New Lawsuit Alleges San Diego Catholic Diocese Fraudulently Transferred Real Estate Assets to Avoid Child Sexual Abuse Claims. Click Here for Complaint

Catholic Diocese of San Diego Files Bankruptcy for a Second Time to Avoid Paying Fair Compensation to Child Sexual Abuse Victims

San Diego, CA: On Thursday, June 13, 2024, Cardinal McElroy of the Catholic Diocese of San Diego announced that the Diocese of San Diego will file for Chapter 11 bankruptcy protection on Monday, June 17, 2024.In addition it will ask the Bankruptcy court to extend the same bankruptcy protections it receives to each of its parishes, schools and other affiliated institutions. This will be the second time the Diocese of San Diego has filed for bankruptcy protection following the filing of multiple child sexual abuse lawsuits stemming from decades of abuse by its clergy. The San Diego Diocese’s current Chapter 11 represents at least the thirteenth Catholic Diocese to recently file for bankruptcy protection in the wake of hundreds of child sexual abuse lawsuits filed in various states following either extensions, or revival, of state statutes of limitations that previously barred such claims. The San Diego Diocese’s filing follows bankruptcy filings by the California Dioceses of Santa Rosa, Oakland, San Francisco, Sacramento and is soon to be followed by the Diocese of Fresno.

In 2007, after agreeing to pay nearly $200,000,000 to 144 clergy abuse survivors the San Diego Diocese decided to dismiss its bankruptcy. Then U.S. Bankruptcy Judge Louis DeCarl Adler took the unusual step of requesting a hearing to discuss the Diocese’s request for dismissal and did not mince words. She explained:

“I decided this morning to reacquaint myself with the exact definition of ‘disingenuous.’ According to Merriam Webster’s it means lacking in candor, also giving a false impression of simple frankness, calculating. From what I understand of the Diocese’s finances … I think the term ‘disingenuous’ as applied to the Diocese description of assets available to fund the settlement is completely accurate. There is, in my view, ample other property available for liquidation to fund the settlement without threatening the mission of the church. It is simply a question of how the Diocese sets its priorities. …[¶] … I say this because this case has ramifications beyond San Diego. There may be other dioceses in this country which may be considering Chapter 11 as an easy vehicle to deal with the claims of abuse victims. I think that would be a mistake now or in the future. The church needs to look within itself. It needs to ask itself whether its core mission to educate children, to tend to the spiritual needs of the community, and to bring some healing to those abuse victims requires it to retain nonessential assets such as parking lots, apartment buildings, houses bequeathed to it, parish churches no longer viable, vacant land … Before a diocese – any diocese – resorts to a Chapter 11 filing, it should be making a good faith honest effort to assess whether that is necessary. … [¶] … Chapter 11 is not supposed to be a vehicle or a method to hammer down on the claims of the abused. It is a method of dealing with those claims fairly while preserving the core business, if you will, of the Chapter 11 debtor.”

Judge DeCarl Adler’s words were prescient.

“After nearly a year of mediation, we were hoping that child sexual abuse survivors, the Diocese and its insurer would have been able to reach a settlement and an agreed to plan for compensating victims through the inevitable bankruptcy announced by the Diocese about a year ago. .

Unfortunately, that hasn’t happened,” said attorney Irwin Zalkin, of The Zalkin Law Firm, who served as court appointed Liaison Counsel for 457 child sexual abuse survivors, as well as their mediation representative.

“It has become very clear that these Catholic Dioceses and their insurers have adopted a national strategy to use Chapter 11 bankruptcies to resolve child sexual abuse cases in a way that reduces the compensation paid to survivors and deprives survivors of their right to trial, a misuse of the bankruptcy system that Judge DeCarl Adler sternly warned against seventeen years ago,” said Devin Storey, partner with The Zalkin Law Firm and San Diego Superior Court appointed liaison counsel in that court’s coordinated proceeding involving 457 lawsuits against the San Diego Diocese.

“It is our intention to continue our efforts on behalf of the 457 survivors who will now find themselves in bankruptcy court, to work with the Diocese and its insurer to arrive at a fair settlement for these survivors. The ball is very much in the Diocese and its insurance company’s court,” said Zalkin.

The Zalkin Law Firm exclusively represents survivors of child sexual abuse, sexual violence and harassment against institutions who are legally responsible for such abuse. The firm has represented over a thousand survivors during the past twenty- two years involving cases against various Catholic Dioceses, Boy Scouts of America, multiple school districts, youth sports organizations and other religious organizations.