Santa Rosa Catholic Diocese files for bankruptcy protection over sex abuse claims

The Roman Catholic Bishop of Santa Rosa filed for Chapter 11 bankruptcy protection Monday, citing unknown millions of dollars in anticipated liabilities related to pending child sex abuse claims filed in court over the past three years.

The petition, filed in U.S. Bankruptcy Court in the Northern District of California, sets off a yearslong process Bishop Robert F. Vasa said is the best way to settle the cases “in a fair and equitable manner” while allowing the diocese to carry out its ministries. Otherwise, he said, the claims would overwhelm the diocese’s resources.

The Santa Rosa Diocese said in its bankruptcy petition it has unidentified assets valued between $10 million and $50 million. It estimated its liabilities in the same dollar range.

But with at least 222 lawsuits pending in which the diocese is named a defendant or co-defendant, at least one attorney involved with numerous cases said $50 million would fall short in addressing them.

“This is a bare bones court filing that telegraphs both the diocese’s lack of empathy and understanding of number of survivors and depth of trauma caused by childhood sexual abuse,” said Mike Reck, a West Coast attorney for Minnesota-based Anderson & Associates, a national firm engaged in child sexual abuse litigation. “These are not just financial debts. This case is about childhoods crushed.”

BankruptcyPetition.pdf

Attorney Mike Finnegan, who works with the same firm, said the diocese’s estimates for both assets and liabilities seemed to be low but said those are the substantive issues that will be debated and resolved as the bankruptcy proceeds.

A hearing is scheduled for Thursday in an Oakland courtroom so federal bankruptcy Judge Charles Novak can respond to initial filings from the diocese seeking authorization to continue paying its 25 salaried and six hourly employees — part of its $12.5 million annual operating budget.

The diocese also seeks permission to place deposits with various utility companies to help secure, with court support, assurances of continued service for things like trash collection, phones, internet and water. The cost is around $3,500 a month for the chancery, the bishop’s Santa Rosa home, the Newman Center at Sonoma State University and offices at Cardinal Newman High School in Santa Rosa.

A U.S. trustee also will be appointed to assemble a creditors’ committee in the next few weeks made up of survivor plaintiffs who will negotiate settlements and develop a reorganization plan for the diocese.

Vasa announced the diocese’s plan to seek bankruptcy protection in December, amid mounting lawsuits filed during a three-year window in which the statute of limitations for child sex abuse claims had been waived.

At least 1,566 cases are now pending in the Alameda County Superior Court, where all Northern California clergy cases are being coordinated through a unified case processing effort. Similar coordinated efforts are proceeding in San Diego and Los Angeles courts.

The first of six Northern California cases set for trial is scheduled to begin May 1. The sixth, a case involving the Santa Rosa Diocese, presumably will be stayed, along with all the others, which will not proceed to trial unless the bankruptcy judge approves anticipated pleas to freeze only those cases that name the diocese as sole defendant. Attorneys for most survivors otherwise believe cases in which the diocese is named with a school, camp or other entity should proceed.

Though no one can say what those plaintiffs might have won in the way of civil awards at trial or sought in the way of settlements, six survivors, listed as “John Does,” are included on a list of 20 Santa Rosa Diocese creditors holding the largest unsecured claims.

Topping the list is the Archdiocese of San Francisco, to which the Santa Rosa diocese owes a debt of $1,410,000.

Vasa said it was among several loans made by other dioceses in 1999, as the clergy abuse scandal took its toll. He said the Santa Rosa Diocese has worked to pay them back over the past 10 years or more, but still owes San Francisco, even though it and other dioceses “graciously” forgave the interest.

The Santa Rosa Diocese has paid out at least $35 million in settlements for clergy abuse claims since the 1990s, $19 million of it covered by insurance.

Additional creditors include things like printing companies, Pacific Gas & Electric and FedEx.

Bishops for both the San Diego Diocese, facing more than 400 cases, and the Sacramento Diocese, facing more than 200, have signaled they also are likely to file for bankruptcy protection.

Plaintiffs attorneys argue the Santa Rosa Diocese, like most others, have systematically worked to reduce access to assets the bishops control by separately incorporating church parishes and other entities and funneling money into endowments and foundations.

“It will become evident that they have engaged in a pattern of divesting themselves of assets to protect those assets from the survivors,” by funding endowments, directing donations into restricted funds and setting up separate corporations, Reck said.

“Law firms like mine are saying that’s a slight of hand,” he said. “We are challenging these … We think this is a disingenuous play by the church.”

Vasa said last week the courts have largely recognized the independence of the parishes and the need to use charitable donations as they are designated.

But Finnegan said the diocese’s approach has not been fully tested in court despite its widespread adoption around the nation and said he had “a high degree of confidence in being able to challenge that.”

“The parishes are controlled by the bishop, hard stop,” Finnegan said. “They have a bunch of legal entities that they try to create that makes it harder for survivors to collect against that money. But the absolute truth it’s always the bishop that is in control.”

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