Diocese Set to Split with Its Parishes
Chapter 11 Case Makes Assets Major Legal Issue
By Stephanie Innes
Arizona Daily Star [Tucson AZ]
September 23, 2004
The following is an excerpt from the deposition of Tucson Catholic Diocese Bishop Gerald F. Kicanas on Aug. 30 in connection with a pending civil action against the diocese alleging sexual abuse by clergy members. California attorney John Manly, who is working with Tucson lawyer Lynne M. Cadigan, conducted the questioning:
Manly: Are you representing that the parishes are totally separate from you? Is that right?
Manly: Do you really believe that, your excellency?
Kicanas: Canonically there's no question about it.
Manly: Forget that -
Kicanas: That's - that's the law under which I operate. I can't forget it. I operate under the laws. I could be removed by canon law; I could hardly be removed by civil law unless I perform some criminal act.
Manly: You actually operate under the laws of the state of Arizona, too.
Kicanas: Yes, exclusively.
Manly: You're incorporated in the state of Arizona, right?
Kicanas: Right, yes.
Manly: And you have to follow those laws, right?
Kicanas: Yes, unless they are in contradiction to the canon law, in which case I'd have to find a way to work through that.
As part of its Chapter 11 reorganization, the Roman Catholic Diocese of Tucson plans on making its 75 parishes independent nonprofit entities to legally separate them from the diocese.
"As the diocese has become immersed in litigation and people have continually raised the issue of whether the parishes are separate legal entities, we thought: Why don't we separately incorporate?" said Michael McGrath, one of two attorneys who have been retained by the diocese's 75 parishes to represent their interests in bankruptcy court.
The diocese, which includes 350,000 Catholics in nine Arizona counties, filed for Chapter 11 bankruptcy protection on Monday in the face of potentially expensive and embarrassing litigation over sexual abuse of children by clergy members.
One of the main issues of contention in the filing, which lists the diocese as owing $20.7 million to creditors while also anticipating future claims over clergy abuse, is whether parishes are included in the diocese's overall worth. Tucson Bishop Gerald F. Kicanas says the parishes are not part of the diocese's overall assets and are not part of the bankrupt estate that will be reorganized through the court to pay current and future creditors.
"I think it's fair to say that in Tucson, the parishes were never separately incorporated - as they have been in other parts of the country - because it was viewed as redundant," McGrath said. "The parishes are separate operations with their own bank accounts. Now the pastors are saying to the bishop that this should have been done."
Kicanas cites canon law when he explains that parishes are not part of the diocese. But the parishes are listed in property records as being owned by the diocese, and lawyers for plaintiffs with pending claims are expected to challenge the diocese's statement of worth in its court filings.
The diocese listed $16.6 million in assets. But Tucson attorney Lynne M. Cadigan, who represents 20 direct plaintiffs in 17 of the pending legal actions, places the overall diocesan worth at $110 million. Cadigan says it's legally impossible for the parishes to disaffiliate from the diocese as long as the bishop retains control over their actions.
"These are substantial matters that we want to take in a responsible, professional manner. We don't want to rush it," said Clifford Altfeld, another bankruptcy attorney who is working with Cadigan. "The plaintiffs' lawyers have a duty to their clients not to commit to anything until we know the assets of the diocese. Like Ronald Reagan said: 'Trust, but verify.' "
Cadigan said the bankruptcy filing is a "clever corporate ploy," and although the diocese does not include parishes in its list of assets, she intends to go after the parishes for money if it's necessary to adequately compensate plaintiffs. She noted that 11 parishes are named in the pending civil actions, including Our Mother of Sorrows Catholic Church, 1800 S. Kolb Road, and St. Elizabeth Ann Seton Catholic Church, 8650 N. Shannon Road, and those parishes should consider themselves potentially responsible for paying plaintiffs.
To that end, Cadigan is still trying to get one of the 22 pending actions to trial this year by arguing that the plaintiffs sued both the diocese and the parish, and therefore the parish can still go to trial as planned. Lawyers for the parish want the case to be stayed by the bankruptcy court.
The case had been scheduled to go to trial in Yuma next Wednesday. The diocese's filing for Chapter 11 bankruptcy protection Monday automatically stayed all pending legal actions. However, the stay does not apply to third parties, and lawyers are arguing that because Immaculate Conception Catholic Church in Yuma was named as a co-defendant, the trial should proceed against the parish.
The case involves the three Rodriguez brothers - two of whom are still minors - who say they were repeatedly sodomized by the Rev. Juan Guillen, former associate pastor at Immaculate Conception, between 1996 and 2002. Their lawsuit names the parish and the diocese as defendants, and the issue over whether parishes are part of the diocese is one of the main points of contention in the bankruptcy filing.
Cadigan said she would try to get the case to trial as soon as possible because the brothers' mother is gravely ill and because the parish is "vicariously liable" for what happened.
"We asked the state court, and they said to go back and ask the bankruptcy court," Cadigan said. "The state judge said he will set a trial as soon as the bankruptcy judge signs off on it."
McGrath said the parish would prefer the case be stayed to avoid unnecessary expenses.
Attorneys for the plaintiffs stressed on Tuesday that the plan filed by the diocese is not set in stone. The diocese had suggested a 90-day deadline for anyone who hasn't yet filed a molestation claim to come forward, but that is subject to approval of the court, said Jim Stang, a Los Angeles bankruptcy attorney who is consulting with Cadigan and her law partner, Kim E. Williamson.
"The plan itself is just their offer," Stang said. "They have a legal position that is the prism through which they see things. If you believe like I believe, I would say it is not an accurate description of the diocese's assets, and that's an issue that has yet to be resolved. Also, they asked the court to set a deadline for claims, but if it's anything like Portland (Ore.), that is an example that this is an ongoing negotiation."
The Archdiocese of Portland filed for Chapter 11 reorganization on July 6 and had suggested a claim period through the end of the year for victims to come forward, but Stang said the claimants and the Portland Archdiocese are still negotiating how to structure the claim form, and a hearing on the motion isn't set until late October.
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