Democrats now control both houses of the New York Legislature as well as the Governor’s office. A host of legislation may be in the offing. One expected piece of legislation will be passage of the Child Victim Act (CVA).

Background

On June 20, 2018 the Legislative term ended without the CVA voted into law. In the 11 years since the measure was first introduced, support for the CVA has increased along with public awareness, and continued media attention as to the issue of childhood sexual abuse. A February 20, 2018 Quinnipiac Poll showed 90% of New York voters support passage of the Act. Yet, year after year, the CVA had failed to pass due to a razor thin Republican Majority in the New York State Senate. So while the Democrat controlled Assembly had proposed and passed the CVA with ease, each year Senate Republicans ensured the legislation was never presented for a vote.

The Senate had been the Republican Party’s last foothold of power, and they used it to protect the special interest groups that lobbied hard to deny the CVA’s passage. Now, for just the third time in 50 years, the Democrats, which needed only to flip one seat, secured eight previously held Republican seats, taking command of both of the Legislative houses. Passage of the CVA is atop their list of proposed legislation.

What is the Child Victim Act?

The CVA is legislation designed to protect childhood victims of sexual abuse. The CVA would change and liberalize New York’s strict statute of limitations in sex abuse cases. The current law requires initiation of any civil lawsuit within five years after an alleged victim’s 18th birthday, or age 23. The new legislation, as currently drafted, would allow alleged victims to bring civil lawsuits until their 50th birthday and further provide an open one year window to revive old cases, which may previously have been dismissed on statute of limitations grounds. The Bill would also apply to private and public institutions named as defendants when sexual abuse is alleged.

What is on the Horizon?

The New York legislature begins its January term on January 9, 2018. Slated for its first 100 days is the “2019 Justice Calendar” representing a suite of proposals. Unlike in prior years when these priorities were announced as part of the January “State of the State” address which highlighted top priorities for the upcoming year, this calendar was previewed in December 2018, presumably to demonstrate what Governor Andrew Cuomo called “New York’s Declaration of Independence from Washington”. Although not expressly discussed while other proposed legislation was, one of the twenty point agenda items was the passage of the CVA.

But with this initiative has come considerable behind the scenes activity. While staunch supporters are pushing for quick enactment of the Bill, other legislators are urging to proceed with more caution. The reason is clear. When the Bill had no chance of passing, the Senate supporters did not need to consider its full ramifications. Now they will have to. And while Governor Cuomo clearly supports the measure, certain legislators are exerting significant pressure to amend the one year look back provision, which is expected to create an onslaught of litigation and could lead to bankruptcy for various institutions. Governor Cuomo, a Catholic, has been listening to religious leaders of various faiths concerned about these draconian consequences. He has publicly stated his concerns as to the financial repercussions on the Church, which runs many of the New York state social service programs as well as funding New York based hospitals, colleges and religious schools. Cuomo has stated that “nobody wants to see a diocese or the Catholic Church bankrupt, so how it is done is very important.” On the other hand, he noted, it would be wrong to say “well this may cost the church money so we shouldn’t do it”. These remarks have led advocacy groups to complain that it is misguided to suggest that victims would be responsible should a church go bankrupt.

One thing is for certain however, the Governor is speaking to various constituencies and giving the ramifications of the CVA serious consideration.

How it Could Work.

No law can be enacted in New York state unless it is adopted by the legislature in bill form. Only legislators or standing committees of the Senate and Assembly may introduce bills.

The existing Assembly bill, which has already gone through the steps necessary for passage in the Assembly, can be sent to the Senate where it can be discussed in Committee, and then debated in open session and go to the full Senate membership for the vote. If it is approved without amendment it then goes to the Governor for signature. Alternatively, if there are amendments made in the Senate it is returned to the Assembly for its concurrence as to those amendments.

Sometimes the Senate and Assembly seek passage of similar bills but cannot easily reconcile their differences. In such cases a conference committee is used to iron out the differences. The Senate Majority Leader and Speaker of the Assembly each appoint five members from their respective houses to serve on that committee. After an agreement is reached it is sent to the Governor who can sign or veto the legislation. A two thirds majority in both houses can override that veto.

The take away of this process is that there are various opportunities to discuss, debate, and lobby to change the content of what will be the final version of the law. The time to weigh in on that content is now.

So what does this mean for your Institution?

Any educational, religious or other civic organization that cares for children, such as a school camp or day care facility, will be subject to this law. This means that, if you have been fortunate enough to not have had to worry about defending claims of decades old sexual abuse due to the protections afforded by the statute of limitations, those protections will soon no longer exist. It means that more people than ever may now be emboldened to come forward, recognizing that they have broad-based legislative and public support, and that they will not be faced with an outright dismissal of their claims on statute of limitations grounds. Some victims may have hesitated to come forward because they knew that they would be putting themselves in the public eye for claims that would not even survive a motion to dismiss on timeliness grounds. As an institution providing services to children, even if you are currently unaware of any pending issues as to children previously in your care, these individuals, so long as they are under 50 years old, would now be able to initiate a public lawsuit. The defense of such cases is often extremely difficult as memories have faded and witnesses have disappeared. In cases of abuse in schools or camps, for example, evidence such as records, medical records, witnesses to the abuse, individuals who might have received the victim’s outcry, and even the wrongdoers themselves, may be long gone. In many respects this can make an institution essentially defenseless when such claims are asserted.

