Court makes decisions on Gallup diocese bankruptcy

By Elizabeth Hardin-Burrola
Gallup Independent
September 22, 2014

http://gallupindependent.com/

ALBUQUERQUE – U.S. Bankruptcy judges delivered two significant decisions in the Diocese of Gallup’s Chapter 11 case this month.

With the first decision, a major deadline in the church bankruptcy case has been pushed back to next spring, and with the second decision, a U.S. Appellate Panel has dismissed an appeal filed in the case by the Diocese of Corpus Christi.

Extended deadline

On Sept. 8, Bankruptcy Judge David T. Thuma, of the District of New Mexico, granted an order extending the exclusivity period for the Diocese of Gallup to file its plan of reorganization.

This is the second time Thuma has approved a motion by attorneys for the Gallup Diocese to extend the reorganization plan deadline. After filing its Chapter 11 petition on Nov. 12, 2013, the Diocese of Gallup had been scheduled to file a plan of reorganization by March 12, 2014.

However, Susan G. Boswell, the diocese’s lead bankruptcy attorney, filed a motion to extend the exclusivity period through Sept. 8, and Thuma approved that extension. In August, Boswell filed a second motion to extend the deadline once again.

Boswell cited a number of factors, including the complexity of the Diocese of Gallup’s bankruptcy case, the difficulty of determining what real property the diocese owns that can be sold, the need to hire an insurance archaeology company to determine insurance coverage, and the identification of other Catholic entities that might have “indemnification or contribution obligations” to the Gallup Diocese for sexual abuse that occurred in the past.

Those other Catholic entities include other Catholic dioceses and religious orders that allowed their sexually abusive clergy to serve in the Diocese of Gallup.

With Thuma’s order, the diocese now has until May 12, 2015, to file its plan of reorganization.

Dismissed appeal

On Sept. 16, the U.S. Bankruptcy Appellate Panel of the Tenth Circuit dismissed an appeal filed by Albuquerque attorney Jennie D. Behles on behalf of her client, the Diocese of Corpus Christi in Texas.

Behles had appealed an order by Thuma concerning a motion to examine the finances and insurance coverage of the Corpus Christi Diocese. The motion had been filed by James I. Stang, the legal counsel for the Official Committee of Unsecured Creditors, which advocates for the interests of abuse survivors who have filed confidential claims against the Gallup Diocese in the bankruptcy case.

The Diocese of Corpus Christi was drawn into the case because Clement A. Hageman, one of its former sexually abusive priests, was allowed to move to the Gallup Diocese and work here for more than three decades. During that time, Hageman molested untold numbers of Catholic school children and altar boys.

After considering a number of legal arguments by Behles and Stang, Thuma issued a memorandum opinion and order that attempted to navigate what Thuma called “reasonable middle ground” between Stang’s motion and Behles’ opposition.

Behles then filed an appeal of Thuma’s order. In their dismissal of Behles’ appeal, U.S. Bankruptcy Judges Terrence L. Michael, Janice Miller Karlin and Dale K. Somers, members of the Tenth Circuit Appellate Panel, said allowing “an appeal at this juncture” would not further the bankruptcy case and it would not “result in an efficient use of judicial resources.”

As a result of the dismissal, the Diocese of Corpus Christi must now produce the financial and insurance information to Stang and the Unsecured Creditors Committee as required under Thuma’s order.

Ultimately, the Diocese of Corpus Christi, along with other Catholic dioceses and religious orders who sent sexual abusers to serve in the Diocese of Gallup, may be required to contribute money toward Gallup’s reorganization plan and its financial negotiations with abuse survivors who have filed confidential claims in the bankruptcy case.