The two-century-old Archdiocese of Baltimore, the first Catholic diocese in America, has filed for bankruptcy, marking a historic event in the long, sad story of clergy sex abuse and coming on the eve of a new state law that would open the church to a flood of lawsuits.
Church lawyers filed bankruptcy papers Friday — even as plaintiffs’ attorneys were holding news conferences and writing their lawsuits for Sunday. That’s when Maryland’s statute of limitations lifts to allow new claims about old acts of abuse. The General Assembly passed the law in April.
Attorneys and survivors had planned dozens, if not hundreds, of lawsuits against the archdiocese. Bankruptcy halts much of the litigation.
The federal bankruptcy court immediately scheduled a hearing for Tuesday morning in Baltimore.
Archbishop William E. Lori announced the bankruptcy with a letter to the archdiocesan email list of 120,000 people. In an interview with The Baltimore Banner ahead of the filing, Lori said church leaders weighed their options for months this summer before concluding Chapter 11 bankruptcy was inevitable. Whereas Chapter 7 bankruptcy liquidates a business, Chapter 11 aims to reorganize one.
“There’s going to be lots of lawsuits, more than our resources can handle,” Lori told The Banner. “Why not come to the table now? Why not get going? Why delay?
“Let’s enter a process that we think and hope and pray will be fair and equitable,” he added. “We just felt that now was the time.”
Dozens of dioceses around the country have filed for bankruptcy, and survivors of priest sexual abuse and their attorneys have condemned the move as a tactic to limit payouts and protect church secrets. Lori recognized the criticism, but he said the bankruptcy proceeding was the best course for two reasons.
First, he said, more survivors would be paid than if the archdiocese litigated cases one by one in state court. Second, he said, it’s the best chance for Baltimore’s Catholic schools, parishes and charities to stay open. The archdiocese employs about 200 people at its downtown office alone.
“If we were to litigate the first few lawsuits that were filed, that would exhaust our resources and we would have little or no ability to assist many other people,” Lori said. “Our desire was to do this as equitably as we can.”
The archdiocese reports on its website nearly $250 million in assets. In the bankruptcy filings, church lawyers estimated they had 1,000 to 5,000 creditors and liabilities between $500 million and $1 billion.
Further, the archdiocese has been unsuccessful in using its insurance to cover past claims of abuse or obtaining any commitments that its insurance will cover future claims, archdiocesan officials wrote in the filings.
Lori acknowledged the bankruptcy proceedings may take two to three years to conclude. He hopes the process brings not only financial stability, he said, but healing and closure for survivors and the church.
“My hope is, first and foremost, that the victim-survivors could see this as a process that has been of help to them. Secondly, I would pray that the archdiocese would not simply see this as a legal process that we have gotten through, but that we would emerge through it purified spiritually.”
Some survivors and their attorneys have said they will try to block the move. A bankruptcy judge could consider the filing premature and order the church to wait, experts say.
“If Baltimore filed without any litigation pressure from survivors, I would want to be on the side arguing that the case should be dismissed,” said James Stang, a Los Angeles attorney who has represented creditors in 17 church bankruptcy cases. “To do it now, kind of prophylacticlly, especially, they’re just trying to grind people down. They’re trying to dissuade people from coming forward, and I don’t think that’s right.”
The filing comes as no surprise. Lori sent a letter to parishioners three weeks ago and disclosed the church was considering bankruptcy. A series of events over the past year set the stage for his decision.
In November, the Maryland Attorney General’s Office revealed the results of its years-long investigation into the history of child sexual abuse within the archdiocese. Investigators found 158 priests and other church figures accused of the “sexual abuse” and “physical torture” of more than 600 victims in the past 80 years.
The disclosure energized long-stalled efforts in Annapolis to reform Maryland’s statute of limitations for sex abuse lawsuits. The attorney general released the 456-page report in April — the same day lawmakers passed the Child Victims Act. The bill lifts age and time limits for abuse survivors to sue churches, schools and other institutions. The church’s lobbying arm had warned that legislation could push the archdiocese into bankruptcy. Some archdiocesan employees expressed concerns about their jobs and pensions.
The bill also repeals a murky legal provision known as a “statute of repose.” Opponents of the bill argued the repeal violates the Maryland Constitution, therefore the law was invalid.
Maryland’s Supreme Court is to decide whether the new law will stand.
