Catholic Diocese of Santa Rosa to file Chapter 11 bankruptcy Monday due to sex abuse claims

Faced with more than 200 new legal claims over childhood sexual abuse, the Catholic Diocese of Santa Rosa plans to file for Chapter 11 bankruptcy protection Monday, automatically freezing all lawsuits so they can be settled through federal bankruptcy court.

The move, telegraphed by Santa Rosa Bishop Robert Vasa last December, was announced Friday in a news release from the bishop reaffirming his belief he had no other choice, given what he called a “staggering” number of claims and too few financial resources to satisfy them individually.

That means the Santa Rosa Diocese will not face trial in any of the current 222 lawsuits involving priests and others at church-related institutions, said East Bay attorney Rick Simons. Simons is liaison counsel for all Northern California clergy abuse cases filed during a 3-year window waiving statute of limitations on child sex-abuse cases.

Instead of individual trials, the diocese, plaintiffs and their lawyers, insurance company representatives and a mediation judge will spend the next few years establishing exactly how many and what type of claims exist and what assets the diocese has at its disposal. Finally, a settlement fund will be established and allocated to the plaintiffs as agreed by the parties.

But the claims “don’t go away,” said Mike Reck, a lead West Coast attorney for Anderson & Associates, one of the country’s big legal players in child sex abuse cases. They may take a different form, as “proofs of claim” in bankruptcy court, but there will still be accountability, he said.

Vasa said in an interview that authorizing attorneys to move forward with the bankruptcy petition proved weightier than “talking about it speculatively” in prior months.

“While I have been anticipating this action for more than a full year, it is most distressing to have the duty of actually proceeding with this filing,” he wrote in the news release. “Nevertheless, I remain convinced that it is a necessary step for the Diocese and the only way to resolve the claims which have been presented against it.“

Bankruptcy - PRESS RELEASE and Q & A.pdf

But he also said he took “a kind of tranquility” in the knowledge that many other corporations and even other Catholic dioceses have found bankruptcy proceedings an effective way “to get their financial house in order, and I’m looking forward to have that happen for the Diocese of Santa Rosa, as well.”

At least 32 dioceses and archdioceses in the United States and its territories have sought bankruptcy protection since 2004, primarily stemming from a sex abuse scandal that erupted publicly after decades in which church leaders secretly reassigned accused priests or referred them for therapeutic treatment, and privately resolved allegations.

They include the Stockton Diocese, which emerged from bankruptcy in 2017 with a plan to settle child sex abuse cases with 27 survivors for $15 million.

Two other California bishops, in San Diego and Sacramento, have announced recently they may seek bankruptcy protection in the face of hundreds of claims filed during the look-back window that closed on New Year’s Eve. More than 400 claims have been filed against the San Diego Diocese and more than 200 cases against the Sacramento Diocese, according to diocesan communications.

The Santa Rosa Diocese, which runs from Petaluma to the Oregon border, claims more than 178,000 parishioners in 41 parishes and was embroiled early on in a series of civil and criminal cases that exposed a long history of abuse by certain priests. Vasa said more than 115 of the current claims date back more than 30 years.

He said in the news release that a similar, one-year look-back window in 2003 resulted in fewer cases than the more recent, three-year period. But it still forced the diocese to sell property to cover its share of $31 million in settlements, $19 million of which came from insurance. An additional $4 million in individual settlements have been paid since.

Vasa, who took over the diocese in 2011, said it has been financially “fragile.” Though it’s accumulated a small reserve in recent years, it’s “not anywhere near what these potential lawsuits will demand.”

He said some of the new claims allege abuse in years for which the diocese may have no or limited liability insurance, or may have exhausted it.

While Vasa said the number of new claims was “at least 160” and possibly more than 200, Simons, the liaison attorney, said the latest number was 222.

In all, 1,566 claims have been added to the Northern California caseload so far, Simons said. Similar unified case loads are being processed through courts in San Diego and Los Angeles, as well.

Vasa pointed out that only the diocese, known legally as a “corporation sole,” is seeking bankruptcy protection. He said individual parishes and Catholic schools are separate civil corporations and ecclesial entities, though the bankruptcy court will determine “the degree of participation by any other entities such as parishes and schools” in the proceedings.

In a series of questions and answers prepared for parishioners, Vasa said schools are not expected to close. He also said discrete funds like those raised for the Annual Ministry Appeal and those deposited with the Catholic Community Foundation are held in trust for special purposes and can’t be designated by the diocese for use in settling cases.

Catholic Charities, a significant provider of shelter and housing services for people experiencing homelessness in Sonoma County, as well as a host of other charitable social services, is financially separate from the diocese and should not be affected, he said.

Attorneys for many child abuse survivors describe the bankruptcy and incorporation of individual parishes as part of cynical playbook intended to try to wall off church assets that remain under the bishop’s control and to avoid sworn depositions that might expose additional liability by the church.

They are poised to challenge the diocese’s position in court, as well.

When talk of waiving the statute of limitations first started in the state legislature, Reck described the incorporations undertaken since 2016 as “fraudulent divestments.”

“My suspicion is this is an attempt to shield those assets from the survivors,” he said.

“Their position, that the parishes are separate entities, is a fiction,” Simons said, “which is, of course, a fiction right out of the Conference of Bishops.”

In San Diego last month, a lawyer for survivor plaintiffs sued the San Diego bishop and the parishes in the diocese, alleging assets had been transferred fraudulently to the parish corporations to avoid paying adequate settlements in pending lawsuits.

Attorneys for some survivors also will argue that cases should go forward against co-defendants of the diocese, including individual parishes, camps or schools, Reck said.

In some of those cases, Simons said, the diocese isn’t even the principal defendant. Rather, it’s named alongside another diocese where a priest was assigned, or a camp or religious order, for instance.

Many cases filed against the Hanna Boys Center in the Sonoma Valley name the diocese, as well, though the facility for at-risk youth holds primary liability.

“Our position on behalf of the survivors,” Reck said, “is one, you cannot hide assets through a corporate shell game, and two, you cannot ask for all these other lawsuits to freeze just because the diocese is seeking bankruptcy protection.”

Vasa said bankruptcy courts generally have accepted that gifts received by parishes and other church entities for certain specific uses cannot be redesignated for settlements. Similarly, the courts have considered property held in trust for parishes that are independently incorporated belong to the parishes and not the dioceses, but the court will make those determinations when the time comes, he said.

“In some ways, the bankruptcy filing allows me to say, ‘I’m not making the decision,’ ” Vasa said.

“I’m just opening up, if you will, the records of the diocese: Here’s what we have. And the reality is the bankruptcy court will determine which of those will need to into that (settlement) fund and which ones can’t.”

The diocese has opened a new landing page on its website for updates on the bankruptcy. It is located at srdiocese.org/chapter-11-reorganization.

You can reach Staff Writer Mary Callahan (she/her) at 707-521-5249 or mary.callahan@pressdemocrat.com. On Twitter @MaryCallahanB.