Duluth diocese files for bankruptcy after $8M abuse award

The Catholic Diocese of Duluth filed for Chapter 11 bankruptcy Monday, a month after a victim of priest sex abuse there was awarded $8 million in damages. The diocese was found responsible for $4.8 million.

The northern Minnesota diocese is the 15th diocese in the nation to file for bankruptcy protection after clergy abuse litigation. It follows the Archdiocese of St. Paul and Minneapolis, which declared bankruptcy last January.

Given the "magnitude" of the jury's award, "the diocese was left with no choice but to file for reorganization," the Rev. James Bissonette, diocese vicar general, wrote in a public statement.

"There is sadness in having to proceed in this fashion," wrote Bissonette. "The decision to file today safeguards the limited assets of the diocese and will ensure that the resources of the diocese can be shared justly with all victims, while allowing the day-to-day operation of the work of the church to continue."

The diocese, on its website, notes that the $4.8 million award was greater than its annual operating budget of $3.2 million in the past fiscal year.

"If you put together the diocese's limited assets and its insurance coverage, it doesn't add up to anywhere near $4.8 million," said Susan Gaertner, an attorney representing the diocese.

But advocates for abuse victims argue that bankruptcy is a strategy to take the spotlight off abusive priests.

"The advantage [for the diocese] is it completely shifts the focus from who is endangering kids to how do we divvy up the dollars," said David Clohessy, national director of Survivors Network of those Abused by Priests.

"There's no depositions [as there would be in lawsuits]. No discovery. No trials," he said. "So the church can say, " 'We didn't know.' "

In its filing in U.S. Bankruptcy Court, the diocese reported fewer than 50 creditors and estimated the value of its assets and liabilities as "$1 million to $10 million."

The diocese is facing six lawsuits, including the one resulting in the multimillion dollar award, as well as 12 additional notices of claim, Gaertner said. The diocese may ask the bankruptcy court for permission to appeal the $8 million verdict in a state court, she said.

The Duluth diocese has more than 56,000 members in 92 parishes across 10 counties in the northeastern corner of Minnesota. Its website names 32 priests credibly accused of child sex abuse who have worked in the diocese.

All six dioceses in Minnesota have faced an unprecedented wave of child sex abuse claims stemming from the Minnesota Child Victims Act, which allowed older civil cases to go to court.

Duluth joins 14 other dioceses and archdioceses that have filed for Chapter 11 in roughly the past decade, all in response to a surge in clergy abuse claims, typically from a change in law. In the past five years, bankruptcies were filed in Milwaukee; Gallup, N.M.; Stockton, Calif., and Helena, Mont.

Patrick Wall, a former priest and researcher for Jeff Anderson & Associates, the St. Paul law firm representing the majority of abuse victims in Minnesota, said the Duluth bankruptcy is probably most similar to the one filed in Fairbanks, Alaska, in 2008.

"They're both great big rural dioceses, with a lot of clergy brought in from the outside," said Wall.

Neither is flush with cash, he said. Nonetheless, Fairbanks managed to pay more than $10 million to abuse victims through the bankruptcy process "and continue their business without having to close one church, school, homeless shelter or soup kitchen," he said.

Bishop Paul Sirba presides over the diocese of Duluth. He is a former auxiliary bishop in the Twin Cities archdiocese.

The lawsuit that sparked the bankruptcy involved a man who said he was abused when he was 13 by the Rev. James Vincent Fitzpatrick in the 1970s. Now 52, the man told a Ramsey County jury in November that Fitzpatrick had brought him to a home in Squaw Lake under the pretext of having him help out at the parish. Instead he was sexually molested.

The jury found the diocese negligent in supervising that priest.

If bankruptcies in other dioceses are an indication, more victims are likely to step forward as the Duluth bankruptcy moves ahead. However, the Minnesota Child Victims Act set a deadline of May 2016 for the filing of older abuse cases.

The case has been assigned to Judge Robert Kressel, who also oversees the archdiocese case.

Jean Hopfensperger • 612-673-4511