Meanwhile, this new opportunity to sue the Archdiocese of Baltimore has attracted attorneys from all over. Firms are soliciting clergy abuse survivors with ads on local radio, TV stations, billboards and flyers — even during Ravens games. Attorneys are jockeying for the chance to bring their case to the high court and argue the new law should stand.
Baltimore attorneys such as Rob Jenner, Steve Kelly, Kurt Wolfgang, Joanne Suder and others have said they will sue. National civil rights lawyer Ben Crump has visited Baltimore and said he will join in.
Friday morning, Jenner held a news conference and announced that he would file five lawsuits on Sunday. His clients say they were abused as children at the old Archbishop Keough High School in Baltimore, the Key School in Annapolis, and at a parish in Lansdowne. They spoke of feeling brushed off by the church for years.
“You don’t have a voice as a child. You don’t have a voice as an adult. I feel like now, a legal voice is the only way to get the attention of the archdiocese,” said Eva Dittrich, one of the survivors.
Four hours later, however, the archdiocese had filed for bankruptcy and Jenner was rethinking his strategy. His clients had spent months revisiting their trauma in preparation to sue. Now, he could proceed only with cases against the schools and other entities. Claims against the archdiocese itself must go through the bankruptcy process.
“By filing for bankruptcy on the Friday before the effective date of the statute, Archbishop Lori is doing just the opposite of fostering healing,” Jenner said. “These clients have been building for this day, and this act, and this sense of transparency. ... If they were going to file for bankruptcy, then do it in April, do it in May.”
In recent months, New York state lawyer Steve Boyd applied to practice law in Maryland, opened a temporary office here, hired staff, and advertised on local radio and TV. When New York State lifted its statute of limitations for two years, Boyd said, he filed 165 lawsuits against the Catholic Diocese of Rochester and 385 cases against the Diocese of Buffalo; both filed for bankruptcy.
Boyd expected the Archdiocese of Baltimore to do so, too. Baltimore is bigger than the New York Dioceses and the Maryland attorney general’s report identified 600 victims.
“I’ll be shocked if it’s not well over 1,000 cases [in Baltimore],” he said.
Maryland’s Child Victims Act sets no deadline for lawsuits. But if the archdiocese enters bankruptcy, the judge would set a deadline for survivors to file claims. The church and survivors would negotiate a payment plan. And the church would put money into a trust to make court-approved payments.
“It creates a scenario where all the cases will get handled by the bankruptcy court and there would be no more cases after that,” Boyd said.
In bankruptcy, the judge, not the jury, approves payments to survivors. In state court, attorneys present evidence of the abuse and the cover-up. This public airing brings closure and affirmation to survivors.
In bankruptcy court, however, the discovery process is focused on church finances, not abuse.
Church lawyers began arguing in Friday’s papers that some assets should be considered out-of-bounds for the bankruptcy. They wrote that money in the priest pension plan and an employee pension plan is not an asset of the archdiocese.
They wrote that the 18 Catholic high schools and 40 elementary and middle schools are each a separate entity from the Archdiocese of Baltimore, even though they receive funding from the archdiocese. Assets of the church lobbying arm, the Maryland Catholic Conference, are not the assets of the archdiocese, the lawyers wrote. And the 53 parish cemeteries within the archdiocese share no assets with the Archdiocese of Baltimore, the lawyers wrote.
Bankruptcy has become a common step by dioceses since at least 2004, when allegations of clergy sex abuse reached national attention. More than two dozen Catholic organizations and three religious orders have filed for bankruptcy, according to a national database on diocesan bankruptcy maintained by Catholic University of America.
“As soon as they file, everything grinds to a halt, which means no survivors get any payment or money related to the abuse settlement,” said Jack Ruhl, professor at Western Michigan University who studies church finance. “While bankruptcy is in progress, attorneys’ fees keep mounting up. By the time bankruptcy court determines what survivors get, there are far fewer assets.”
Under Chapter 11, an entity can reorganize its assets and finances in a way that allows executives to continue operations and without reducing services. An organization need not be financially insolvent to enter bankruptcy.
The process was designed for businesses that encountered unexpected, overwhelming debts — not entities that harbored criminal abusers, said Kathleen Hoke, a University of Maryland, Baltimore law professor who helped pass the Child Victims Act. That’s led advocacy groups and abuse survivors to lobby Congress for reforms of federal bankruptcy laws.
“There really doesn’t seem to be a public policy reason to allow a business to get out of tort claims for allowing their employees to rape little kids,” Hoke said.
Reporters Dylan Segelbaum and Hallie Miller contributed to this article.