Creditors to challenge archdiocese plan

Milwaukee Journal Sentinel
April 23, 2014

http://www.jsonline.com/news/regional-news-briefs-b99251923z1-256290711.html

The judge in the Archdiocese of Milwaukee's bankruptcy is scheduled to take up its reorganization plan in October. But lawyers for the creditors committee said Tuesday that they would file a motion aimed at throwing out the plan before then.

U.S. Bankruptcy Judge Susan V. Kelley on Tuesday scheduled a four-day hearing on the reorganization plan for Oct. 14 to Oct. 17, with the understanding that the lawyers for the creditors committee would file their motion.

They contend that Kelley has no authority to approve the plan — which includes the settlement of a lawsuit over $60 million in a cemetery trust created by the archdiocese — while that lawsuit is pending before the U.S. 7th Circuit Court of Appeals.

Attorneys for the archdiocese accused the creditors committee of trying to delay the process.

The archdiocese sought Chapter 11 bankruptcy protection in January 2011 to deal with its mounting sexual abuse claims. Under the reorganization plan it proposed in February, it would set aside up to $4 million for abuse survivors and create a $500,000 therapy fund, among other provisions. The plan also would settle the pending litigation over the cemetery trust, which abuse survivors allege was created to shield the funds in the event of lawsuits.

The creditors committee, which consists of abuse survivors but represents all creditors, argues that the archdiocese does not have standing to settle the cemetery trust litigation because it ceded that authority to the committee, and that Kelley issued an order to that effect.

Pending before the 7th Circuit is a narrow question: whether taking any portion of the cemetery funds for the bankruptcy estate would violate the archdiocese's free exercise of religion under the First Amendment and the 1993 Religious Freedom Restoration Act. Kelley had ruled it would not. But U.S. District Judge Rudolph T. Randa ruled it would, and that decision is now on appeal.