Judge to rule on allowing sex-abuse trials in San Diego diocese

U.S. BankruptcyJudge Louise DeCarl Adler issued a preliminary ruling late Wednesdaynight tentatively granting the plaintiffs' request for state courttrials, but said she needed to weigh additional issues brought up inoral arguments before making a final decision.

San DiegoSuperior Court trials already scheduled for five cases wereautomatically suspended when the diocese abruptly filed for bankruptcyin February, the night before the first trial was slated to begin.

Lawyersrepresenting about 150 people who claim they were sexually abused bypriests as children told Adler that re-activating those trials was theonly way to force the diocese into a settlement after more than threeyears of fruitless negotiations in state and federal courts.

"Atrial is something that drives settlement, maybe because we're afraidwe'll lose, maybe because there are things they don't want to have comeout on the stand," said James Stang, a bankruptcy lawyer representingthe plaintiffs. "It worked in L.A., it worked in Orange, and it willwork here."

The Los Angeles Archdiocese settled 508 cases for$660 million in July, two days before jury selection was scheduled tobegin in the first of 15 trials involving 172 abuse claimants. TheDiocese of Orange agreed to settle 90 claims for $100 million in 2004 after a judgepromised to set trial dates and begin the discovery process ifsettlement talks collapsed. Bishop Tod D. Brown later said he couldn'trisk a trial in a state where a jury once awarded $30 million to twopeople who claimed they were sexually abused by clergy.

The SanDiego diocese has offered about $94 million to settle the claims aspart of its bankruptcy reorganization plan. Plaintiffs' attorneys areseeking a settlement of about $200 million, which they say would putSan Diego in line with settlements reached elsewhere in California.

Inher tentative ruling, Adler said jury trials were an efficient way ofvaluing claims against the diocese and accused the church of shoppingits case to different courts to seek the best advantage. A districtcourt judge decided earlier this week to hold off on a church requestto assign a federal judge to estimate fair settlements for the abuseclaims.

Attorneys representing the diocese told Adler they werelooking for the fastest and most efficient way to reach a fair deal forboth sides.

"This case is about plaintiffs who want lots ofmoney," said John Harris, a diocese attorney. "But $94 million is notzero, and the way to resolve this is through an estimation."

Anotherlawyer likened setting state court trial dates for individual cases todetonating a bomb in the middle of a bankruptcy proceeding designed tohandle all of the abuse claims collectively.

"Our perception isthat a detonation charge isn't necessary," said Michael McGrath, whorepresents the Diocese of San Bernardino, which is named as aco-defendant in some abuse claims that occurred prior to 1978, when itsplit from San Diego. "You can hold people's feet to the fire withoutfractionalizing this and sending it out to different forums."

Adlersaid she would issue a final ruling no later than Monday. The judge hasrepeatedly tried to pin down the diocese in her rulings, including anApril threat to find its attorneys in contempt of court forinstructions allegedly given to individual parishes about financialmatters. That order was not finalized, but Adler appointed an outsideauditor to examine church finances.

Also Thursday, Adler heardtestimony from Todd Neilson, the auditor whose report was highlycritical of the way the diocese and individual parishes kept track oftheir finances. Adler, who has found the church misrepresented itsfinances in multiple filings, has scheduled a separate hearing forSept. 6 asking the diocese to explain why it qualifies for bankruptcyprotection.

Neilson was careful not to ascribe "sinistermotives" to the church, but said in some cases the diocese had behavedlike a "neglectful parent" with regard to the parishes, particularlywith respect to $19 million that went missing from church accounts.

"This money was not stolen. It was there and it was moved to another account," Neilson said.

Neilsontold the judge he was still untangling hundreds of bank accounts andtitle documents to determine what belonged to the diocese and whatbelonged to parishes.

With nearly 1 million Catholics andholdings throughout San Diego County, the diocese is by far the largestand wealthiest of the five U.S. dioceses to have filed for Chapter 11bankruptcy protection under the shadow of civil claims over sexualabuse.

Dioceses in Spokane, Wash., Portland, Ore., and Tucson,Ariz., have already emerged from Chapter 11 bankruptcy protection. TheDavenport, Iowa, diocese, which faces claims from more than 150 people,is still in proceedings.