The Archdiocese of Baltimore believes that it doesn’t have to pay any of the more than 1,000 sexual-abuse claims filed in its bankruptcy case — at least with its own money, a new lawsuit alleges.

Attorneys for sexual abuse survivors are asking a bankruptcy judge to decide whether America’s oldest Catholic diocese can continue to take the hard-line legal position that it has staked out. They argue that it runs contrary to the law, the church’s public reasoning for entering bankruptcy and archdiocesan officials’ testimony that compensating victims is part of the church’s mission.

The archdiocese declared bankruptcy in the fall of 2023 after Maryland passed a law that eliminated time limits for those who claim they were sexually assaulted as children to sue their abusers and the institutions that enabled their torment. The law opened the door for innumerable lawsuits.

At the time, Archbishop William E. Lori said the church would rather pay all of its victims at once in bankruptcy rather than exhaust its budget on a few state court cases. “Our desire was to do this as equitably as we can,” he said.

However, the survivors’ lawsuit alleges, the archdiocese has been privately invoking an old legal theory known as the “doctrine of charitable immunity,” which exempts charities from liability not covered by insurance.

The suit says that the archdiocese has maintained that position in confidential mediation, a critical phase of bankruptcy in which attorneys hash out how much money the church and its insurers must contribute to compensate victims, causing an impasse less than a year into negotiations.

In a statement to The Baltimore Banner, the archdiocese said it was “surprised” by the deadlock in negotiations and the subsequent lawsuit, given its record of compensating victims through settlements even when Maryland law did not allow survivors to file suit after a certain age. The archdiocese has spent $13.2 million on survivors since the 1980s, Lori has said.

Even though discussions on other issues — such as which sexual-abuse claims are covered by insurance policies — will continue, the legal dispute about the church’s liability threatens to prolong a bankruptcy process that was already expected to take years.

There is a lot at stake for survivors in the case. Time is money in bankruptcy: As the case drags on, attorneys’ fees accumulate, drawing dollars away from survivors.

‘The best path forward’

The story of clergy sexual abuse in Maryland reached a fever pitch in November 2022, when the state attorney general released a report stating that 158 church employees abused more than 600 children dating to the 1940s and spanning the archdiocese’s territory of Baltimore City and nine counties in Central and Western Maryland.

That report provided momentum for state lawmakers to overcome years of pushback from the Catholic Church’s lobbying arm and pass the Child Victims Act of 2023, which allowed people to file sex-abuse lawsuits previously barred by a statute of limitations.

The landmark law took effect Oct. 1 of that year. The archdiocese filed for bankruptcy days earlier, on Sept. 29.

“Chapter 11 reorganization is the best path forward to compensate equitably all victim-survivors, given the Archdiocese’s limited financial resources, which would have otherwise been exhausted on litigation,” Lori wrote in a letter announcing the bankruptcy. He added that the decision would protect “ministries that families across Maryland rely on for material and spiritual support.”

Last year, the archdiocese closed nearly half of its churches in Baltimore and parts of Baltimore County, citing declining attendance at Sunday Mass and the cost of maintaining many older buildings. Archdiocesan officials said the closures were not related to the bankruptcy filing.

Bankruptcy typically allows an organization to limit its liability by establishing a deadline for lawsuits. In the archdiocese’s case, U.S. Bankruptcy Judge Michelle M. Harner set May 31, 2024 as the deadline for survivors of child sex abuse to submit a proof of claim in the case.

Harner set aside days for survivors to testify about the abuse they endured in the church, an unusual occurrence in bankruptcy cases that Harner said she felt was necessary to increase participation in the case and to bring a human focus to the money-oriented proceedings. Lori attended the hearings where survivors spoke, saying afterward that he was moved by their courage.

The judge sent the case to mediation in July, and silence largely followed. Mediation is confidential to protect sensitive information such as details of sex-abuse claims and finances.

It all seemed to be going well, according to updates posted on a website hosted by the survivors’ committee.

Then, a lawsuit appeared on the case docket April 1.

Lots of money at stake

The complaint says the archdiocese was maintaining a stance that it raised before filing for bankruptcy, “that the doctrine of charitable immunity provides a complete legal defense under Maryland law to the obligation to pay Survivor claims that are not covered, or to the extent the claim exceeds the limits provided, by third-party insurance.”

Paul Jan Zdunek, chair of the Official Committee of Unsecured Creditors, which represents survivors, referred questions to an attorney, who declined to comment.

Attorneys for the archdiocese have yet to respond to the complaint. In a statement, archdiocese spokesman Christian Kendzierski doubled down on Lori’s reasoning for declaring bankruptcy, saying the church had chosen the “most orderly process in which victim survivors can be compensated, including from its insurance policies.”

“The Archdiocese remains committed to providing equitable compensation to victim survivors and ensuring the continued mission and ministry of parishes and schools to the communities they serve and will continue to proceed while honoring its dual goals,” Kendzierski said.

It’s relatively common for lawsuits to come up when negotiations in bankruptcy cases stall, said Robert A. Gordon, a former U.S. Bankruptcy Court judge in Maryland who now teaches at the University of Maryland Carey School of Law.

In the archdiocese’s case, there is almost certainly a lot of money at stake.

Gordon said there is undoubtedly a “huge difference” between the sum of money available to settle survivor claims when including the archdiocese’s assets, which the survivors want, versus excluding the assets, as the church wants.

Created by judges rather than lawmakers, the charitable immunity doctrine protects charities from being “wiped out by lawsuits,” Gordon said.

“While it probably existed in most if not all states from long ago, many of them have abrogated it, which means nullified it or changed the law, or limited it significantly,” Gordon said. “In Maryland, it still exists for the most part.”

Insurance policies that covered sexual abuse dropped off in the 1990s, said Marie T. Reilly, a Penn State Law professor who specializes in bankruptcy law. Reilly has tracked archdiocesan bankruptcies nationwide and said a similar lawsuit hasn’t come up.

Reilly said it’s understandable that the archdiocese would stand behind charitable immunity and file for bankruptcy. Organizations don’t waive their legal defenses in bankruptcy, she said, and opting for bankruptcy spares the organization from having to raise a defense in each individual case, which “would be hugely costly.”

The survivors committee is arguing that the Child Victims Act nullified the charitable-immunity defense, Gordon said, “but the problem is the legislature didn’t say that specifically.”

At issue is a question of state law, which Harner could ultimately choose to send to the Supreme Court of Maryland. Several federal judges asked the state’s highest court to decide whether the Child Victims Act was constitutional while presiding over sex-abuse lawsuits filed under that law in U.S. District Court.

“They were serious enough about the stoppage, the impasse, to decide ‘Well, we need to file litigation,’” Gordon said. “Knowing that and just the way things work, it seems to me this couldn’t do anything but delay things further.”

Baltimore Banner reporter Dylan Segelbaum contributed to this article.