Baltimore archdiocese declares bankruptcy as sexual abuse lawsuits loom

BALTIMORE – Facing a mountain of potential lawsuits connected to its history of child sexual abuse committed by priests, America’s oldest Catholic archdiocese declared bankruptcy Friday, a move designed to limit its liability against potential damages and conserve its assets.

The bankruptcy petition, filed in federal bankruptcy court in Baltimore, was not unexpected. Archbishop William E. Lori, the highest-ranking Catholic cleric in Maryland, sent a letter Sept. 5 to the more than 500,000 Archdiocese of Baltimore parishioners saying the church was considering such a step.

The church acted as Maryland’s newly passed Child Victims Act is set to go into effect Sunday. The law, which the legislature passed in April over the objection of the church and other organizations, will remove a statute of limitations on when childhood sexual abuse victims may sue perpetrators.

Declaring bankruptcy is the latest legal countermove from the archdiocese since the Maryland Attorney General’s Office completed a four-year investigation of childhood sexual abuse in the church last year. The archdiocese paid for attorneys in Baltimore to fight against a release of the full report and took part in renewed lobbying efforts in Annapolis as part of a push to kill the Child Victims Act.

According to the attorney general’s office, 156 clerics and lay staff abused at least 600 children and young adults (and likely far more) over a period dating back to the 1930s, and church officials systemically covered up and enabled the abuse through the end of the 20th century.

Filing for the protection under Chapter 11 of the U.S. Bankruptcy Code, as the archdiocese has now done, means it will remain in operation while undergoing a financial reorganization.

A significant consequence for victims is that the bankruptcy filing moves ongoing legal actions against the archdiocese from the state court system to federal bankruptcy court, where they’re consolidated into one case.

Ultimately, a bankruptcy judge will decide on an amount the archdiocese can afford to pay, and claimants will be awarded a percentage of that pot. Some claimants will receive far less than they would have in state court but, as church officials argued, most if not all claimants will receive something.

The bankruptcy filing also restricts any further state lawsuits. Anyone who wishes to file a complaint from this point on must do so by a date agreed to by the archdiocese and a party representing sexual abuse victims in bankruptcy court.

Lastly, and to the concern of many victims, under bankruptcy law, any complaints they file will be kept confidential. Victims and their advocates have said that will severely impair their ability to use lawsuits to learn more about what happened to them and how the church handled their cases.

Advocates for victims view the archdiocese’s filing as all of a piece with closed-door settlements and other measures the church has used to limit awareness of the scope of abuse in Catholic churches and schools.

“They see this as yet another abuse by the church and another opportunity to shroud secrecy around something that the attorney general and the state of Maryland determined should come out in public,” said plaintiffs’ attorney Rob Jenner, who represents a number of individuals preparing to sue the archdiocese. “It’s another indignity they have to endure at the hands of the church.”

Potential plaintiffs can challenge the legitimacy of a bankruptcy filing. One survivor of abuse in the Baltimore archdiocese who is now an advocate for victims, Annapolis attorney Teresa Lancaster, said she and her allies plan to do just that.

But experts say such challenges face several hurdles. Unlike individuals filing for personal bankruptcy, who must prove they would be unable to survive financially without such protection, corporations or nonprofit organizations can declare bankruptcy as a strategic move. More than 30 archdioceses and dioceses in the United States have declared bankruptcy in the face of childhood sexual abuse lawsuits, and all continue to operate.

“When you and I and the average person thinks about debt, we think about borrowing money that you might have difficulty paying back,” said Melissa Jacoby, a law professor at the University of North Carolina at Chapel Hill. “Bankruptcy laws that define what a debt and a claim are do so super broadly. People who have a legal cause of action can be considered a claimant.”

In his letter, Lori pitched the decision as one rooted in equity.

“Litigating them individually would potentially lead to some very high damage awards for a very small number of victim-survivors while leaving almost nothing for the vast majority of them,” Lori wrote. “The Archdiocese simply does not have unlimited resources to satisfy such claims; its assets are indeed finite.”

Lori did not mention the law will cap damages against private institutions at $1.5 million per suit.

While the church’s resources are not unlimited, they are substantial. In its 2022 fiscal year, the archdiocese reported having more than $108 million of unrestricted assets, according to the most recent audited financial statements it has made public.

Lori is correct that a greater number of people would likely see compensation under a bankruptcy process. Unlike lawsuits, which are decided by a jury, claims in bankruptcy proceedings are brought to settlement. Typically, a criteria is developed that determines levels of payouts for different allegations.

Awards going forward are expected to be larger than those given out previously.

The archdiocese historically settled cases through mediation with a retired judge. The Archdiocese of Baltimore has paid out the equivalent of $6.8 million in 105 settlements since 2007, according to church spokesman Christian Kendzierski. Put another way, that’s an average settlement of $65,000.