the interests of these claimants have been protected. (audio at approx. 7:45 in the audio file attached to the linked Disclosure Statement Order PDF)

 

  • The Diocese failed to discuss how it came up with its determination that covered parties, like parishes and schools, be released in exchange for its contribution of 0.2% of Ordinary Income to the Trust from which survivors will be compensated. The Court found that there was no explanation of why this is an appropriate amount, why the claimants should accept that amount in exchange for releasing the covered entities, or why parties should consider that contribution to the trust to meet the requirements under the law. (audio at approx. 8:32 in the audio file attached to the linked Disclosure Statement Order PDF)

 

  • The Judge expressed serious doubt about whether the Diocese can confirm a Plan until the bar date passes and the universe of survivors with claims is known, noting that “seems nearly impossible.” (audio at approx. 10:16 in the audio file attached to the linked Disclosure Statement Order PDF)

These efforts by Bishop Sullivan are the most aggressive, sinister and diabolical of bishops using Chapter 11 reorganization to-date; one designed to deny any modicum of justice, accountability or compensation to those harmed and in search of it. We are grateful to the court for recognizing this, to all the Camden survivors who have come forward, and to all those who have yet to come forward.