Plaintiffs suing the Diocese of Spokane for sexual abuse filed a court action Friday asserting that Catholic parishes, schools, charities and other entities should be made available to settle the diocese’s bankruptcy debts.
The move has been anticipated and came amid a rapid-fire series of events this week.
The plaintiffs were awarded a separate creditors’ committee on Wednesday to represent the interests of alleged victims who have sued the diocese.
By Thursday the new committee had agreed to hire Los Angeles bankruptcy attorney James Stang to represent their interests in the Chapter 11 case. And by Friday afternoon, Stang had filed the court action seeking to fold the parishes and other properties into the financial estate of the diocese.
It is among the essential issues in this case.
“We just totally disagree with them and at the end of the day, we believe the position of the diocese will be vindicated,” said diocese attorney Shaun Cross.
The diocese is claiming that under Catholic Church law and under Washington state laws of incorporation, the diocese does not own the parishes.
The plaintiffs assert that the parishes are basically operating entities of the diocese, which acts as corporate parent.
The stakes couldn’t be bigger for the church.
If the parishes and other properties are folded into the diocesan estate, it may force the mortgage or sale of property – ranging from Our Lady of Lourdes Cathedral to All Saints School to the new St. Anne’s Children and Family Center – and the seizure of funds held in trust.
The diocese filed for bankruptcy Dec. 6, claiming it was unable to meet the settlement demands of plaintiffs and fearful that it would be drained of money before all victims were paid.
It is the third Catholic bankruptcy case in the country. The others are in Portland and Tucson, Ariz., where they are wrestling with similar issues.
Ford Elsaesser, an attorney working pro bono on behalf of the parishes, called the filing a press stunt and questioned why the plaintiffs wouldn’t work with all parties on a timetable to settle the question of whether parishes belong to the diocese.
Stang declined to comment on the filing, which is called an adversary proceeding within the bankruptcy case.
He said the new committee is meeting early next week to discuss who should respond to media inquiries.