Diocese of Duluth Files for Bankruptcy

By Tom Olsen
Duluth News Tribune
December 7, 2015

http://www.duluthnewstribune.com/news/3898226-updated-diocese-duluth-files-bankruptcy

Duluth.jpg The Catholic Diocese of Duluth, headquartered at 2830 East Fourth Street in Duluth, filed for bankruptcy on Monday. The diocese covers ten counties in northeastern Minnesota. Steve Kuchera / skuchera@duluthnews.com

Facing a nearly $5 million verdict, six lawsuits and a dozen additional claims stemming from child sexual abuse cases, the Diocese of Duluth on Monday filed for bankruptcy protection.

The Chapter 11 filing comes a month after a St. Paul jury handed down a landmark $8.1 million verdict against the diocese and a Catholic religious order in the first case to go to trial under the Minnesota Child Victims Act.

The Rev. James Bissonette, vicar general of the diocese, said bankruptcy was the only option in wake of a sizeable verdict and uncertainty over the number of lawsuits the diocese will face.

“Because of the size of the award and our limited resources, when we looked at it we needed to do this today in order to assure some measure of justice for all the victims and to make sure that the day-to-day operations of the diocese continue,” Bissonette told the News Tribune.

Bissonette noted that the diocese has been ordered to pay approximately $4.9 million in damages from the recent trial, while the organization’s annual budget is only about $3.3 million.

The diocese is the 15th in the nation to file for bankruptcy over sexual abuse claims, according to victims’ advocates.

Mike Finnegan, an attorney for St. Paul-based Jeff Anderson and Associates, the leading law firm representing abuse victims, said he’s confident that his clients will see a fair resolution to their cases.

“It’s my belief that the bankruptcy process here involving the survivors that we represent and the Diocese of Duluth will be a fair process for everyone involved,” he said. “All the other bankruptcies that have involved a diocese or religious order have all resulted in settlements between the diocese and the victims involved.”

The nine-page bankruptcy filing states that the diocese maintains both assets and debts ranging from $1 million to $10 million. The diocese’s 18 biggest unsecured claims all belong to victims represented by Jeff Anderson and Associates.

In addition to $4.9 million awarded to victim Bill Weiss, five other cases are pending against the diocese in State District Court under the Child Victims Act, a legislative action that temporarily allows abuse victims to file suits that would otherwise be barred by statutes of limitation.

Twelve additional claims have been filed with the diocese but not yet brought to court. In total, Finnegan said his firm represents about 30 victims of abuse that occurred within the Diocese of Duluth.

The deadline for filing suit under the law is May 25, but a bankruptcy judge could opt to set an earlier date for claims.

Chapter 11 bankruptcy is most commonly used by corporations or other entities with large debts, and allows the entity to reorganize in order to find financial stability without liquidation.

The diocese follows the Archdiocese of St. Paul and Minneapolis, which in January filed for Chapter 11 protection in response to a number of abuse lawsuits.

Bissonette said the filing should not affect the services offered by the diocese.

“My understanding is that the day-to-day operations of the parishes and schools will remain the same,” he said. “We’re going to continue working and continue doing the good that we’re doing as a church.”

David Clohessy, national director of the Survivors Network of those Abused by Priests, blasted the diocese’s decision to file for bankruptcy, saying claims could be resolved without seeking court protection.

“Duluth’s Catholic bishop is making an immoral, selfish, and hurtful move by seeking bankruptcy protection,” he said in a statement. “More kids are apt to be molested because of Bishop Paul Sirba’s irresponsible decision to put his comfort and his colleagues ahead of his flock and their families.”

Bissonette said the diocese has sought to work with victims and will continue to do so going forward, a goal he said can only be achieved through the bankruptcy process.

“It is a sad day, but we are not without hope,” he said. “We’ve tried to put victims first and seek the truth with transparency and do things in the right way. Going forward now, we’re going to make sure victims share in a measure of justice.”

While not as critical, Finnegan suggested that the bankruptcy potentially could have been averted if the diocese had acquiesced to victims’ demands that documents be publicly released.

The diocese released the names of priests it considers “credibly accused” of abuse in December 2013, and maintains the list on its website, but has rejected calls to publicly release documents detailing abuse. Files on several priests were made public for the first time last month after they were admitted into evidence in the St. Paul trial.

“From day one, one of our stated purposes here was to make sure we have those documents, and that they’re made public,” Finnegan said. “The bankruptcy filing is not going to stop us from doing that, but it definitely delays us from doing that.”

Susan Gaertner, an attorney for the diocese, said she attempted to initiate conversations with Finnegan’s firm before and after the Weiss case. A release of documents was on the table, but settlement talks were rejected by the victims’ attorneys, she said.

“We consistently indicated a willingness to do what it would take from a noneconomic standpoint,” she said, “but it came down to dollars and cents.”

In response, Finnegan asserted that his firm was never approached to discuss a deal that would lead to the release of documents.

“There wasn’t a single conversation with them where they said they would release the documents,” he said. “It’s absolutely false that there was any conversation from their side about a willingness to release documents.”

While diocesan bankruptcies have taken anywhere from one to five years to resolve, attorneys on both sides said they hope to reach an amicable solution quickly.

In the near future, Finnegan said a bankruptcy judge will likely appoint several victims to form a creditor’s committee, which will represent the interests of all claimants. The judge is also expected to set a final “bar date” for claims to be submitted.

The diocese’s bankruptcy efforts will be led by Ford Elsaesser, an Idaho attorney who recently led the Diocese of Helena, Montana through bankruptcy. In that case, the diocese paid $21 million to 380 people who filed claims.

“That bankruptcy was remarkable for its efficiency, its smoothness, its inclusiveness and its respect for victims,” Gaertner said.

Finnegan said his clients are not seeking to disrupt the operations of the diocese or force the sale of any assets. Despite the bankruptcy, he stressed that there are still options for victims to come forward and seek relief.

“This is something that we have been preparing our clients for,” he said. “Our experience is been that we can do this and that this can still be a very fair process for survivors.”