San Diego Roman Catholic Diocese to file for bankruptcy

The Roman Catholic Diocese of San Diego announced Thursday that it will file for bankruptcy in the wake of hundreds of legal claims from alleged sexual abuse victims.

"The fact that these abuses ever took place is a stain on the Catholic Church, so we have to respond to that no matter what," Kevin EcKery, a spokesperson for the Diocese of San Diego told NBC 7. 

In a letter to parishioners and clergy, Cardinal Robert McElroy wrote that bankruptcy would help the diocese fulfill its goals going forward, while also compensating abuse victims.

Last year, McElroy announced the possibility of bankruptcy in a separate letter, when he wrote that the diocese  "must face the staggering legal costs" in response to lawsuits alleging abuse dating back as far as 1945.

In 2007, the Diocese settled lawsuits brought by 144 victims, but recently more than 450 claims have been made against the diocese, according to a statement. The diocese said more than 60% of the latest claims are for incidents that occurred more than 50 years ago.

In last year's letter, McElroy wrote that the 144 claims were settled for $198 million, but settling the present claims at the same rate would cost more than $550 million.

"The diocese faces two compelling moral claims in approaching the settlement process: the need for just compensation for victims of sexual abuse and the need to continue the church's mission of education, pastoral service and outreach to the poor and marginalized," McElroy said. "Bankruptcy offers the best pathway to achieve both."

The diocese, which will be filing for Chapter 11 bankruptcy on Monday, said its parishes, charities and schools would continue normal operations.

However, McElroy wrote, "It is clear that as part of providing appropriate compensation to past victims of the sexual abuse of minors, both the parishes and high schools will have to contribute substantially to the ultimate settlement in order to bring finality to the liability they face."

The Zalkin Law Firm, which represents victims in the cases against the Diocese of San Diego, said this is at least the 13th Catholic Diocese to file for bankruptcy protection in recent years in response to laws that allowed for new abuse claims previously barred by the statute of limitations.

Last year, the firm sued the diocese, alleging it fraudulently transferred real estate to dummy corporations in order to avoid paying out legal settlements to victims.

Devin Storey, partner at Zalkin Law Firm, said in a statement, "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."

Irwin Zalkin, for the firm, said, "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."

“If they really want to do justice, then they should pay what the fair value is for the harm that was done. That's all we can do. We can't give people their lives back, but we can hold accountable by the amount of money that they pay for the harm that's been done. That's the only thing we can do,” Zalkin said.

Zalkin said if they’re unable to reach a deal, cases may have to be released from the bankruptcy back to the state court to actually go to trial, and that’s a long process.

Eckery said the Diocese will likely use money from their surplus property and insurance proceeds to cover the compensations of survivors. However, at the end of the bankruptcy process, parishes will be expected to make financial contributions to be released from liability.