The Archdiocese of Boston is preparing to take the extraordinary step of filing for bankruptcy, as hopes fade for a settlement with an estimated 450 alleged victims of clergy sexual abuse, according to a senior church official and two sources close to the archdiocese.
Cardinal Bernard F. Law, who has been involved in discussions about the prospect, has yet to give his approval. But his senior advisers are united in the view that seeking protection in Bankruptcy Court is preferable to a damaging and costly battle in state courts that might drag on for years, according to the official and the sources.
One of the cardinal’s advisers, who like the others spoke on condition that they not be identified, said church lawyers remain hopeful there will be an equitable settlement, overseen by mediator Paul R. Sugarman, with about 40 attorneys who represent a list of victims that continues to grow.
The attorneys for the victims have until Dec. 16 to provide Sugarman with the size of the damage award that each sexual abuse victim is claiming. Based on recent settlements, according to the estimates of lawyers on both sides, the total of all the claims could exceed $100 million.
Robert Sherman, an attorney who represents some of the victims, said it is premature for the church to consider bankruptcy. Before abandoning the mediation process, Sherman said, the archdiocese needs to determine the potential damages it faces, the amount of insurance coverage it has, and its prospects for raising the difference by tapping its own assets.
“Cardinal Law has made a commitment to resolving these claims so the victims can obtain closure. For the church to file for bankruptcy would be inconsistent with his posture and would keep those wounds open,” Sherman said.
If it opts for Chapter 11 protection, the archdiocese is unlikely to take that step until next month at the earliest, according to the sources.
“Bankruptcy Court ought to be the last resort for any debtor,” said Walter W. Miller Jr., a bankruptcy law specialist at Boston University School of Law. “When you bring in a bankruptcy judge, it may not turn out the way you want.”
There is also a perceptual problem. One attorney, who is familiar with the church’s case but uninvolved, said there will be “irretrievable damage” to the church’s reputation if it has to seek protection in Bankruptcy Court. And it may seriously undercut fund raising, which has already been severely hurt by the disclosures of clergy sexual abuse of minors.
Under federal law, Chapter 11 filings are intended to gather all of the debtor’s creditors under one roof with an equal chance at recovering what is due them, while also allowing the debtor to make a new, and unencumbered, start after the bankruptcy case is settled. During the Chapter 11 process, the church would continue to administer its own affairs, though not without possible oversight by the court.
Bankruptcy filings by charitable organizations are rare. And such a step by the church is without precedent. In 1997, the Dallas diocese received permission from the Vatican to file for bankruptcy after a jury awarded $119.6 million to several victims of one priest. The diocese never filed, but the threat alone prompted the victims to settle for $31 million.
Law, according to the sources, has not yet asked for the Vatican’s permission, but expects that the Vatican would rule quickly.