Bankruptcy Judge Handles Double Duty with City, Diocese Cases

By Kevin Parrish
The Record
January 27, 2014

http://www.recordnet.com/apps/pbcs.dll/article?AID=/20140127/A_NEWS/401270308

STOCKTON - U.S. Bankruptcy Judge Christopher M. Klein, no stranger to Stockton City Hall finances, is about to get familiar with the Catholic Diocese of Stockton.

Klein, already the city's bankruptcy judge, also is handling the Jan. 15 bankruptcy filing by the diocese.

Klein indicated last week in Sacramento that the case's first substantive hearing will be held in early February.

Last week, he held a hearing on several perfunctory motions that will allow the diocese to meet its payroll and keep its lights turned on.

Almost a dozen attorneys - representing sex-abuse victims, insurance companies and various Catholic organizations - were inside the federal courtroom for the hearing.

Judge Klein conducted the proceedings by phone.

"So far, it's all very technical," said Stockton Bishop Stephen Blaire. "Next month, there will be a broader hearing on a lot more issues about how we will proceed."

Blaire spent several months leading up to bankruptcy keeping church members informed of the possibilities and of the financial difficulties.

He said the federal court protection was needed because of $32 million paid out in child sexual-abuse lawsuit settlements over the past 20 years. Of that total, $14 million came directly from the diocesan budget.

The filing involves the diocese's administrative umbrella, a $5 million-a-year operation.

Klein, chief federal bankruptcy judge for the Eastern District of California, ruled April 1 that the city of Stockton was eligible for bankruptcy protection. In his ruling, he said City Hall was broke and had negotiated in good faith with its creditors.

Since then, the city has been working on a plan of adjustment to restructure millions of dollars in debt. Key decisions are expected by March.

In the meantime, Klein now is handling the diocese filing as well.

"The next time we're in court, I will be present," Blaire said. "It will be a determination of how we proceed."

Diocesan financial news is posted on its website. Following last week's hearing, this is what was made public:

"A federal bankruptcy judge ... granted motions made by the Diocese of Stockton to allow it to continue paying employees during the reorganization, to continue current investment practices and to keep utility services in place.

"The court granted the motions following discussions between attorneys for the diocese and key creditors."

Contact: kparrish@recordnet.com