Committee Plan
This document is not a solicitation of votes on the reorganization plan proposed by the Official Committee of Unsecured Creditors (the “Committee Plan.”).[1] Votes may not be solicited until the Bankruptcy Court has approved a disclosure statement regarding the Committee Plan. This summary is only an overview of the Committee Plan. Parties should not rely on this summary for any purpose and should read the Committee Plan in its entirety for the full terms and conditions.The Committee Plan is available here. The information in this Committee Plan summary relates to the Committee Plan as filed. The Committee Plan may be amended, supplemented or modified such that this summary is no longer accurate or applicable.
SUMMARY OF COMMITTEE PLAN
THIS SUMMARY HAS BEEN PREPARED BY THE
OFFICIAL COMMITTEE OF UNSECURED CREDITORS
AND PROVIDES INFORMATION REGARDING
THE COMMITTEE PLAN
On October 1, 2020, the Diocese filed for bankruptcy protection in the Bankruptcy Court. Only the Diocese filed for bankruptcy. None of the Diocese’s affiliated or related entities, including the parishes within the Diocese (the “Parishes”) or other entities that are co-insured with the Diocese under the Diocese’s liability insurance policies filed for bankruptcy protection.
The Official Committee of Unsecured Creditors (the “Committee”) was appointed on October 16, 2020, by a division of the U.S. Department of Justice. The Committee represents the interests of holders of unsecured claims, including the survivors of childhood sexual abuse, against the Diocese. The Committee comprises seven men and two women. Eight of the Committee members are Survivors of acts of child sexual abuse. The ninth Committee member is a guardian for a child who was subjected to serious racially-based cyberbullying at a Diocesan school. The perpetrators (and primary tortfeasors) were priests, teachers, youth leaders and others employed by the Diocese, various Parishes, schools, and other entities affiliated with the Diocese.
The Status of the Committee Plan
The Committee filed the Committee Plan to move this Bankruptcy Case forward and provide for compensation to survivors and other creditors as soon as possible. No other party in interest in the Bankruptcy Case, including the Debtor itself, has agreed to the terms of the Committee Plan. The Bankruptcy Court has not approved the Committee Plan. The Committee intends to file and seek approval from the Bankruptcy Court of a disclosure statement (the “Disclosure Statement”) that, if approved, will be sent to claimants in certain classes for their vote to accept or reject the Committee Plan. Following an opportunity for certain claimants to vote on the Committee Plan, the Bankruptcy Court will consider whether to confirm the Committee Plan, including whether the Committee satisfied the requirements of the Bankruptcy Code regarding confirmation of a plan.
Description of the Committee Plan
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Committee's Offer to Other Insured Entities[2] and Insurers to Resolve Abuse Claims.
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The Committee Plan gives the Diocese’s parishes and other affiliates the opportunity to provide substantial compensation in exchange for releases of liability for Abuse Claims. The Committee Plan also allows the Diocese’s insurers to settle their liability. The below chart sets forth the Settlement Offer those entities must pay to receive those releases. The deadline for each Entity to either accept or reject its Settlement Offer is the date first set for the hearing on approval of the Disclosure Statement, or such later date as agreed to by the Committee in its sole discretion. The deadline for each Entity to fund its Settlement Offer, or such other settlement amount as agreed to by the Committee in its sole discretion with any such entity (the (“Agreed Amount”), is the Contribution Date
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Overview of Treatment of Abuse Claims[8] in Class 4 (Excluding Future Abuse Claims).
• As soon as possible after the Effective Date, and under the terms of the Committee Plan and the Trust Documents, the Trust shall pay all Class 4 Claimants. The payment of the Class 4 Claims by the Trust is not a release, accord or novation of the Debtor’s or the Participating Parties’ liability because of the Class 4 Claims; provided, however, that the Debtor’s liability because of the Class 4 Claims shall be discharged under Bankruptcy Code section 1141(d), subject to Sections 7.1.5 and 15.1 of the Committee Plan.
• Under the Full or Partial Settlement Alternatives, the Participating Parties’ liabilities are subject to the Channeling Injunction and releases under the Committee Plan.
