Diocese of San Diego accused in lawsuit of transferring real estate assets to avoid paying settlements

— The lawsuit claims the Diocese transferred its properties so that those assets weren’t reachable by its creditors, namely survivors of sexual abuse.


The lawsuit claims the Diocese transferred its properties so that those assets weren’t reachable by its creditors, namely survivors of sexual abuse.

A new lawsuit claims that the Roman Catholic Diocese of San Diego transferred ownership of 291 real estate holdings and parcels across San Diego and Imperial counties to parish corporations in order to conceal the Diocese’s true assets to avoid paying settlements of suits brought by survivors of childhood sexual abuse.

The lawsuit, filed in San Diego County Superior Court by The Zalkin Law Firm on behalf of more than 100 plaintiffs who say they were sexually abused by Catholic priests or employees of the Diocese in either San Diego or Imperial county, claims the Diocese began to transfer its property after the passage of Assembly Bill 218. That California law, passed in 2019, significantly extended the statute of limitations for survivors of childhood sexual assault to file lawsuits against their abusers. Survivors can now file suits up until age 40. Starting in 2020, the bill also opened a three-year window for filing lawsuits regardless of the plaintiffs age.

After the passage of the law, more than 400 lawsuits were filed against the Diocese of San Diego.

Earlier this month, the Diocese announced that its leaders are considering filing for bankruptcy in the face of the legal costs and projected settlement costs of those lawsuits.

Irwin Zalkin, the lead attorney for the plaintiffs in the case, called that claim a public relations spin.

Citing deeds in the County Recorder’s office, the lawsuit posits that the total assessed value of the property the Diocese transferred is over $453 million.

“Plaintiffs believe and allege that all of the transfers described below were done as part of a scheme created, masterminded, and designed by Diocese and the Parishes for the Diocese to transfer properties to the Parishes so the assets of the Diocese are not reachable by the Diocese’s creditors, particularly not reachable by Plaintiffs to satisfy Plaintiffs’ Claims against the Diocese,” the lawsuit states.

In a press release, Zalkin said the Diocese made a similar claim in another case that their parish real estate assets were separate from their own real estate assets, and that they were being held in trust for their parishes. That case was settled before that argument was officially decided, Zalkin said, but he believes that the court will not agree side with the Diocese.

“The judge will find that this is a sham,” Zalkin said.

Zalkin’s firm was appointed the liaison counsel on behalf of 144 sexual abuse survivors who settled with the Diocese for $198 million during the Diocese’s bankruptcy proceedings in 2007.

The lawsuit also alleges that the Diocese set up a “Independent Compensation Fund.” Survivors of clergy sexual abuse could submit a claim against a priest, which would then be evaluated by an independent claim evaluator, to see if the survivor was eligible for a settlement. The lawsuit claims that the process was designed to draw out survivors who were eligible to bring lawsuits against their abusers, and given settlements that were “pennies on the dollar.”

“At the same time that the ‘Independent Compensation Fund’ was becoming operational and the Senate was passing AB 218 on to the Governor in mid-September of 2019, the Diocese was engaged in a massive effort to transfer title to hundreds of millions of dollars of real property for no consideration,” the lawsuit suites. “Plaintiffs are informed and believe and on that basis allege that this fraudulent scheme, which is described below and is the subject of this lawsuit, was intended to defraud Plaintiffs and others with claims based on clergy sexual abuse.”

At a press conference on Wednesday, Zalkin added that the properties that were transferred by the Diocese to parish corporations included private homes, and most of the properties were transferred in 2019, the year Assembly Bill 218 was passed. The parishes did not pay for the properties either, Zalkin said.

“This is fraud,” Zalkin said.

The lawsuit, Zalkin said, is the linchpin to making sure the survivors of clergy sexual abuse get adequate compensation if the Diocese declares bankruptcy again.

The Roman Catholic Diocese of San Diego did not immediately respond to a request for comment on the lawsuit.

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