After 1st Bankruptcy Hearing, Archdiocese of New Orleans Is Told Whom It Can, Can't Pay for Now

By Matt Sledge
Times-Picayune / New Orleans Advocate
May 4, 2020

https://www.nola.com/news/courts/article_79fe1748-8e58-11ea-bddc-67606029a0c9.html

A federal judge said Monday that the Archdiocese of New Orleans can keep its lights on, but she held off on other decisions as the first hearing of the archdiocese's bankruptcy process turned into a skirmish between lawyers for alleged victims of sexual abuse and the church.

The archdiocese filed for Chapter 11 bankruptcy protection on Friday, citing the financial fallout from abuse lawsuits and the coronavirus pandemic. The move essentially kicks a multitude of lawsuits against the church out of state court and into a single federal case.

While the bankruptcy process continues, the church asked for approval to keep paying utility bills, salaries for hundreds of employees and insurance premiums.

Such requests are standard procedure at the time of a bankruptcy filing, but attorneys wrangled over them for more than two hours during a telephone hearing on Monday.

Accusers’ lawyers said the judge should order that no salary or pension payments be made to predator priests and demanded to know the archdiocese’s plan for using cash in one bank account.

U.S. Bankruptcy Judge Meredith S. Grabill said she would approve requests from the church to keep making utility and insurance payments. She also approved salary payments for nearly 800 full-time and part-time employees.

However, Grabill also said the church should not make salary or pension payments to employees who have been credibly accused of sexual abuse. The church in 2018 revealed a list of dozens of suspected predator priests.

Attorneys for people accusing priests of sex abuse had pointed to a similar directive from the court overseeing the Archdiocese of Buffalo’s bankruptcy. It’s not clear how many employees or pensioners will be covered by the New Orleans order.

Meanwhile, plaintiffs’ attorneys also pressed for the church to disclose a budget for the cash funds stored in an account at one of its biggest lenders, Hancock Whitney Bank.

The bank agreed to allow the archdiocese to keep using funds without filing a detailed budget. But Grabill ordered a budget and held off on making a final decision on the church's request to keep using the account.

The disagreement offered a preview of a major fault line in the case: As the bankruptcy proceeds, the church and plaintiff’s attorneys are nearly certain to clash over how big of a voice the sex abuse accusers should have in the process and ultimately how much they should receive in financial settlements.

During the hearing, an attorney for the archdiocese questioned the right of the plaintiffs’ attorneys to intervene regarding the Hancock account.

“I’m not sure what standing they have as, at best, an unsecured creditor, who has a contingent, unlitigated claim,” said Mark Mintz, the lead attorney for the archdiocese. “It’s correct that we don’t have a budget, but that’s because the lender is not requiring it.”

That prompted a response from James Stang, a Los Angeles-based attorney who has helped represent accusers in other diocesan bankruptcy cases.

“The notion that unsecured creditors do not have standing to make comments about orders of the court and a cash collateral order about how this debtor is operating — I’ve never heard such a thing,” he said.

Plaintiffs’ lawyers have already accused the archdiocese of using bankruptcy to shield the church from a full accounting of its past sins. Attorney Soren Gisleson sent all parties in the case a sharply worded letter on Sunday.

Gisleson alleged that the bankruptcy filing was designed to cut off the discoveries that were filtering out of dozens of ongoing cases in Orleans Parish Civil District Court.

“Its filing was designed to stop Archbishop (Gregory) Aymond’s May 28 deposition and block the publication of thousands of pages of documents. Rather than embrace truth and transparency, the Archdiocese (moved) its campaign of delay and silence to another forum,” he said.

Aymond has said bankruptcy is in the best interests of victims and the church.