Jesuits' Ch. 11 filing in Ore.
With 61 sexual abuse cases filed this year and others coming, the already besieged order runs for cover.

By Matt Miller
Daily Deal
February 19, 2009

Beset by continued allegations of sexual abuse and already crippled by multimillion-dollar payouts, the Jesuit order in a wide swath of the U.S. Northwest has petitioned for bankruptcy protection after a rash of new abuse-related lawsuits was filed against it.

Officially known as the Society of Jesus, Oregon Province, the Portland, Ore.-based Jesuits filed for Chapter 11 in the U.S. Bankruptcy Court for the District of Oregon on Tuesday, Feb. 17. The Oregon Province includes Alaska, Idaho, Montana and Washington, as well as Oregon. The order also includes two colleges, Seattle University and Gonzaga University, in Spokane, Wash.

The filing demonstrates that the use of bankruptcy courts to resolve cleric-related abuse is far from over, despite a year of relative calm.

In all, six dioceses have filed for Chapter 11 since the extent of abuse was uncovered six years ago and lawsuits began pouring in. The last to file was the Diocese of Fairbanks, Alaska, which went bankrupt March 1 and whose case is related to the Jesuits' actions this week.

The Jesuits listed assets of $4.82 million and liabilities of $61.78 million in their petition. Liabilities are almost entirely tort claims by alleged abuse victims. Ten plaintiffs are suing the Jesuits for $5 million each.

This year alone, 61 more plaintiffs have filed suit against the Jesuits. According to Ken Roosa, a plaintiff's attorney based in Anchorage, an additional 40 were preparing to file next week.

In a statement, the order's provincial head, Patrick Lee, said there are "approximately 200 additional claims pending or threatened."

"I think that number's low, but not completely out of hand," responded Roosa, who believes many more claimants will come forward now that the order filed for bankruptcy.

According to Roosa, the Jesuits have been threatening to declare bankruptcy for months.

The Jesuits settled in late 2007 with more than 100 victims for a total of $50 million, $45 million of which was paid for by the order's insurers. The victims were all Alaskan natives.

The victims also had sued the Fairbanks diocese, which couldn't settle because of unresolved disputes with its insurers. That diocese filed for bankruptcy as a result, and the case is still pending.

The Jesuits' insurers paid the money in exchange for release from future liabilities. That brings into question the ability of the Jesuits to settle a bankruptcy, although Roosa maintains the 2007 settlement doesn't affect either pending claims outside Alaska or some potential liability by the universities, which were spun out into separate corporations in 1972.

Roosa also questioned transfer of land by the Jesuits to the universities in the last "two or three years" for no compensation.

Among those who have been sued this year for covering up the abuse is Steven Sundborg, the current president of Seattle University and the head of the Northwest Jesuit order from 1990 until 1996.

Sundborg denied the allegations as "false," charging "the complaint filed by the plaintiffs' lawyers represents an unprincipled and irresponsible attack on my reputation."

Priest-related abuse began in the 1950s and continued into this decade, Roosa said.

This case reunites some of the actors in a previous church-related bankruptcies.

For example, lead debtor counsel for the Jesuits is Thomas Stilley, a Portland-based partner at Sussman Shank LLP. Stilley led the team representing the bankrupt Portland Archdiocese, the first Roman Catholic diocese to use the bankruptcy court as a way to mediate abuse-related lawsuits.

In addition, Judge Elizabeth Perris presided over the Portland Archdiocese case, which was filed on July 6, 2004, and wasn't confirmed until almost three years later.

She is assigned to handle the Jesuit case as well.

A creditors committee has yet to be formed. However, according to Roosa, Pachulski Stang Ziehl & Jones LLP partner James Stang will asked to represent the victims in the bankruptcy case. Stang, a Los Angeles-based partner, is a lead counsel representing the unofficial tort claimants committee and the official committee of unsecured creditors in the Fairbanks Diocese case.

Stang and his colleagues also represented tort claimants in the bankruptcies of the dioceses in Spokane, Davenport, Iowa, and San Diego.