Written by Marci Hamilton, Esq. February 16, 2023, Prof. Marci Hamilton, Founder and CEO of CHILD USA, is a national expert on child sex abuse statutes of limitations that make it difficult for victims to pursue justice.
The San Diego Diocese is not “going bankrupt” in the sense most readers would have thought from this headline. To the contrary, San Diego is swimming into the safe waters of Chapter 11 bankruptcy, where organizations go to protect assets, reduce liabilities, and survive and thrive into the future. At the same time, the victims’ truth-seeking lawsuits will be halted as victims are instructed to wait in the wings while the important business of ensuring the organization’s future well-being is debated. Federal law perversely caters to the needs of the organizations that destroy childhoods through sex abuse while it sidelines and silences the victims. This has to change and change soon.
The colloquial meaning of “go bankrupt” is that the organization lacks the assets to stay in business. But in the United States, there are two ways to file for bankruptcy: (1) Chapter 7 for dissolution of assets; and (2) Chapter 11, which permits an organization to reorganize its assets and liabilities so it will survive and thrive in the future. The Boy Scouts, diocesan, and gymnastics bankruptcies were ALL Chapter 11 filings.
Congress has the power to right the balance of power between these organizations and the victims they created. Chapter 11 needs to be amended in three ways:
(1) End Third-Party Releases in Child Sex Abuse Cases: don’t let related organizations that are not declaring bankruptcy get their benefits. The only one that should get the pampering of Chapter 11 is the one that can prove it belongs there. Everyone else should be fair game for the victims to take to court.
(2) End the Automatic Stay in Child Sex Abuse Cases. Chapter 11 stops all related litigation, moving all of the disputes into the bankruptcy court. That means the case is halted if a victim has initiated a lawsuit to seek the truth and full justice. Suddenly, the victim is stuck in a proceeding whose focus is on the well-being of the bad actor and which blocks the victim from learning the truth they need to know. These cases are the only way a victim can force the organization that endangered them to release the truth. The lawsuits reveal the identities of the players that ruined their childhood. They are also the most important way the public learns the mechanisms and persons putting children at risk. Parents need the ugly truths in these cases to protect their children.
(3) Enact a Right for Victims to Provide a Victim Impact Statement BEFORE the Reorganization Plan Is Affirmed. One of the most impactful moments in the child sex abuse movement was when the survivors of Larry Nassar were given an opportunity to read victim impact statements in open court before his sentencing. The number of brave survivors– 156 — and the length of the hearing — 7 days — hammered home how much harm this perpetrator and the enabling institutions had inflicted. The public will be able to witness the stunning scope of the childhoods crushed, and the families hurt. These truths need to be released before the organization in Chapter 11 is allowed to carry on with the extraordinary benefits of Chapter 11.
Chapter 11 is an important mechanism for honest debtors to right the ship, but in the child sex abuse cases, its operation perversely empowers the bad actors in this space while it derails the one chance victims have for truth and justice.
Members of Congress: it’s time to pass these three straightforward Chapter 11 reforms to empower child sex abuse victims thrown into the vortex of existing bankruptcy law.