Judge to Address Protection of Parishes in Priest Sex Abuse Cases

By Annysa Johnson
Milwaukee Journal Sentinel
October 3, 2014

http://www.jsonline.com/news/religion/judge-to-address-immunity-of-parishes-in-priest-sex-abuse-cases-b99364368z1-278053361.html

The Catholic Archdiocese of Milwaukee, which faces more than a dozen civil fraud lawsuits over its handling of clergy sex abuse cases, filed for Chapter 11 bankruptcy protection in 2011. As the case proceeds, we'll have updates, analysis, documents and more.

Whether Catholic parishes that harbored sexually abusive priests should be protected from future lawsuits is among the issues that will be hammered out in the coming months as the Archdiocese of Milwaukee attempts to emerge from its nearly 4-year-old bankruptcy.

U.S. Bankruptcy Judge Susan V. Kelley on Friday voiced disappointment that the parties could not reach a settlement during two rounds of talks last month. And she issued a road map that will dictate how the case proceeds, saying she wants it "on a fast track."

"If this case is not going to be settled amicably...it's time to litigate the remaining issues," Kelley told attorneys at a status hearing Friday. "I want this case over."

The hearing came as the archdiocese filed motions to move forward in throwing out 11 claims filed by individuals who allege they were sexually assaulted as children.

Kelley issued a schedule for taking up questions related to a number of issues in the case. Among them:

¦ Whether the archdiocese's proposed reorganization plan — which sets aside less than $4 million for 128 victims of diocesan priests — is fair and equitable.

¦ Whether a key provision of that plan — an $8 million payment from London Market Insurers in return for a release of liability from any future parish lawsuits — is reasonable.

¦ And whether certain other assets, including the Cousins Center headquarters building, millions in fixed-income accounts, and proceeds from its $105 million Faith in Our Future capital campaign, should be considered part of the bankruptcy estate.

The question of liability protection for the parishes — and whether the archdiocese should have to turn over parish financial information — prompted the day's most heated exchange.

"You've got to be kidding me. Are you going to go after these little parishes that can barely keep the lights on?" said archdiocese attorney Frank LoCoco. "All of this is about their not liking your ruling that the parishes are separate" legal entities, whose assets are not part of the bankruptcy, he told Kelley.

Attorneys for victims and creditors question why parishes that knowingly housed abusive priests should be protected from lawsuits and said the archdiocese has refused to turn over any parish financial records.

LoCoco had initially said the archdiocese has no records. His co-counsel, Daryl Diesing, suggested it does but they are confidential. Ken Brown, an attorney for the creditors committee, said numerous documents, including the archdiocese's own manual, suggest it collects such data.

Kelley ordered the archdiocese to relinquish the records of 15 parishes of the creditors' choosing, and said she would decide about additional parishes after that.

"Whatever you have, produce it," Kelley told archdiocese attorneys. "Don't say it's at the parishes. It's been four years now, and if they want to come in and seek a protective order they can do that."

Kelley said she would not address, at least for now, issues related to the lawsuit over $60 million the archdiocese holds in a trust for the care of its cemeteries, while a key issue in that case is on appeal before the 7th Circuit U.S. Court of Appeals.

Also on appeal, before U.S. District Judge Lynn Adelman, is Kelley's decision that she cannot confirm the reorganization plan while the 7th Circuit case is pending.

In other action Friday:

¦ The archdiocese said it is nearing a settlement with at least one additional insurance company, the proceeds of which would go toward its reorganization plan. State court case law has found that insurers are not liable for the archdiocese's actions in the sex abuse cases because the underlying allegation — that they moved abusive priests from place to place without telling parishioners — involves fraud, an intentional, rather than accidental, act. But they could face tens of millions of dollars in liability if higher courts rule otherwise.

¦ Attorneys for the creditors committee appeared to suggest they might ask the court to require the archdiocese to mount a fundraising campaign to compensate sex abuse victims.

¦ Kelley said she will re-evaluate the wide protective order she issued early in the case that has left a vast number of documents under seal.

"Obviously, I don't want to do anything that potentially discloses the identities of survivors. That is paramount in my mind," Kelley said. "But these legal issues — these objections to claims — should not be a secret." Lawyers on both sides agreed.

The archdiocese filed for Chapter 11 bankruptcy protection in January 2011 to address its mounting sex abuse case, and 575 men and women filed claims alleging they were abused as children by priests or others affiliated with the church. The archdiocese has moved to throw out all of those claims, though 128 would be compensated under the reorganization plan.