• Under no circumstance shall the Abuse Claims Reviewer’s review of a Class 4 Claim affect the rights of a Non-Settling Insurer.
• Abuse Claimants in Class 4 shall have their Claims treated under the Trust Allocation Protocol.
• Neither the Trust nor the Diocese have any obligation to take any action to enforce an Insurance Policy of a Non-Settling Insurer, including any obligation to commence/prosecute any action against any Non-Settling Insurer or to defend an action commenced by a Non-Settling Insurer, though the Trust (or the Diocese, as applicable), may do so.
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Overview of Treatment of Future Abuse Claims in Class 7
• The Future Abuse Claims Trust will be funded by the Trust with ___ percent (__%)[9] of the Non-Insurance Trust Assets under the Committee Plan. On the Effective Date, the Future Abuse Claims Trust shall pay all Future Abuse Claims under and the Committee Plan and Future Abuse Claims Trust Documents.
• The payment of the Future Abuse Claims by the Future Abuse Claims Trust is not a release, accord or novation of the Debtor’s or the Participating Parties’ liability because of the Future Abuse Claims; provided, however, that the Debtor’s liability because of the Future Abuse Claims shall be discharged under Bankruptcy Code section 1141(d), subject to Sections 7.1.5 and 15.1 of the Committee Plan.
• The Participating Parties’ liabilities are subject to the Channeling Injunction and releases under the Committee Plan. Under no circumstance shall the Abuse Claims Reviewer’s review of a Future Abuse Claim affect the rights of a Non-Settling Insurer. Future Abuse Claimants shall have their Claims treated under the Future Abuse Claims Trust Allocation Protocol.
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Overview of Treatment of Claims Other than Abuse Claims.
• Other Priority Claims in Class 1 and Secured Claims in Class 2 shall be unimpaired under the Committee Plan and shall receive 100% recovery.
• General Unsecured Claims in Class 5 shall be unimpaired under the Committee Plan and shall receive 100% recovery.
• Personal Injury Claims in Class 6 are impaired under the Committee Plan. On the Effective Date, the Class 6 Claimants may elect to litigate against the non-Debtor Co-Defendants or select to receive from the Trust $250,000 minus any amounts already expended by the Diocese or the non-Debtor Co-Defendants on pre-petition defense costs relating to litigation of such Class 6 Claim. If a Class 6 Claimant elects to litigate, the Trust shall provide the Reorganized Debtor with $250,000 minus any amounts already expended by the Diocese or the non-Debtor Co-Defendants on pre-petition defense costs relating litigation of such Class 6 Claim to satisfy the self-insured retention under the relevant Ecclesia policy.[10]
• Abuse Related Contingent Contribution/Reimbursement/ Indemnity Claims in Class 8 are impaired under the Committee Plan and shall receive no recovery.
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Releases Under the Committee Plan
• Under the Full or Partial Settlement Alternatives, the Participating Parties and the Settling Insurers will be released. To receive a distribution from the Trust, Abuse Claimants, Personal Injury Claims and Future Abuse Claims must execute a complete release of the Participating Parties and the Settling Insurers, and all known or unknown parties who may claim coverage under any insurance policy issued to the Debtor by a Settling Insurer of any Claims arising from or relating to Abuse Claims or Future Abuse Claims.[11]
• Under the Litigation Alternative, there will not be non-debtor releases, and Holders of Claims will maintain all of their rights regarding any non-debtors.
• Under the Full Settlement Alternative, the Partial Settlement Alternative, or the Litigation Alternative, except as otherwise provided in the Committee Plan, on the Effective Date under section 1141(d) of the Bankruptcy Code, the Diocese will be discharged from all liability for any and all Claims and Debts. Any claims that Abuse Claimants or Holders of Personal Injury Claims may have against non-debtors are unimpaired by the Committee Plan.
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Injunctions and Channeling Injunctions under the Committee Plan.
