Register, or Login to view the article
September 28, 2022 – The Court hearing the Norwich Roman Catholic Diocesan Corporation case has extended (for a fifth time) the periods during which the Debtor has an exclusive right to file a Chapter 11 Plan, and solicit acceptances thereof, through and including November 18, 2022 (NB: The Debtor also agrees NOT to file a Disclosure Statement prior to November 11th) and January 18, 2023, respectively [Docket No. 847]. Absent the requested relief, the Plan filing and solicitation periods are scheduled to expire on September 30, 2022 and November 30, 2022, respectively.
At a September 28th hearing, Debtor's counsel noted that further to agreement with its creditors' committee (the "Committee"), the fifth set of extensions would be shorter than requested (the Debtor had asked to extend the exclsuive Plan filing period until January 13th), with the current extension now set to carry the Debtor through further mediation (set for October 24th and 25th) and to allow for the mediator to prepare his report (expected mid-November).
Discretely pressed by Judge James J. Tancredi as to the status of mediation, Debtor's counsel provided: "we made progress…next session hopefully we will close the deal" before noting that "a wide gap between us in terms of numbers."
The Committee's counsel was less sanguine, adding that things were "complicated….challenging hurdles need to be overcome" before apparently surprising Debtor's counsel by informing the Court that the Committee was intending to file motions seeking standing to pursue insurance and accounts receivable claims on behalf of the Debtor's estate, albeit after the next round of mediation. Debtor's counsel responded that he viewed that as "posturing" in advance of that next round, a view that Judge Tancredi seemed to concur with before reminding the parties to "keep their eyes" on mediation. "Complicated and painful" as it might be, he continued, it is the only path forward.
The Extension Motion
The extension motion [Docket No. 815] states, “Originally, the parties in interest intended to begin the mediation on or about July or August 2022, and continuing the following week as needed. The extension of exclusivity requested in the Fourth Exclusivity Motion was premised on this timeline. However, due to scheduling and logistical conflicts, the mediation was not able to commence until September 14, 2022 and September 15, 2022 in New York, New York.
The Debtor believes the mediation sessions were quite productive in moving all parties in interest toward a consensual plan of reorganization; however, at the end of the second session, the parties had yet to reach a final agreement on certain plan terms. The Debtor is hopeful that one or more additional mediation sessions will result in a consensual plan or reorganization. It is important that the status quo is preserved as the parties continue to engage in good faith mediation of plan-related issues in order to transform the hope of a consensual plan into reality.
The Debtor proposes herein to extend its exclusive period to file a plan through and including January 13, 2023. The Debtor will continue to mediate and negotiate the terms of a consensual plan of reorganization with the other key constituencies and with the assistance of the Mediator. During this time, the Debtor wishes to retain exclusivity so as not be distracted by litigation ignited by competing plans. The Debtor reasonably believes this extension will be sufficient time to conduct and conclude the contemplated mediation and propose a consensual plan of reorganization.”
On July 15, 2021, the Norwich Roman Catholic Diocesan Corporation (“the Diocese” or the “Debtor”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of Connecticut, lead case number 21-20687. At filing, the Debtor, a Roman Catholic Diocese based in Norwich, Connecticut, noted estimated assets between $10.0mn and $50.0mn; and estimated liabilities between $50.0mn and $100.0mn.
In a statement on the Diocese’s website announcing its Chapter 11 filing, the Debtor advised that: “The Diocese has been named in numerous sexual abuse lawsuits pending against Mount St. John, an historic but now closed, Catholic residential school for boys in need of care, seeking damages in amounts greater than the Diocese has the capacity to pay. Litigation costs and settlements will exceed many millions of dollars. The Diocese does not have the resources or available insurance or other coverage to address these claims fairly and equitably on a one-by-one basis.
By filing for relief under chapter 11, the Diocese will be able to more fairly and proportionately address the claims asserted by all asserted survivors of abuse. If the Diocese did not file for bankruptcy relief, the first survivor to obtain a judgment against the Diocese could possibly receive all available funds, leaving little to no assets available for payment to or otherwise care for other survivors. Survivors who obtain later judgments against the Diocese would likely receive nothing, and the Diocese would be left with insufficient resources to address the claims of the remaining survivors. Moreover, the lengthy state court process will inevitably delay justice for and any payment to survivors, effectively and unnecessarily prolonging their pain and suffering.
An important aspect of Chapter 11 is that the filing ‘automatically stays (puts a hold)’ on all civil actions, judgments, collection activities and related actions by claimants. The automatic stay provides the Diocese with the time needed to negotiate reasonable settlements with abuse survivors, as well as key creditors and to prepare a disclosure statement and reorganization plan.”
The Diocese further stated, “The Diocese believes its current and future liquidity should be sufficient to fund normal operations and services during the restructuring process. Vendors should be paid for all goods and services after the filing and transactions that occur in the ordinary course of business should continue as before. Employees will be paid their normal wages, and health and benefits programs will continue uninterrupted.”
Michael R. Cote, the Bishop of the Norwich Diocese commented further in a separate statement: “With nearly 60 lawsuits filed against the Diocese relating to abuse alleged to have occurred at the Mount Saint John School – a former ministry of the Diocese and residential school in Deep River to which students were sent, tuitions paid, and annual audits performed by the State of Connecticut – it became clear that the Diocese could not continue to carry out its spiritual, charitable and educational missions while also bearing the potential costs of litigation associated with these cases….
For the Diocese, fair and equitable treatment for survivors of sexual abuse has always been a priority. That is why we created the Office for Safe Environments, instituted mandatory Abuse Prevention Training programs, published the identities of clergy against whom there are allegations of substance and continue to provide victim assistance. The Diocese has also settled other abuse claims over the years which has greatly depleted our financial assets leaving us with fewer resources and coverage to be able to defend or settle abuse cases.
Over the past two years, our financial and legal advisors have studied our situation and concluded that a Chapter 11 filing was the only way to ensure an equitable settlement for abuse survivors, help us manage litigation expenses and carry out our essential mission and ministries.”
Read more Bankruptcy News