June 25, 2005 in City

Parishes seek deal to stop litigation

Virginia De Leon Staff writer
 

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Upcoming ruling on diocese’s financial holdings may be most significant in bankruptcy case/A7

As the cost of bankruptcy continues to skyrocket, parishioners and priests from the Roman Catholic Diocese of Spokane are asking for a quicker resolution: an out-of-court settlement that would likely entail voluntary contributions from people in the pews.

Continued litigation – at the rate of more than $325,000 a month – will only drain the diocese of its limited funds, said Robert P. Hailey, co-chairman of the Association of Parishes, an organization representing the roughly 90,000 parishioners and priests of all 81 parishes in the Spokane Diocese.

“In my opinion, the best solution would be some sort of reasonable settlement or plan worked out between the diocese and creditors (abuse victims), with involvement from the AOP,” he said. “The litigation isn’t going anywhere. That’s become obvious to everyone.”

Lay members and priests have expressed their feelings to Bishop William Skylstad and his advisers, who have been receptive to their concerns, Hailey said. In response to a motion filed on behalf of the diocese, U.S. Bankruptcy Court Judge Patricia Williams appointed Gregg Zive, a U.S. bankruptcy judge from Reno, Nev., to serve as a mediator among all the parties, including the insurance agencies. A mediation session hasn’t been scheduled.

Recent discussions about the possibility of mediation, however, won’t halt the legal showdown Monday between attorneys for the diocese and those representing the alleged victims of clergy sexual abuse. During the hearing, creditors will ask the judge to rule that parish assets – church and school buildings, equipment and cash – belong to the diocese and should be available in the bankruptcy case to pay claims.

The diocese, on the other hand, has argued that parishes are separate, distinct entities. It says parish assets are held in trust by the bishop, not owned, and therefore can’t be used to pay abuse victims.

Without the parish assets, the diocese is worth an estimated $11 million, although diocese officials have acknowledged that the numbers included outdated assessments and appraisals. If parish property is included, the value of the diocese could swell to $80 million.

Many parishioners sympathize with the victims of sexual abuse, Hailey said, but they, too, feel victimized by the bankruptcy process.

“Hundreds of thousands of dollars that should go toward the work of the church is being wasted on attorneys fees,” said Hailey, a member of St. Mary’s Presentation in Deer Park.

Regardless of the different opinions on who owns what in the bankruptcy case, Hailey and others in the Association of Parishes fear that Monday’s hearing won’t end the costly legal wrangling.

“In trying to do their best for the clients, in trying to win their case, attorneys might overlook the fact that there are other ways of resolving disputes,” said Hailey, who is also an attorney in Spokane. A settlement “would not involve a win for either side, but a compromise.”

That’s what’s happening now in the Diocese of Tucson, which filed for bankruptcy protection in September, a few months before the Spokane Diocese did the same. The various parties involved in Tucson have avoided the turmoil in Spokane by heading straight for the bargaining table.

Creditors in Tucson’s Chapter 11 bankruptcy case are being asked to approve a reorganization plan that involves at least $20 million for the settlement trust, said Fred Allison, director of community relations for the Diocese of Tucson. That total will increase by about $3 million after the sale of diocesan property and perhaps more depending on one of the insurance companies involved, Allison said.

The 76 parishes in Tucson also have kicked in $2 million for the settlement trust, said Michael McGrath, an attorney representing the Committee of Parishes and Parishioners. Most of the churches in the Tucson Diocese don’t have extra money, he said, but some will conduct fund-raisers. The few parishes that have the cash will lend money to poor churches so that everyone can be part of the resolution, he said. In 2002, the Tucson parishes also lent the diocese $5 million to finance a litigation settlement.

All the parties involved, including the victims, didn’t want to waste money on litigation, McGrath said. “In solvency situations, taking what limited resources there are and using those to pay lawyers to fight is a good way to exhaust those resources,” he said.

McGrath doesn’t believe his clients – the parishes – are liable for the abuse, but “rather than having a big passion play on stage, we focused on compensating people who have been hurt and keeping the parishes and the diocese as separate entities that can fund the recovery.”

While some believe the best-case scenario for the Spokane parishes would be for Judge Williams to rule they are separate from the diocese, this could create problems for individual churches, particularly those who have had an abusive priest working in their parish. Tim Kosnoff, a Seattle attorney representing many of the abuse victims, said that if a judge were to support the diocese’s argument, “we’d turn around and name the parishes (in a lawsuit). … Some of the parishes would be subject to claims.”

In Tucson, victims of clergy abuse not only sued the diocese, but also 10 individual churches where the alleged molestations occurred. But now, because the parishes are pitching in their own money for the settlement trust, the proposed reorganization plan would prevent future claimants from directly suing the churches, McGrath said. Those victims would be directed toward a pool of money reserved specifically for those who come forward with allegations of abuse after the bankruptcy proceedings.

It’s possible that a similar settlement plan could be obtained in Spokane through insurance, through a sale of property that would not interfere with the mission of the Catholic Church and through a loan, which would have to be repaid by voluntary contributions, Hailey said. That plan would also need approval from the people who would donate the money.

Hailey said he believes parishioners would be willing to contribute to a settlement, but the amount would have to be “reasonable and fair” to all parties involved. The challenge, he said, is that the thousands of parishioners in this diocese would have different opinions on defining fair and within their means. So, too, would the more than 60 victims of clergy sexual abuse. But if settlement talks were possible, the Association of Parishes would discuss the issue and ask pastors and lay members how much parish members can to give, Hailey said.

“No one anticipated that the cost of bankruptcy would create a worse problem than the one it intended to solve,” he said. At this point, any resolution “will require compromises on all sides.”


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