• Full or Partial Settlement Alternative: Channeling Injunction. Under the Full or Partial Settlement Alternatives, the Participating Parties, and the Settling Insurers will receive the benefit of the Channeling Injunction. The Channeling Injunction prohibits any persons from asserting against any Participating Party or Settling Insurer any claim related to any Abuse Claim or Future Abuse Claim, any insurance policies issued by the Settling Insurers, or any claim against any Participating Party for contribution, indemnity, defense, subrogation, or similar relief. This injunction permits the Settling Insurers to contribute to the Trust in full satisfaction of their respective comprehensive general liability insurance policies, ensuring they will not face claims relating to such policies in the future, and is a necessary component of the Committee Plan. Non-Settling Insurers will not have the benefit of the Channeling Injunction.
• Litigation Only Alternative: No Channeling Injunction. Under the Litigation Alternative, there will be no Channeling Injunction because, unlike under the Full or Partial Settlement Alternatives or the Debtor Plan, there will not be releases of non-debtors that would require a channeling injunction.
• Exculpation and Limitation of Liability: Certain Exculpated Parties will be protected from claims arising from or relating to any act or omission in this Bankruptcy Case, pursuing confirmation of the Committee Plan, or the administration of the Committee Plan, including the exercise of their business judgment and the performance of their fiduciary obligations.[12]
• Discharge Injunction. If the Committee Plan is confirmed the Debtor will receive the benefit of a discharge injunction in Section 7.1.5 and 15.1 of the Committee Plan.
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There Are Three Different Scenarios in the Committee Plan
Depending on whether the Parishes and other Affiliates or insurers agree to make substantial contribution, there are three scenarios under which the Committee Plan could proceed.
Scenario 1: Full Settlement Alternative
• In the Full Settlement Alternative, the Diocese, the Other Insured Entities, the Cemetery,[5] the Seminary, the Department of Education[6] and the Debtor’s Insurers[7] (other than Arrowood) agree to the terms of the Committee Plan, and the Other Insured Entities, the Cemetery, the Department of Education and each of the Insurers agree to fund the Agreed Amount.
• Under the Full Settlement Alternative, all Other Insured Entities, Cemetery, Seminary, and Department of Education become Participating Parties and all Insurers become Settling Insurers. The Trust Assets will consist of the Settlement Fund, including contributions from the Diocese, the Participating Parties, and the Settling Insurers. Trust Assets will fund Distributions to Abuse Claimants, under the Trust Allocation Protocol. The Diocese and Participating Parties will retain their Arrowood Insurance Claims.
Scenario 2: Partial Settlement Alternative
• Only in the Committee’s sole and absolute discretion, the Partial Settlement Alternative occurs if, by the date of the hearing on approval of the Disclosure Statement:
(a) the Other Insured Entities, Seminary, Cemetery, and Department of Education each commit to fund their respective Agreed Amount and
(b) no Insurer or less than all of the Insurers agree to fund an Agreed Amount.
• Under the Partial Settlement Alternative, all Other Insured Entities, Cemetery, Seminary, and Department of Education become Participating Parties. Only those Insurers that contribute an Agreed Amount become Settling Insurers. The Diocese’s, the Participating Parties’ and the Settling Insurers’ Insurance Claims against any Non-Settling Insurer, except Arrowood, shall be transferred to the Trust and shall be a Trust Asset.
• Under the Partial Settlement Alternative, the Diocese, each Participating Party, and Settling Insurer will receive the benefit of injunctions and releases provided under the Committee Plan. Nothing in the Committee Plan is intended to replace and does not affect, diminish, or impair the liabilities of any Non-Settling Insurer or any Person that is not a Participating Party under applicable non-bankruptcy law, including the law governing joint and several liabilities
• Under the Partial Settlement Alternative, Abuse Claimants whose Claims occurred during the coverage period of a Non-Settling Insurers’ policy may, subject to the Trustee’s consent and the Trust Documents, pursue their Abuse Claims in a court of competent jurisdiction against the Debtor and any other defendant; provided, however, that any such Claims are subject to the terms of the Committee Plan and that Claims against the Debtor or a Participating Party may be paid only from the proceeds of an Insurance Policy issued by a Non-Settling Insurer.
