Spokane sex abuse bankruptcy case settled for $48 million

Zive, chief bankruptcy judge of the U.S. Bankruptcy Court for theDistrict of Nevada, had been mediating the case since last July undermandate from the federal bankruptcy court in Spokane. He said theagreement reached Jan. 4 must still be confirmed by the court inSpokane and by creditors in accord with provisions of the U.S.Bankruptcy Code.

"The economic portion of the global settlement totals at least $48million and provides a mechanism for the payment of future claims," hesaid.

He said parishes of the diocese will have to raise $10 million to contribute to the settlement.

The Spokane Diocese has nearly 100,000 Catholics served by 82 parishes,so the cost to the parishes, who depend on contributions for theirincome, works out to an average of about $100 per Catholic.

Other key economic elements include more than $20 million contributedby six insurance carriers, the sale of diocesan assets, andcontributions from various other entities in the diocese, he said.

"As important as the economic terms of the plan are, the plan containsnumerous nonmonetary provisions that are as critical as the monetaryprovisions," Zive said.

"These noneconomic terms were absolutely essential to arriving at a consensual plan," he added.

He said reaching an "equitable resolution" through mediation "has beena complex and often emotional process, but one that was essential toavoid protracted, debilitating, risky and expensive legal disputes."

The Spokane Diocese entered bankruptcy protection proceedings inDecember 2004 when faced with $77 million in clergy sexual abuseclaims, seven times the diocese's claimed net assets.

It faces up to 185 claims, but the validity of some of those has not yet been established.

One of the biggest issues that arose during the bankruptcy proceedingswas whether Catholic parish and school properties should be included asdiocesan assets subject to the damage claims of the sexual abusevictims.

Victims' lawyers claimed that the way the Spokane Diocese wasestablished in civil law, the bishop, as a corporation sole, owned allthe parishes and parish schools. The diocese claimed that under churchlaw he could not own them and only held them in trust.

Judge Patricia C. Williams of the U.S. Bankruptcy Court for the EasternDistrict of Washington, who is presiding over the case, ruled in August2005 that the bishop as corporation sole did own the parishes and theirschools. The diocese appealed the decision to the U.S. District Court,which in June 2006 reversed Williams' ruling.

Following that decision the parties went into mediation under the guidance of Judge Zive.

The Jan. 4 announcement from Zive's office said that the globalsettlement is contained "in a consensual plan of reorganization thatwill be filed today" in the Spokane court.

"The plan will go through the normal confirmation process" in the Spokane court, it said.

Diocesan spokesman Deacon Eric Meisfjord had no immediate comment on the announcement and referred inquiries to Zive's office.

Spokane was the third U.S. diocese to enter bankruptcy protectionproceedings in order to deal equitably with a number of victims ofclergy sexual abuse who collectively were seeking damages in excess ofthe diocese's assets.

The Archdiocese of Portland, Ore., entered bankruptcy court in July2004 as two lawsuits seeking $155 million for clergy sex abuse wereabout to go to trial. In all it faced more than $300 million in claims.In December it reached a settlement of $75 million for all claims,which numbered nearly 150.

The Diocese of Tucson, Ariz., filed for bankruptcy protection inSeptember 2004 and emerged in July 2005 with a $22.2 million globalsettlement that resolved more than 50 claims.

In October 2006 the Diocese of Davenport, Iowa, became the fourth U.S.diocese to enter bankruptcy proceedings. It faced at least 25 claimstotaling $7 million and had just lost a $1.5 million judgment in asingle case.