A Tale of Two (or Three or Four) Bankruptcies

By Jennifer Haselberger
Canonical Consultation
January 16, 2015

http://canonicalconsultation.com/1/post/2015/01/a-tale-of-two-or-three-or-four-bankruptcies.html

In a move that surprised no one (except perhaps the priests, who were not notified in advance of news bulletins by the AP and others), this morning the Archdiocese of Saint Paul and Minneapolis became the 12th Catholic diocese in the United States to file for bankruptcy protection. Being the twelfth to file should mean that the Archdiocese has the benefit of the hard won experiences of other dioceses. However, not all Catholic bankruptcy filings are equal.

When the Diocese of Helena filed for bankruptcy in January of 2014 (becoming the 11th to file) the move was heralded by plaintiffs' attorneys as well as diocesan officials as being 'in the best interests' of the 362 victims that had filed sexual abuse cases against the diocese, the Ursuline Sisters, and the Jesuits. Described as a 'consensual, prepackaged bankruptcy' the reorganization plan filed by the diocese in November of 2014 included not only a $16.4 million settlement for victims of clergy sexual abuse, but also allowed a wrongful termination lawsuit to proceed. The petitioner in that case was a former Catholic school teacher who was fired for being unmarried and pregnant (the teacher was in a same-sex relationship). The reorganization plan was approved by a federal bankruptcy judge this week, less than a year after the diocese officially filed for bankruptcy protection.

As quick as that process was, the record for speedy exits still goes, I believe, to the Diocese of Tucson, which became the second Catholic diocese to seek bankruptcy protection when it filed in September of 2004 and the first to emerge when a bankruptcy judge approved its reorganization plan in July of 2005. That plan provided $22 million for settlements with more than 34 plaintiffs. The money for the settlements came from insurance payouts, the selling of church property (mainly land that was to have been used for new parishes for the growing diocese), and $2 million pledged by the parishes of the diocese, whose pastors promised to 'dig, scrimp and save' to make up their portion of the settlement (parish assets were not included in the reorganization plan).

On the other end of the spectrum is the Archdiocese of Milwaukee. It filed for bankruptcy protection in January of 2011, and that process is still ongoing today. The reorganization plan filed by the Archdiocese in February of 2014 included only $4 million to compensate 130 victims of sexual abuse by clergy. Victims quickly rejected the plan, and multiple attempts at mediation have failed. One of the main points of dispute remains the $55 million cemetery trust fund established by Cardinal Timothy Dolan, the former Archbishop of Milwaukee, in advance of the bankruptcy filing. Almost all commentators agree that the Milwaukee bankruptcy is unique for the hardball tactics used by the Catholic Church, and for the Archdiocese's attempts to limit the claims filed by alleged victims of abuse.

The Archdiocese of Saint Paul and Minneapolis has been preparing for its bankruptcy since at least the early spring of 2013, prior to the passage of the Minnesota Child Victims Act. That preparation predated the Helena filing, but not the successful resolution of reorganizations such as that of the Diocese of Tucson. Nonetheless, when planning for its own bankruptcy, the leadership of this Archdiocese chose not to consult with those successful dioceses, but instead flew in attorneys from Whyte, Hirschboeck, & Dudek, the firm representing the Archdiocese of Milwaukee. This meeting, which took place at the Archdiocesan Chancery in the spring of 2013, was meant to be kept 'top secret', but was accidentally broadcast over the Chancery's intercom system.

Although the Archdiocese of Saint Paul and Minneapolis is claiming that it intends to do 'the right thing' with its bankruptcy filing, I remain skeptical, especially given the ease with which attorneys from Milwaukee were brought in for consultation, and the absence of any kind of conversation about moral obligations prior to that decision. Tough times require strong leadership, and I think we are all in agreement that such is lacking in Saint Paul.

The Archbishop's letter to priests announcing the filing, which was sent out after the AP and other media outlets announced that the filing had occurred, is below.