Judge denies bankruptcy plans for Twin Cities Archdiocese settlement, sends back to mediation

A federal bankruptcy judge has rejected the two compensation plans aimed at settling the long-standing clergy abuse claims against the Archdiocese of St. Paul and Minneapolis and ordered all parties in the case to return to negotiations.

In a ruling Thursday, Judge Robert Kressel ordered the archdiocese, insurance companies, parishes, a creditors' committee and sexual abuse survivors back to mediation.

Kressel said the compensation plan presented by survivors of the abuse would require too much time and money to carry out, while the archdiocese plan didn't provide enough financial accountability from the parishes involved.

"Therefore," Kressel wrote in his order, "I expect all the parties to return to mediation. And I expect them to mediate in good faith."

The Twin Cities case is unusual among the 15 bankrupt dioceses and archdioceses in the country, as Kressel allowed the two competing plans to be heard in court, said Jeff Anderson, an attorney for the sexual abuse victims.

In August, the judge heard from more than 20 attorneys about the plans, which aimed to put an end to more than two years of legal wrangling over compensation to more than 400 victims.

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

The archdiocese's plan, which included $156 million for those survivors who filed claims, drew opposition from victims' attorneys who have said that it was inadequate and let insurers and parishes off the hook. More than 90 percent of the survivors voted against the plan, Anderson said.

"The public record certainly demonstrates that for decades the response of officials from the archdiocese to the sexual abuse of children was disgraceful," Kressel wrote. "That same record indicates the debtor [the archdiocese] is taking steps to do better and to remedy some of those wrongs."

Anderson said Kressel's ruling could lead to a speedier settlement, adding that he was pleased that every parish insurance company that refused to engage in good faith in previous negotiations was ordered to go to mediation. Settlements made by the archdiocese with insurance companies without including the survivors don't count, he said.

"The ruling rejects a plan the archdiocese created to cram down their desires on the survivors," he said. "The judge's order acknowledges the power of the survivors' voice. For the first time, at least by this court, that voice was heard."

Richard Anderson, an attorney representing the archdiocese, and Mary Jo Jensen-Carter, attorney for a group of more than 100 parishes, didn't return requests for comment Thursday.

But Tom Abood, chairman of the Reorganization Task Force of the Archdiocese of St. Paul and Minneapolis, said Kressel's decision "bolsters our resolve to move forward in the bankruptcy process.

"We are guided by his words from earlier this year, that the longer this process continues, the less money will be available for those who have been harmed," he said. "We note and are gratified that Judge Kressel has once again directly dismissed the assertions by creditors' counsel that the Archdiocese has acted or is acting in bad faith regarding the reorganization. We look to engage with all participants in mediation as directed by the judge to bring a prompt and fair resolution."

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

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

Kressel noted in his order the toll the case has taken in time and expense.

He wrote that eight people who filed proofs of claim against the archdiocese have died since 2015. He also took issue that attorneys' fees for the victims' individual lawyers could run from $30 million to $40 million.

Jim Keenan, chairman of the creditors' committee representing the survivors, called the ruling "surreal and overwhelming.

"I've been battling this for 12 years, and this ruling is absolutely phenomenal for us," he said at a news conference at Anderson's St. Paul law office. "Think about what we are fighting. We are fighting against a religious organization about safety for our children. As a society, should we have to do this?"

Joining Keenan at the news conference were survivors Ann Fern and Jamie Heutmaker, who said Kressel's ruling was a late Christmas present.

"It gives new hope for us as survivors," he said. "My biggest concern was that the parishes and archdiocese weren't going to be held accountable."

Keenan, who was abused by a priest in the early 1980s when he was 13, said the archdiocese victimized the victims again over the past two years during the bankruptcy fight.

"We need a fair and just settlement and to make sure this never happens again," he said.

Keenan said that he hasn't been able to enjoy the Christmas scene and spirit since he was victimized, adding that he recently went by a midnight mass and "wanted to vomit …"

"You can't understand unless it happens to you," he said. "Today we were told we exist. Our voice made a difference."

David Chanen • 612-673-4465