Bishop appeals ruling over assets of parishes

A federal judge ignored evidence and centuries of religious law when she ruled that Catholic churches and schools could be sold to pay sexual abuse claims against the Catholic Diocese of Spokane, asserted an appeal filed Tuesday by Bishop William Skylstad.

Through his attorneys, Skylstad pointed to 11 areas where he contends U.S. Bankruptcy Judge Patricia Williams erred in her analysis of the important legal question of whether parish assets belong to the diocese.

Parishes named in the lawsuit also urged an immediate review by U.S. District Court in Spokane, arguing that the case is among the first of its kind and therefore ripe for appeal. Parishes, the diocese and alleged victims have all acknowledged that the case presents so many “firsts” that appeals will play an important role.

Even the judge said in open court last June that, “all I’m doing is writing the first position paper for appeal.”

The appeal follows sharp criticism from many that the diocese made a mistake by filing for Chapter 11 bankruptcy protection because it’s expensive and untried as a means of avoiding big settlements in alleged sex-abuse cases.

But Spokane attorney Shaun Cross, who represents the diocese, said the issue of parish ownership was bound to surface in one of the 19 lawsuits that were set to be tried in state court beginning last year. A judgment likely would have attached parish ownership to the diocese, forcing appeals on the state level and eventual bankruptcy anyway, he said.

Federal bankruptcy court, where property ownership issues are commonly argued and resolved, was the appropriate venue, Cross said.

Bankruptcy also offers a process to handle all current and future claims against the diocese, an important aspect to insurers seeking finality in a case that otherwise threatens to last for many years.

Alleged victims and their attorneys called the appeal attempted intimidation.

“The diocese has threatened to delay justice and healing for years, taking full advantage of the appellate process,” attorney James Stang said in a written statement.

Resolving the abuse cases would be better for all parties, including the 97,000 Catholics of Eastern Washington, he said.

“Skylstad’s ‘take no prisoners’ strategy is misguided and, ultimately, will fail,” Stang said.

The diocese predicts it can come up with approximately $25 million, including $10 million in assets that include the Chancery, and another $15 million worth of insurance policies.

Now that Judge Williams found that parish assets belong to the diocese, an appraiser may be hired to affix value to parish assets, ranging from the Our Lady of Lourdes Cathedral to parochial schools.

As the appeal unfolds, the Diocese has until Oct. 10 to file its reorganization plan and disclosure statement. A draft of the plan is being circulated, but will lack critical details until the appeals process is exhausted.

Bankruptcy plans include liquidation analyses in which creditors are given a prediction of what their claims may be worth. In corporate bankruptcies, for example, investors are given a range of the recovery they might expect.

In the diocese bankruptcy, the liquidation analysis is a “big question mark,” Cross said.

If alleged victims and the diocese don’t settle, the plan will most likely call for claims to be settled in state courts.

“The plan will provide that those individuals that want their day in court will be given their opportunity,” Cross said. If an alleged victim wins a judgment in state court, that judgment amount then becomes a claim in the bankruptcy case.

Michael Ross, who has a sexual abuse claim filed against the Diocese, said alleged victims have wanted to settle their cases from the start rather than fight it out in court.

“Now (the diocese) wants to blame us for trying to shut down their schools. It isn’t fair for them to say that,” he said. “It was never our intention. We want fairness … what’s right.”

In Arizona, the Catholic Diocese of Tucson, which also filed for bankruptcy, announced that its parishes will independently incorporate. The move would attempt to protect those parishes from the sort of ruling that now has Eastern Washington Catholic churches and schools worried about the future.