Diocesan Bankruptcy Battles Color Pope Francis’s First U.S. Visit

By Tom Corrigan
Wall Street Journal
September 22, 2015

http://blogs.wsj.com/bankruptcy/2015/09/22/diocesan-bankruptcy-battles-color-pope-franciss-first-u-s-visit/

Pope Francis delivers a sermon during a mass at the shrine of the Virgen de la Caridad del Cobre in Santiago, Cuba, Sept. 22. As Catholic officials highlight the pope’s inaugural U.S. visit, the Catholic church in the U.S. is seeking a different kind of renewal—in the courtroom. Orlando Barria/European Pressphoto Agency

As Catholic officials highlight Pope Francis’s inaugural U.S. visit as a time of spiritual renewal, the church here is seeking a different kind of renewal—in the courtroom.

Four dioceses are in active bankruptcy proceedings attempting to settle claims of sexual abuse by their clergy: Milwaukee, Wis.; Gallup, N.M.; Stockton, Calif.; and Minnesota’s Twin Cities.

Filing for bankruptcy temporarily freezes all litigation, giving a diocese breathing room to continue serving its flock while it negotiates a plan to compensate, and potentially reconcile with, abuse victims. (Pope Francis is expected to meet with victims during his visit, though it isn’t on his official itinerary.)

But chapter 11 doesn’t come cheaply. These cases, often filed on the eve of trial, can spark lengthy and hard-fought legal battles that not only take an emotional toll but also devour cash, cutting into funds available for both victims and churches’ charitable pursuits.

“The sin of sexual abuse affects more than just victims and their families,” said the Rev. James Martin, a Jesuit priest and editor at large at the Catholic magazine America. “Think of all the things that a diocese that has spent millions of dollars on settlements and lawyers could have done in terms of keeping parishes open and schools and scholarships.”

The sexual-abuse scandal in the U.S. has cost the church nearly $3 billion between 2004 and 2014, according to the U.S. Conference of Catholic Bishops. While many big settlements have been reached outside of bankruptcy court, 12 dioceses have so far turned to chapter 11 to broker deals, and more could follow.

The Archdiocese of Milwaukee, for instance, hopes to exit chapter 11 by the end of the year—a goal made possible after more than 4 1/2 years of courtroom wrangling over victim compensation. The archdiocese recently agreed to pay $21 million to several hundred abuse victims in a settlement that’s drawn criticism. Legal fees in the case have already exceeded $18 million, and future legal fees have been capped at $1.25 million.

The Archdiocese of Portland, Ore.’s bankruptcy produced a $75 million settlement for about 170 victims but also accrued legal fees of about $19 million over a case that lasted nearly three years. Lawyers in the Wilmington, Del., diocese’s chapter 11 case earned $16 million payday for work that eventually produced a $77.5 million settlement.

Victims’ advocates complain that the cases deprive them of their day in court and force them to relive their abuse. They also say the settlements reached are less than what they would seek in court.

While recognizing the drawbacks of bankruptcy, church officials say the cases are a necessary step toward reconciling with victims as well as a way to continue fulfilling the church’s obligations to be a place of worship and to help those in need.

“Managing civil court litigation and claims has been difficult and costly,” the Rev. Charles Lachowitzer, the vicar general of the Archdiocese of St. Paul and Minneapolis, said in court papers soon after the archdiocese filed for bankruptcy in January. “This chapter 11 case will allow the archdiocese to move forward on stable financial ground so that it may focus on its Gospel mission and serve the hundreds of thousands of people who depend on the church.”