Delaware Courts: Wilmington Diocese, Victims Close to Mediation

By Maureen Milford
The News Journal
March 26, 2010

Process could lead to quicker resolution of bankruptcy, settlement

In a move that could foretell a quick resolution of the Catholic Diocese of Wilmington's bankruptcy, the diocese and victims of clergy sexual abuse are close to a deal to work on settling their conflicts outside the courtroom.

An agreement to mediate disputed issues -- the equivalent of legal peace talks -- could be struck and papers filed as early as today in U.S. Bankruptcy Court for the District of Delaware, according to lawyers for the diocese, the official unsecured creditors' committee and abuse victims suing in state court.

The goal of mediation is to more quickly and cost-effectively reach agreement on a plan of reorganization, avoiding protracted courtroom battles before the judge, lawyers said. During the mediation process, the case would remain in bankruptcy court and the judge would have to approve any settlement.

"The diocese is very hopeful that we now have a path forward to resolving the entire bankruptcy. As we said at the first day hearing it's in everyone's interest to resolve it quickly and not litigate," said Tony Flynn, attorney for the diocese.

Tom Neuberger, a lawyer for plaintiffs suing the diocese in state court, called the move "a very positive development."

"It appears the diocese is trying to turn the page and put this behind it," Neuberger said.

The diocese, which has pastoral charge of more than 230,000 Roman Catholics in Delaware and on Maryland's Eastern Shore, filed for bankruptcy in October under the weight of lawsuits resulting from clergy sexual abuse.

The Wilmington diocese potentially was facing tens of millions of dollars in liability from lawsuits following the 2007 passage of the Delaware Child Victim's Act. Once the diocese filed for bankruptcy, the lawsuits were halted under bankruptcy law.

Bishop W. Francis Malooly said in a statement at the time of filing that while bankruptcy was a painful decision, Chapter 11 offers the best opportunity for fair treatment of all sexual abuse victims of diocesan priests. In October, when the diocese filed for bankruptcy, it and certain parish churches were defendants in 131 lawsuits.

Mediation was used in nearly all of the country's other diocesan bankruptcies and was "the vehicle for resolving all or substantially all of the disputed issues," according to court documents.

In mediation, everything will be on the table, including the value of the property owned by the diocese, the liability of the diocese, the total amount of claims, insurance coverage issues, the amount of money to pay the claims and issues involving money held in trust.

Jim Stang, the lawyer for the creditors' committee, said mediation would be a significant advance in the proceeding, adding that it would not involve a "moratorium on any aspect of the case."

But Stang stressed that mediation is voluntary.

"It's just settlement discussions while litigation continues," he said.

In filings, the creditors committee said other parties with an interest in the bankruptcy, including the parishes and religious orders, could participate "in a multi-party effort to mediate the sex abuse claims against them."

David Clohessy, director of Survivors Network of those Abused by Priests, said he supports abuse survivors "who want to achieve some justice, closure and healing" through collective action.

"By the same token, sometimes in mediation, less of these deeply hidden church secrets emerge," he said. "We think everybody benefits when the truth surfaces and victims get help. In the best circumstances, the victims push in mediation to have the records unsealed as part of the deal."

Thomas Rutter, a lawyer who heads ADR Options Inc. in Philadelphia, will serve as global mediator, Neuberger said. Rutter has extensive experience in mediating sexual abuse and personal injury claims, including cases involving the diocese, according to court filings.

Originally, the diocese had proposed that U.S. Bankruptcy Judge Kevin Gross, a sitting judge in the federal court in Wilmington, act as mediator.

Contact Maureen Milford at 324-2881 or


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