On June 13, the Roman Catholic Diocese of San Diego announced its intention to file for Chapter 11 bankruptcy reorganization to address 450 new legal claims of clergy sexual abuse it is facing. This is the second time the Catholic Church in the area is applying for Chapter 11 bankruptcy. The first was in 2007 to deal with similar lawsuits.
In a letter to parishioners and clergy, Archbishop Robert McElroy stated that the bankruptcy filing would help the diocese achieve its future goals and also provide compensation to the victims. The Catholic Diocese of San Diego posted the news of the Chapter 11 bankruptcy protection application on its website, along with Archbishop McElroy’s letter. The bankruptcy application is set to be submitted on June 17, the following Monday.
According to Archbishop McElroy, the diocese has been considering filing for bankruptcy protection since February last year to address around 450 legal claims. After substantial and beneficial negotiations with lawyers representing the victims, including himself, Archbishop McElroy stated that the decision to formally file for bankruptcy and continue negotiations was reached.
The claims the diocese is facing target some clergy and staff members who have worked in the diocese over the past 80 years, accused of sexual abuse towards victims. The recent wave of lawsuits follows a settlement in 2007 involving 144 victims. More than 60% of the latest claims date back 50 years.
Archbishop McElroy mentioned in a previous letter that the total compensation for the 144 claims settled previously was $198 million. If applied to the current cases, the claims could exceed $550 million. In late February of 2007, the church first applied for Chapter 11 bankruptcy protection, settling the 144 claims several months after filing for bankruptcy.
The diocese emphasized that after the bankruptcy application on June 17, its operations, charitable organizations, and schools will continue to function normally. The Zalkin Law Firm, representing the victims, noted that this marks at least the 13th Catholic diocese in recent years to apply for bankruptcy protection.
As per the University of Pennsylvania’s Law School, as of April 2024, a total of 38 American Catholic religious organizations have filed for Chapter 11 bankruptcy. Out of these, 24 cases have been concluded, while 14 are still ongoing.
Last year, the Zalkin Law Firm sued the San Diego Catholic Diocese, alleging deceptive real estate transfers to escape legal compensation to victims. Partner Devin Storey mentioned that these dioceses and their insurance companies have been using Chapter 11 bankruptcy protection nationwide to address child sexual abuse cases, minimizing compensation to survivors and denying them their rights to trial.
Lead attorney at the firm, Irwin Zalkin, stated that they will work with the diocese and its insurance companies to seek fair resolutions for the 457 victims in bankruptcy court.