The Archdiocese of Milwaukee's Chapter 11 case is the longest-running and most contentious of the 14 Catholic Church bankruptcies filed since 2004 to address sexual abuse liabilities going back decades. Here's a look at how it got there and where it's headed.
Q:Why was the Archdiocese of Milwaukee in Chapter 11?
A: The archdiocese has employed numerous priests over the decades who sexually assaulted minors. Victims began suing in the early 1990s, alleging the archdiocese knew some priests were a danger and put them in positions where they harmed children.
The lawsuits alleging negligent supervision were effectively halted in the mid-1990s, when the Wisconsin Supreme Court issued a pair of significant rulings. In 1995, it deemed such lawsuits unconstitutional, finding that meddling in the church's staffing decisions would violate its religious liberty. And in 1997, it ruled that the statute of limitations on negligence for these cases had lapsed.
Victims continued to sue, asserting various claims, including fraud. In 2007, a new state Supreme Court ruling found that the fraud cases could proceed.
Then, courts began ruling that the archdiocese could not tap its insurance policies for settlements or judgments in those cases because fraud, unlike negligence, is an intentional act.
By late 2010, a dozen cases involving 17 victims had been filed. Church officials realized as those moved closer to trial that multimillion-dollar judgments in even a few of those could decimate the archdiocese. Victims' attorneys also believe they were concerned about the impending depositions of retired Archbishop Rembert Weakland and Auxiliary Bishop Richard Sklba and the possible release of documents in the court's discovery process.
The archdiocese filed for Chapter 11 because it is designed to allow a debtor to settle its obligations — in this case sex abuse claims — and still retain enough money to continue its operations. It also serves as a "last call" for victims, which means once it's done, past victims can't come forward and sue the church.
Q: Why did it take so long to resolve?
A: That's a long and complex answer, so we'll just address a few reasons here.
Milwaukee is not like the other dioceses where multimillion-dollar settlements were reached. It's the only one without access to insurance, and so lawyers for the church and its creditors battled over other sources of money, including parishes, a $35 million parish investment fund and a now $70 million cemetery trust.
It's also the only diocese to attempt to throw out all of the sex abuse claims filed in bankruptcy. And the creditors committee, which is made up of abuse survivors but represents all creditors in the case, aggressively defended those claims.
The case proceeded more like a contentious tort litigation, which is adversarial in nature, rather than a Chapter 11, which is intended to bring parties together to negotiate.
Nearly every decision in the case was appealed. In one decision, U.S. Bankruptcy Judge Susan V. Kelley found that forcing the church to tap at least some of its cemetery funds would not violate its religious liberty.
Q:How much is the deal worth and where is the money coming from?
A: In all, the deal is valued at about $29 million, with $21 million going to victims, $500,000 for a therapy fund and $7.8 million to legal fees. The archdiocese's insurers will pay $11 million and its cemetery trust $16 million. The balance will come from archdiocesan resources that are yet to be determined, said Jerry Topczewski, chief of staff for Archbishop Jerome Listecki. And parishes will contribute to the therapy fund.
Q:What happens next?
A: The archdiocese will file its revised plan of reorganization on Aug. 24, and U.S. Bankruptcy Judge Susan V. Kelley has scheduled the confirmation hearing for the week of Nov. 9. Creditors will have an opportunity to vote on the plan. If they object, the archdiocese could still prevail with what's known as a "cram down" process.