Archdiocese bankruptcy plans face off in court

Before an overflow crowd of clergy abuse survivors, a federal bankruptcy judge heard arguments Tuesday for two competing compensation plans to settle abuse claims against the Archdiocese of St. Paul and Minneapolis.

U.S. Judge Robert Kressel heard from more than 20 attorneys about the plans, which aim to put an end to more than two years of legal wrangling.

The plan by the committee representing abuse survivors, calling for tougher settlements with insurance companies and far greater contributions from the archdiocese, faced objections from the archdiocese, parishes and insurance companies for being too far reaching and essentially "liquidating" the archdiocese.

The archdiocese's plan, which includes $156 million for the more than 400 people who have filed claims of clergy sex abuse, drew opposition from victims' attorneys who say it is inadequate and lets insurers and parishes off the hook.

Kressel did not rule on either plan, but he expressed concern about the length of time that would transpire before the survivors would receive compensation. At least two survivors with claims already have passed away, he said.

"Looks to me like we're talking years ... before they are getting compensated," said Kressel, in response to the plan put forth by the victims' committee. But victims' attorneys argued that their plan could actually speed up the process.

The archdiocese filed for bankruptcy in January 2015, citing the number of clergy abuse claims made possible through the Minnesota Child Victims Act, which opened a window for older abuse cases to be heard in civil court. That window closed in 2016.

The Twin Cities case is unusual among the 15 bankrupt dioceses and archdioceses in the country, as the judge has allowed two competing compensation plans to be heard in court, said victims' attorney Jeff Anderson.

The archdiocese plan calls for tapping about $120 million in insurance settlements, plus $30-some million from the archdiocese and from some parishes, to create a fund for sex abuse victims who filed claims in bankruptcy court. It includes a court order to prevent them from filing future lawsuits against the parishes and insurers involved.

The competing plan filed by the survivors' committee calls for the archdiocese to increase its own contributions to the victims' fund from the current $15 million to at least $80 million.

Attorney Robert Kugler, representing the survivors' committee, asked the court to honor the wishes of the hundreds of abuse survivors who filed claims in the case. Earlier this year, 94 percent voted against the archdiocese's plan.

"The archdiocese plan was created without the input of a single survivor," Kugler said.

Parishes have long held they have limited, if any, responsibility for clergy abuse because priests were assigned by the archdiocese, without warnings of their past. They objected to a provision in the survivors' committee plan to tap excess funds available in the archdiocese's general insurance fund and medical benefit fund.

The premiums were paid by the employees of parishes and other Catholic entities and should be retained, they said.

"Parishes rights are being taken away with no right to even vote on the plan," said Mary Jo Jensen-Carter, attorney for a group of more than 100 parishes.

Richard Anderson, an attorney representing the archdiocese, argued that the survivors' plan would leave the archdiocese without money to operate. That plan calls for the archdiocese to turn over assets, including property holdings and parish contributions, for the survivor's compensation fund.

"The plan is a de facto liquidation of the archdiocese," Richard Anderson said.

Archdiocese attorneys also defended the insurance settlements reached, saying they were the result of more than a year of negotiations.

Jim Keenan, chairman of the creditors' committee, was among several dozen clergy abuse survivors in court Tuesday. Sexually abused by a priest known to have abused children for years, Keenan said it was critical to stay focused on why this bankruptcy hearing was happening — namely because the archdiocese failed to protect children from abusive priests.

"We're not here because the archdiocese didn't pay its bills," Keenan said.

Dennis Galatowitsch spoke on behalf of his mother, Nancy, an abuse survivor who died last year. He argued that her settlement should be transferred to her estate, a provision not in the archdiocese plan.

Kressel showed considerable interest in the issue. He asked archdiocese attorney Anderson if he had read the Galatowitsch objection. Anderson said no.

"Your homework for you and every member of your team is to read that," Kressel said. "It's very powerful."

Kressel is expected to rule on the plans in the weeks ahead.

Jean Hopfensperger • 612-673-4511