St. Paul-minneapolis Archdiocese Seeks More Time to File Bankruptcy Plan

By Jean Hopfensperger
Star Tribune
October 27, 2015

http://www.startribune.com/st-paul-minneapolis-archdiocese-seeks-more-time-to-file-bankrupty-plan/337755791/

Archbishop Bernard Hebda speaks during an interview at the offices of the Archdiocese of St. Paul on Tuesday, August 4, 2015.

The Archdiocese of St. Paul and Minneapolis will ask a bankruptcy judge Thursday for a second extension of its deadline to file its reorganization plan, arguing the extra time is needed to address the volume and complexity of sex abuse claims.

The church is now seeking an extension to May 31, 2016.

“There remains a number of difficult issues to be resolved before completion of the mediation process,” the archdiocese stated in its motion before U.S. Bankruptcy Judge Robert Kressel. “As of the filing of this motion, 717 claims — including 416 claims alleging liability for sexual abuse — have been filed in this case.

“Each of these sexual abuse claims must be analyzed and negotiated by various constituencies … as part of the mediation process.”

Extending the deadline is not surprising, as the archdiocese has had less than three months to examine the full universe of abuse claims that poured in by the Aug. 3 filing deadline, said University of Minnesota law professor Christopher Soper. But it does have its drawbacks.

“The downside is it slows down the process and means more uncertainly for the creditors,” said Soper. “The whole point of this process is to figure out how much the church is going to pay to these 400 people. Until a plan is negotiated and approved, they don’t know how much they will be paid, or if they will be paid.”

The archdiocese filed for Chapter 11 bankruptcy in January, following an unprecedented avalanche of clergy abuse claims. The claims were sparked by the Minnesota Child Victims Act of 2013, which opened a three-year window for civil courts to hear older claims of clergy abuse.

The law sunsets May of 2016 — the same month as the new extension request.

Attorney Robert Kugler, who represents the creditors committee of abuse victims, said the extension request reflects an argument he had made earlier this year against the archdiocese’s request to move the deadline for filing abuse claims from May 2016 to Aug. 3, 2015. Kugler argued then that the church should wait until the Child Victim Act sunsets, so that the full universe of claims against the archdiocese and parishes could be in hand.

About a dozen dioceses and archdioceses have filed for Chapter 11 bankruptcy over the past decade following clergy abuse claims. Bankruptcy law gives debtors, in this case the church, the exclusive right to file and solicit approval of a reorganization plan within a prescribed period. If it fails to do so, creditors or other interested parties in the case can file a plan.

It is not uncommon to seek extensions, the archdiocese noted. Extensions were granted to the Milwaukee archdiocese, the Diocese of Wilmington, Del., and the Davenport diocese in Iowa.

The Milwaukee archdiocese, for example, extended its “exclusivity period” three times, the archdiocese wrote. It reached a $21 million settlement in August in a four-year bankruptcy case.

Apart from the Twin Cities archdiocese, Soper said he was aware of just one other bankruptcy case pending, in the diocese of Stockton, Calif.

All of the bankruptcies deal with similar challenges, he said, such as a large number of abuse claims and insurance complications because of the scope and age of the cases, some of which date back decades. The archdiocese acknowledged the time and complexities of negotiating insurance coverage in its motion, claiming that accelerating its reorganization plan would be “counterproductive.”

Neither Kugler nor attorney Jeff Anderson, also representing victims in the bankruptcy mediation, plan to contest the archdiocese request. The extension, said Anderson, is “expected and necessary.”

The archdiocese originally had exclusive rights to file a reorganization plan until July 16. The court approved an extension to Nov. 30.

Beyond the May 2016 deadline to file a plan, the motion asks that the archdiocese have exclusive rights to gain court acceptance of its plan through July 29, 2016.