Bankruptcy judge considering deal on mediation in Archdiocese of Baltimore case
BALTIMORE — A judge is set to decide whether to approve an agreement for the terms of mediation in the Archdiocese of Baltimore’s bankruptcy case.
U.S. Bankruptcy Judge Michelle M. Harner is considering a proposed order for mediation crafted by attorneys for the Catholic church, a committee of sex abuse survivors and the archdiocese’s insurers.
The proposed order, which awaits Harner’s signature to make it official, came after the attorneys struck an 11th hour agreement last week in the hallways outside of the U.S. Bankruptcy Court in Baltimore, avoiding debate over complex legal matters.
Under the agreement, the archdiocese will drop its breach-of-contract lawsuit against its insurers. Should the church later decide to renew its complaint, attorneys have agreed, abuse survivors will have the right to intervene in that case.
Mediation is a critical phase in bankruptcy proceedings.
In the church’s case, independent mediators will help to negotiate the amount of money the archdiocese and its insurers each have to contribute to settle survivor claims. They also will hash out a reorganization plan for the church that includes protocols designed to prevent future clergy sexual abuse.
“Mediation has the best chance of success when everybody buys into the structure and procedures,” Harner said during a brief court hearing Monday held on the video-conference platform Zoom.
Almost a year has passed since the archdiocese declared bankruptcy Sept. 29, days before a Maryland law erasing time limits for lawsuits filed by people sexually abused as children took effect. In addition to protecting assets and limiting liability, church leaders also said they hoped pursuing bankruptcy would allow them to fairly compensate all survivors.
Lawmakers enacted the Child Victims Act in 2023 after a groundbreaking state attorney general report describing the torment of more than 600 children and young adults by 156 clergy and other officials in the Baltimore diocese. Dating to the 1940s, the abuse spanned the diocese’s jurisdiction, which covers Baltimore and nine counties in Central and Western Maryland.
Instead of filing lawsuits in state court, victims had to reduce their stories to proof-of-claim forms in the bankruptcy. The May 31 deadline for such claims passed with hundreds of survivors filing, though the precise number has not been disclosed. The church and head of survivors committee have said attorneys still are evaluating the claims and resolving duplicate filings.
While Archbishop William Lori recently struck a unified tone with Paul Jan Zdunek, the chair of the survivors’ committee, tensions had remained with insurance companies in the case.
The church had sued its insurers alleging breach of contract for failing to cover, or indicating they would not provide coverage for, claims of sexual abuse of minors. Also at odds with insurance companies, the survivors’ committee sought standing in the lawsuit. The insurers pushed back and asked that the complaint be moved to the U.S. District Court in Baltimore.
The proposed agreement between the church, survivors’ committee and insurance companies shelves that lawsuit.
Attorneys for two insurance companies expressed optimism over the agreements in court Monday.
Edwin Caldie, a lawyer representing the committee tasked with representing abuse survivors in the bankruptcy, said there still was “fundamental disagreement” with insurers regarding the implications of a recent Supreme Court decision on the church’s case, but that the attorneys were able to put those differences aside for now.
“Pragmatism won out and it won out on all sides,” Caldie said.
In the Supreme Court’s June decision, it found 8-0 that insurers with responsibility for claims in a bankruptcy case had standing to object to a debtors’ reorganization plan. The decision, experts say, gives insurers a seat at the table in bankruptcy cases in which they face exposure.
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