Scenario 3: Litigation Only Alternative
• The Litigation Only Alternative occurs if the Other Insured Entities, the Seminary, the Cemetery and the Department of Education do not commit to fund the Settlement Offer or another Agreed Amount.
• The Other Insured Entities and the Non-Settling Insurers will not be released from any of their obligations and/or liabilities and shall not benefit from any injunctions.
• The Trust Assets will consist of the Settlement Fund, including contributions from the Diocese and the assignment of the Diocese’s Insurance Claims. For clarity, the Insurance Claims of the Other Insured Entities who are not Participating Parties will not be assigned under the Litigation Only Alternative.
• Trust Assets will fund Distributions to Abuse Claimants, under the Trust Allocation Protocol.
• Under the Litigation Only Alternative, Abuse Claimants may elect to pursue their Abuse Claims in any court of competent jurisdiction against the Debtor and any other defendant; provided, however, that any such Claims and pursuing any such litigation are subject to the terms of the Committee Plan and the Trust Allocation Protocol and that Claims against the Debtor may recover only from the proceeds of an Insurance Policy and may not recover from any assets that have revested with the Diocese.
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The Trust: The Committee Plan provides for the creation of a Trust to fund payments to Abuse Claimants (other than Future Abuse Claims);
• An Abuse Claim Reviewer will review the Abuse Claims (other than Future Abuse Claims) and determine the amounts to be distributed from the Trust to the individual holders of Abuse Claims (other than Future Abuse Claims).
• The Trust will be funded on the Committee Plan’s Effective Date with cash and assets from the Diocese, and, in the Full or Partial Settlement Alternatives described below, will also be funded with contributions of the Agreed Amounts from the Other Insured Entities, the Cemetery, the Seminary, the Department of Education and certain Insurers.
• The Trust Assets will include (i) no less than forty-one ($41) million dollars of cash, (ii) title to or proceeds from the sale of certain assets described in the Committee Plan Sections 12.2 – 12.4, (iii) all Avoidance Rights (not otherwise released, time-barred, compromised, enjoined or discharged under the Committee Plan), (iv) all Causes of Action and any recoveries of such Causes of Action arising from or related to denials of coverage or coverage defenses raised by Non-Settling Insurers, and (v) the Insurance Claims and the proceeds of such Insurance Claims. Under the Full or Partial Settlement Alternatives, the Trust shall also receive funds from the Participating Parties and any Settling Insurers, but it will not receive those Insurance Claims relating to or arising under the Arrowood Policies.
• Trust Assets will fund Distributions to Abuse Claimants, under the Trust Allocation Protocol. The Trust Allocation Protocol will describe the process for the review and determination of Abuse Claims in Class 4. The Trust Allocation Protocol will be filed before the hearing on the Disclosure Statement.
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Classification of Claims under the Committee Plan
• The following table briefly summarizes the classification and treatment of Claims under the Committee Plan:
• As provided by Section 1126 of the Bankruptcy Code, only Classes of Claims that are both impaired under the Committee Plan and entitled to a recovery under the Committee Plan may vote to accept or reject the Committee Plan. The only Classes of Claims that may vote on the Committee Plan are Class 4 (Abuse Claims, Except Future Abuse Claims), Class 6 (Personal Injury Claims), and Class 7 (Future Abuse Claims).
[1] On January 19, 2023, the Official Committee of Unsecured Creditors (the “Committee”) in the bankruptcy case of The Roman Catholic Diocese of Rockville Centre (the “Diocese” or the “Debtor”) pending in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”), Case No. 20-12345 (the “DRVC Bankruptcy Case”) filed the Chapter 11 Plan of Reorganization Proposed by the Official Committee of Unsecured Creditors [Docket No. 1574] (the “Committee Plan”). Any capitalized terms used and not otherwise defined herein shall have the meaning ascribed to them in the Committee Plan.
[2] “Other Insured Entities” are entities who are co-insured with the Diocese except the Cemetery, Seminary and Department of Education. Generally speaking, these are the Parishes.
