Fate of bankruptcy plans in judge’s hands

| September 5, 2017 | 0 Comments

The judge overseeing the Archdiocese of St. Paul and Minneapolis’ bankruptcy is now considering what he will do with the two competing plans of reorganization before the court.

Counsel for multiple parties with interests in the matter, including representatives of the archdiocese, parishes, insurers and clergy sexual abuse claimants, presented objections to the plans before Judge Robert Kressel in U.S. Bankruptcy Court in Minneapolis Aug. 29. The objections were previously outlined to the court in written briefs during July and August.

The archdiocese’s plan would provide $156 million to claimants after court approval and would protect parishes and several Catholic high schools from further lawsuits from past claims of sexual abuse. Proceeds from the sale of archdiocesan properties on Cathedral Hill in St. Paul, insurance settlements and parish contributions fund the archdiocesan proposed plan.

The competing plan was submitted by the Unsecured Creditors Committee, which represents creditors, including sexual abuse claimants, in the bankruptcy proceedings. The UCC plan rejects most of the insurers’ settlements in the archdiocesan plan, calls for an $80 million contribution from the archdiocese secured by the Cathedral of St. Paul and several Catholic high schools — and retains the ability of creditors to sue parishes, schools and other Catholic entities. That plan would require years of further litigation during which victims would not receive compensation.

This spring, creditors, including abuse claimants, took a nonbinding vote on the plans to indicate their preference to the court. The majority of abuse claimants voted for the UCC plan. The decision of which plan to implement ultimately rests with the judge.

During the more than two-hour-long hearing, Judge Kressel asked attorneys representing the UCC whether they had considered the fact that their plan prolongs the bankruptcy. He pointed out that at least two abuse claimants have died since the archdiocese filed for Chapter 11 in January 2015.

“[If there is additional delay,]More people are going to die, and without meaningful compensation,” he said.

The Archdiocese has argued that its $156 million plan represents the best way to provide meaningful compensation to the victims in the shortest time possible, all available assets of the Archdiocese have been liquidated and the proceeds will be contributed to the plan.  Counsel for the Archdiocese have reached settlements with all of the Archdiocese’s insurance companies — those who provide current coverage and those who provided coverage as far back as the 1950s.

Attorney Richard Anderson, who represents the archdiocese in the bankruptcy, said that the archdiocese’s plan provides fair compensation for victims/survivors, while allowing the archdiocese, parishes and schools to reorganize and continue their ministries. In June, Anderson called the UCC plan speculative and “based on an illusionary source of financing.”

Judge Kressel said he was taking the arguments presented under advisement. He is expected to rule in the coming weeks.

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