Victims’ attorneys appeal judge’s decision not to consolidate parish, archdiocesan assets

| August 11, 2016 | 1 Comment
The U.S. Courthouse in Minneapolis. iStock

The U.S. Courthouse in Minneapolis. iStock

A committee representing sexual abuse claimants filed Aug. 10 to appeal a bankruptcy court judge’s ruling that declined to consolidate the assets of the Archdiocese of St. Paul and Minneapolis with those of parishes and other Catholic entities in the archdiocese’s bankruptcy process.

Minneapolis attorney Robert Kugler appealed the ruling to the Federal District Court. Kugler represents the unsecured creditors committee, which includes people with clergy sexual abuse claims.

St. Paul attorneys Jeff Anderson and Associates also filed an appeal Aug. 10. The firm represents more than 350 clergy sexual abuse claimants.

The unsecured creditors committee filed a motion in May asking U.S. Bankruptcy Court Judge Robert Kressel to consolidate the assets of more than 200 parishes and local Catholic organizations such as the Catholic Community Foundation, Catholic Cemeteries and some Catholic schools, with those of the archdiocese. As The Catholic Spirit previously reported, the motion argued that the organizational relationships between the archdiocese and the institutions give the archdiocese or archbishop control over their governance and finances, thereby linking their assets.

Attorneys for the archdiocese, parishes and other Catholic entities argued that the archdiocese and other institutions were separate entities under civil law.

On July 28, Kressel dismissed the unsecured creditors committee’s motion, writing that the committee “failed to allege sufficient facts to support substantive consolidation.”

The archdiocese filed for Reorganization under Chapter 11 of the U.S. Bankruptcy Code in January 2015 in response to mounting claims of clergy sexual abuse. In May, it filed a plan for Reorganization, which listed an initial $65 million to be used primarily for sexual abuse claimant compensation.

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  • Charles C.

    Judge Kressel’s opinion is stronger and more clear than the article might lead one to believe. The case number is 15-30125, if you’d care to look up the opinion itself. The American Bankruptcy Institute has an article on his ruling. They say:

    “Judge Kressel found the motion defective because broad equitable powers cannot be used to ‘contravene specific statutory provisions,’ citing the Supreme Court’s 2014 decision in Law v. Siegel.

    “The substantive consolidation motion ‘squarely implicates’ Section 303(a), Judge
    Kressel said, because that section prohibits involuntary petitions against churches, schools and eleemosynary institutions. To force substantive consolidation on non-bankrupt parishes and schools would ‘circumvent and contravene Section 303(a),’ he held.

    “Even if the statute permitted, Judge Kressel said that the factual allegations in the motion fell short.

    “It was not enough to allege that the archbishop ‘exercises control’ by presiding over an institution that is ‘hierarchical in its organization and authoritarian in doctrinal matters.’ The motion, he said, did not allege that the finances were so ‘confusingly intertwined’ that the court could ignore the separate corporate existence of the parishes and schools. The exercise of authority, by itself, fails to ‘constitute an abuse of the corporate form.’ ”

    Another federal bankruptcy judge, in discussing the matter privately, told me that Judge Kressel was quite correct in his ruling, and that the appeal was very unlikely to succeed.

    Remember, Judge Kressel made two general points. One was that there is a law which forbids forcing non-profit churches, schools, and charitable hospitals into bankruptcy against their will, so he has no authority to forcefully consolidate them into a bankruptcy proceeding. And the second is that not only weren’t there enough facts shown to justify ordering the parishes, schools, and churches into a bankruptcy hearing, it would be unjust to do so.

    My opinion? The appeal is being brought to gain increased payments to the lawyers, and to try to appease a raging hatred and desire for vengeance which is set upon destroying anything with the word “Catholic” attached.