Archdiocese abuse victims to vote on bankruptcy plans

About 450 clergy abuse victims, plus several hundred other creditors of the Archdiocese of St. Paul and Minneapolis, soon will be able to vote on competing compensation plans presented in bankruptcy court.

U.S. Bankruptcy Court Judge Robert Kressel approved a timeline Thursday for sending out the ballots — within about 30 days — and a 40-day response time. Creditors can vote for one of two competing plans or none at all.

Kressel also denied a motion that would have allowed the survivors' committee to sue more than 100 parishes, schools and other Catholic institutions that received several million dollars in transfer payments from the archdiocese in the 90 days before it filed for bankruptcy.

The voting schedule represents a key moment for survivors in the archdiocese's bankruptcy case, which enters its third year this month. The courtroom was packed with attorneys and several abuse survivors with claims before the court who have been watching the long bankruptcy process unfold.

"This is something tangible," said survivor David Lind, of St. Paul, standing outside the courtroom. "But I just want it to be done. It's such a hard issue."

The abuse survivors, as well as other creditors, including 180-some parishes and businesses vendors such as office supply firms and grocery stores, will vote on two competing plans.

The archdiocese's plan includes a fund of at least $155 million — about $120 million from insurance payments — for the clergy sex abuse victims who filed claims in bankruptcy court. It also includes a court order to prevent them from filing future lawsuits against the parishes and insurers involved.

A 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.

Committee attorneys also want to see insurance companies contributing more to the fund.

Having two competing plans sent out for a vote is highly unusual, said Mike Finnegan, an attorney representing the survivors. "In every other [similar] case, there's been a consensual plan," he said.

The competing plans are evidence of how contentious the bankruptcy proceedings have become, said Christopher Soper, a University of Minnesota law professor. Church-related bankruptcies typically involve legal battles, but the parties somehow manage to reach a consensus on a compensation plan, he said.

In February, a ballot containing four options will be sent to creditors, said Richard Anderson, bankruptcy attorney for the archdiocese. Creditors can vote a yes or no to either plan, or can reject both or accept both.

If they reject both, they'll be asked if they have a preference for one or the other.

Votes should be tallied this spring. They will inform but not determine the final compensation plan, said archdiocese attorney Charles Rogers. Even if one plan receives a majority vote, or none does, the judge has discretion on how to proceed, said Soper.

The parties will continue negotiating until an agreement is reached.

"Our goal is to have it decided by June," Rogers said.

Finnegan, however, declined to lay out a time frame. "Our goal is to get a fair resolution for survivors as quickly as possible," he said.

An abuse survivor in the courtroom called the impending vote "a positive step." But she was not in a hurry for a plan to be approved. She said she just wanted it to be "a just resolution."

"Yes, it's been two years [in bankruptcy court]," said the woman, who didn't want her name revealed. "But it's been 34 years for us dealing with this. It's important it's done right."

The archdiocese declared bankruptcy in January 2015, following an avalanche of clergy child sex abuse lawsuits. Early on, attorneys predicted a relatively smooth process. But two years later, the two sides still can't agree on the archdiocese's assets available for creditors and the extent of the contributions from parishes and insurers.

One issue is that diocesan bankruptcies — unlike most commercial bankruptcies — are typically about something more than money, said Jonathan Lipson, a law professor at Temple University in Philadelphia. They are very emotional issues. The dioceses worry about significantly impairing their religious mission if they give up too much, he said. And clergy abuse victims want a settlement that is just and fair for them. All of that is difficult to monetize, he said.

Rogers attributed part of the two-year process to the "multitude of parties and complexities of claims." Finnegan, meanwhile, also put blame on the "unreasonable positions" of the archdiocese insurance companies that underwrote abuse coverage.

"I think the process, while to an outsider it may seem slow and prolonged, is similar to the pace of the proceedings we've seen in other diocese reorganization," he said. " ... Now it's time to turn our attention to the plans ... and to try to reach a consensual resolution."

Jean Hopfensperger • 612-673-4511