Next Steps

Your institutional consideration of the ramifications of any legislation that will likely be enacted is a necessary and critical first step in addressing this potential problem. Being able to demonstrate that you have undertaken such consideration is also prudent business judgment. The reputation of your institution, how your response is received by those associated with it, and the public face you want your institution to present, are all important considerations when you decide on how to proceed.

Determine your potential risk:

  • Are there lawsuits that were dismissed on statute of limitations grounds that will likely be resurrected?
  • Investigate what is in your institution’s history that has remained hidden. It may result in the next big lawsuit… and likely a headline.
  • If lawsuits are commenced do you still have access to witnesses or to documentary proof? Is the alleged abuser still alive? Are they still involved with your institution? In short, is this a lawsuit you can defend?

Understand the Act:

  • How will its passage change the laws concerning statute of limitations. When the new legislative term begins the actual provisions of the Act will be subject to change and political compromise. The time to weigh in is now.
  • Consider contacting your elected official and weigh in on how your institution will be impacted. A lobbying effort, possibly in conjunction with other institutions similarly situated, would help make the legislation more palatable. For example, removing the “look back” provision would go a long way to limiting the likelihood of a spate of lawsuits that could now be filed. The creation of a damages cap per victim would allow for a better consideration of damages. Note, however, that if you should hire lobbyists, your identity is subject to disclosure and may be become public.
  • If lobbying is not feasible, make every effort for a personal outreach to your respective State Senator or Assemblyman. They need to understand that your institution may be forced to face dire consequences for decades old conduct of which it was unaware. If at all possible demonstrate that your existing institution has processes and procedures in place to protect today’s children. These legislators need to understand that they must balance a victim’s need for closure with the very real need an institution has to utilize its existing assets to protect its future, and to best provide for the future children in their care.
  • Consider what could be done now to avoid potential litigation should the legislation pass. An outreach to victims now, offering truth and reconciliation efforts, and perhaps including funds earmarked for counseling, may be a good starting point. You may also consider the creation of a victim fund that can administer compensation to those victims that seek monetary relief but would rather not file a public lawsuit.

Other Options To Consider.

Supporting Organization:

If you are a charitable organization consider establishing a separate legal entity called a “supporting organization” for purposes of autonomy or limitation of liability. Supporting organizations have been used to provide support to a variety of public charities in the form of fundraising and related duties. A supporting organization may solicit potential funding for contributions to build and maintain a separate endowment for a public charity.

In order to receive and maintain its charitable status, a supporting organization must meet and maintain certain technical criteria with respect to its relationship to the public charity which it is established to support.

The “supporting organization” regulations are intricate and detailed, and establishment of supporting organization, its approval by the Internal Revenue Service and its continued operation require careful planning in coordination with its public charity.

The use of the supporting organization is more likely a device used to build and maintain a future endowment under separate management for support of the public charity as opposed to protecting existing endowments from would-be creditors.

Bankruptcy Court Protection:

A last resort may include Bankruptcy protection should a flood of lawsuits make survival of the entity doubtful.

Two entities in the news for sex abuse related issues are The Boy Scouts, and the USA Gymnastics Association. They believe they have potential liability far in excess of their assets. The Boy Scouts are still considering this option. But in December, 2018 USA Gymnastics, reeling from over a hundred lawsuits from the victims of Larry Nassar stemming from his years of assault, filed for such protection. The hope of the organization is to re-organize and preserve assets while it attempts to settle the lawsuits.

  • Filing for bankruptcy is a costly and time consuming step, but may be necessary for those institutions that know that they have untold lawsuits that will be filed if the legislation passes.
  • As part of the process, notice to potential claimants must be given, they need to assert claims before a bar date, and their claims will be settled in Bankruptcy.
  • Those who do not file will have no claim.
  • Concerns include reputational harm to institution, preference concerns, and fraudulent conveyance challenges, among others.

Conclusion

The sexual abuse of children is a heinous crime that has impacted countless victims in many different ways. There is no debate that such conduct is reprehensible and that it must be stopped. New York will be taking legislative steps to now give many of the individuals that were the victim of abuse redress they are not entitled to under the current law. The issue of passage of the CVA is not a question of if, but of when. Your institution has a responsibility to the children it serves, but you have a responsibility to the institution you serve. Taking steps to best protect your institution, whether through the legislative process, containing your risk, or taking steps to protect your assets going forward, requires careful consideration of all available options.