Duluth Diocese to Enter Mediation with Abuse Victims

By Tom Corrigan
Wall Street Journal
December 11, 2015

http://blogs.wsj.com/bankruptcy/2015/12/11/duluth-diocese-to-enter-mediation-with-abuse-victims/

This photo shows the Cathedral of Our Lady of the Rosary in Duluth, Minn.. The Diocese of Duluth, a sprawling but sparsely populated Roman Catholic diocese in northeastern Minnesota, filed for bankruptcy Monday. Dan Kraker/Minnesota Public Radio via Associated Press

The Diocese of Duluth, Minn., is expected to enter mediation with clergy sexual abuse victims, following in the footsteps of other bankrupt dioceses that have sought to resolve growing legal and financial turmoil tied to the abuse crisis.

Ford Elsaesser, a lawyer for the diocese, said Friday that the diocese will “very likely” seek the appointment of a mediator. Mediation is likely the best opportunity to resolve the diocese’s bankruptcy case, which was filed Monday, through a settlement that compensates victims and also protects the church from future litigation.

“We’re hoping that this will follow the Helena model as opposed to some of the other case,” Mr. Elsaesser said.

The Diocese of Helena, Mont., which filed for bankruptcy in January 2014, spent less than five hours in court, resolving much of its case in mediation. Other diocesan bankruptcies have stretched out over years, racking up huge legal bills.

Judge Robert Kressel, who is also overseeing the Archdiocese of St. Paul and Minneapolis’s bankruptcy, said he had already begun to consider who might serve as a mediator for the Duluth diocese, likely another bankruptcy judge.

During a hearing Thursday, the judge urged all sides—the diocese, abuse victims and insurance carriers—to reach a settlement as quickly as possible. The diocese is facing 18 abuse claims, a number that is expected to grow as more victims come forward to seek compensation.

The Diocese of Duluth filed for bankruptcy soon after a jury found it responsible for about $5 million in a lawsuit involving a priest serving in the diocese. The Oblates of Mary Immaculate, a religious order with whom the priest was affiliated, was found to be responsible for the remaining amount of about $3 million.

Last year, the diocese’s operating budget was about $3.3 million. Without the breathing room and time to reach a settlement provided by chapter 11 protection, the judgment would have exhausted the diocese’s resources, leaving nothing behind for other victims, said Susan Gaertner, a lawyer for the diocese.

In a statement, the diocese said filing for bankruptcy would allow it to equitably compensate all abuse victims while preserving the diocese’s pastoral and charitable mission.

The Diocese of Duluth is the 15th Catholic diocese or religious order to file for bankruptcy to address claims of past sexual abuse. The Archdiocese of St. Paul and Minneapolis filed for chapter 11 bankruptcy protection in January and has since been in mediation with representatives for about 400 clergy sexual abuse victims, its parishes and its insurance carriers.

That bankruptcy, like the Diocese of Duluth’s, can be traced to the Minnesota Child Victims Act, which expanded the statute of limitations for sexual-abuse cases in the state, leading to waves of litigation.

Write to Tom Corrigan at tom.corrigan@wsj.com