Judge Orders Parties Involved in Archdiocese Bankruptcy Case to Return to Mediation

By Rebecca Omastiak
December 28, 2017

A judge has denied reorganization plans from the Archdiocese of St. Paul and Minneapolis and the Creditor's Committee.

The archdiocese originally filed its reorganization plan in its bankruptcy case in May 2016. The Creditor's Committee also submitted a request the archdiocese's assets be consolidated, which was denied.

In December 2016, U.S. Bankruptcy Judge Robert Kressel allowed both plans to be moved to a vote. A group of more than 400 clergy abuse victims rejected the reorganization plan.

The plan was then amended, requiring the archdiocese contribute $80 million into the pool of money from which creditors, including victims, would be paid. It also required the archdiocese to release the investigative report concerning former Archbishop John Nienstedt and end payments being made to priests who had been credibly accused of sexual misconduct.. Voters accepted this amended plan.

The Archdiocese of St. Paul and Minneapolis bankruptcy reorganization at a glance

Source: Archdiocese of St. Paul and Minneapolis, KSTP news reports

On January 16, 2015 the archdiocesan corporation filed for Chapter 11 Reorganization under the bankruptcy code. The archdiocese described the move as the fairest way to resolve existing sexual abuse lawsuits as well as future claims while permitting the it to continue essential ministry and support to local people, parishes and Catholic schools.

Under the original reorganization, the a proposed trust for claimant victims topped out at $65 million with about half that ($33 million) coming from settlements with insurance carriers.

The archdiocese increased the proposed trust in November to more than $130 million after further settlements with carriers; $92 million was to come from the settlements.

The victims rejected that proposal in favor of a plan that would see the archdiocese remain on the hook for $80 million toward the fund, the release of investigative report concerning former Archbishop John Nienstedt, and a promise the archdiocese would must payments to priests who have been credibly accused of sexual misconduct.

According to a release from Jeff Anderson & Associates, Kressel issued an order Thursday that denied both reorganization plans. The judge ordered the archdiocese, insurance companies, parishes, Creditors' Committee and sexual abuse survivors to return to mediation.

Attorney Jeff Anderson, who represents several of the abuse victims, called the ruling a "small victory" for his clients.

"We will engage fully with those insurance companies that refused. We will engage fully with the archdiocese that turned its back on survivors," Anderson said. "We will engage fully with the insurance companies for the parishes and everybody else necessary to make a conclusion come."

One of the victims, Jim Keenan told reporters that he felt his voice was heard.

"This should never happen again," Keenan said. "We are going to go back to the table and mediate the way we should have a long time ago. My request of the church is to mediate fair. Mediate because you hurt children. Mediate because you want to make it right."

Late Thursday, Tom Abood, the Chair of the Reorganization Task Force of the Archdiocese of St. Paul and Minneapolis, released the following statement through a spokesperson:

"Judge Kressel's decision bolsters our resolve to move forward in the bankruptcy process. We are guided by his words from earlier this year, that the longer this process continues, the less money will be available for those who have been harmed. We note and are gratified that Judge Kressel has once again directly dismissed the assertions by creditors' counsel that the Archdiocese has acted or is acting in bad faith regarding the reorganization. We look to engage with all participants in mediation as directed by the judge to bring a prompt and fair resolution."








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