[3] The Seminary shall be entitled to retain possession and title to the buildings and approximately sixteen (16) acres associated with the operations of the Seminary; provided however, that if any portion of this property is leased, sold, or subject to an option for lease or sale on or before the date that is six months after the termination of the Future Abuse Claims Trust for the benefit of Abuse Claimants, 85% of the net proceeds of such transaction shall be paid to the Trust.
[4] In addition to the payment described above, the Department of Education must provide the Trust with a reversionary interest in the real and/or personal property owned by the Department of Education if any portion of the property is leased, sold, or subject to an option for lease or sale on or before the date that is six months after the termination of the Future Abuse Claims Trust for the benefit of Abuse Claimants.
[5] The Committee Plan defines “Cemetery” as the Catholic Cemeteries of the Roman Catholic Diocese of Rockville Centre, Inc. and Diocese of Rockville Centre Catholic Cemetery Permanent Maintenance Trust.
[6] The Committee Plan defines “Department of Education” as the Department of Education, Diocese of Rockville Centre.
[7] The Committee Plan defines “Insurer” as a Person (including all of its affiliates, successors) that has, or is alleged to have, issued, subscribed any interest in, assumed any liability for, or underwritten any risk in an Insurance Policy, except that Insurer does not include Arrowood.
[8] “Abuse Claim” does not include any Abuse Related Contingent Contribution/Reimbursement/Indemnity Claims, Extra-Contractual Claims, or Insurance Claims. To avoid doubt, Abuse Claim does not include any Claims first arising after the Petition Date or based only on conduct following the Petition Date.
[9] The Committee is negotiating with the Future Claims Representative concerning the treatment of Future Abuse Claims.
[10] Nothing in the Committee Plan shall enlarge the rights or Claims of Class 6 Claimants or limit or waive any defenses to the Class 6 Claims. Unless otherwise provided in the Committee Plan, the Committee Plan shall not affect the liability of any other Person on, or the property of any other Person for, the Class 6 Claims, which liability shall continue unaffected by the terms of the Committee Plan or the discharge granted to the Diocese under the Committee Plan and Section 1141(d) of the Bankruptcy Code. Nothing in the Committee Plan is intended to affect, diminish, or impair the Class 6 Claimant’s right against any other parties, including such party’s joint and several liability
[11] Notwithstanding the above, to preserve coverage under any Non-Settling Insurer’s Insurance Policies, Class 4 and Class 7 Claimants specifically reserve, and do not release, any claims they may have against the Diocese, the Reorganized Debtor, or any other Participating Party that implicate coverage under any Non-Settling Insurer’s Insurance Policies, but recourse is limited to the proceeds of the Non-Settling Insurer’s Insurance Policies and all other damages (including extra-contractual damages), awards, judgments in excess of policy limits, penalties, punitive damages and attorney’s fees and costs that may be recoverable against any Non-Settling Insurers because of their conduct concerning insurance coverage for, or defense or settlement of, any Abuse Claim, and any such judgments or awards will be handled under the Committee Plan and the Trust Allocation Protocol. The Class 4 and Class 7 Claims will not be released or enjoined as against the Diocese, the Reorganized Debtor, or any other Participating Party for any Abuse that may be covered under any Non-Settling Insurer’s Insurance Policies until such claims are settled with the Diocese, the Reorganized Debtor, any other Participating Party and such Non-Settling Insurer or are fully adjudicated, resolved, and subject to Final Order, but recourse is limited as described above.
[12] These Exculpated Parties are defined in Section 2.5.9 of the Committee Plan to include the Debtor, the Reorganized Debtor, the Committee, the Committee’s Professionals, the Future Abuse Claims Representative, the Future Abuse Claims Representative’s Professionals, and each of their respective predecessors, successors, assigns, past and present and former shareholders, affiliates, subsidiaries, employees, agents, officers, directors, trustees, partners, attorneys, financial advisors, accountants, and consultants, each in their capacities solely as such. Protecting this exculpation and limitation of liability will not extend to any person who personally committed an act or acts of abuse resulting in a claim against the Debtor. The exculpation and limitation and liability will also not apply to any claims arising from willful misconduct or fraud.