Committee Files Suit After Diocese Refused to Pursue Claims That Could Recover Hundreds of Millions for Survivors
BURLINGTON, Vt., Aug. 5, 2026 /PRNewswire/ — The Official Committee of Unsecured Creditors (the “Committee”) in the chapter 11 case of the Roman Catholic Diocese of Burlington, Vermont, Case No. 24-10205 (Bankr. D. Vt.), has been granted standing by the District of Vermont U.S. Bankruptcy Court to pursue claims on behalf of the Diocese and its estate, claims the Diocese itself refused to bring. As the debtor, the Diocese is responsible for maximizing funds available to pay its creditors, but here it refused to initiate actions to recover funds from its parishes and schools. The Court, therefore, gave the Committee the authority to pursue such actions. Acting on that authority, the Committee has filed an adversary complaint against the Diocese, Bishop John J. McDermott, and dozens of parishes and schools across Vermont. The Committee is represented by Pachulski Stang Ziehl & Jones LLP (“PSZJ”).
Judge Heather Z. Cooper’s July 28, 2026 ruling found that the Committee’s claims are colorable and likely to benefit the estate, and that the Diocese had unjustifiably declined to pursue them. The Committee’s complaint, filed three days later, asks the Court to declare that the Diocese’s parishes and schools are not independent legal entities but operating divisions of the Diocese itself and that the “Parish Trusts” the Diocese created in 2006 are self-settled trusts, subject to survivors’ claims.
In 2006, the Diocese transferred property it had valued at roughly $405 million into those trusts for one dollar apiece, while keeping control of the assets through trust documents. The complaint seeks to avoid those transfers as fraudulent and to recover the assets for the estate and its creditors, including over one hundred survivors of child sexual abuse.
“The parishes aren’t separate, and the trusts aren’t valid,” said PSZJ Partner Brittany Michael, counsel for the Committee. “It’s one Diocese, hiding its own money from the people it harmed. We now can prove that in Court.”
None of the allegations in the complaint has been adjudicated. The defendants will have the opportunity to respond.
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SOURCE Pachulski Stang Ziehl & Jones
