MINNESOTA
Canonical Consultation
02/14/2015
Jennifer Haselberger
As I mentioned in an earlier post, it is very possible that the path out of bankruptcy for the Archdiocese of Saint Paul and Minneapolis will include parishes and other institutions contributing to the financial compensation offered to victims of clergy sexual abuse. This could happen in several ways, including by parish insurance policies providing settlement money, parishes voluntarily agreeing to contribute to the final settlement, or with a judgment in support of an alter ego claim. The latter, as I have already mentioned, enables a court to treat separate corporations (such as the parish corporations or other related non-profits) as one legal entity with the Archdiocese, and to hold each liable for the debts of the other and to consolidate the assets of both.
Since that last posting, I have received many emails and comments regarding the alter ego argument. Most, frankly, take the position that the alter ego status is already established by the level of control exercised by the Archbishop over parishes and institutions. However, it is not that easy.
A lot of the control exercised by the Archbishop occurs in the areas of religious practice, such as the appointing of pastors, establishing regulations for the administration of the sacraments, and even dictating prayers and special collections for charitable purposes. A court is unlikely to consider these aspects of Archdiocesan control when determining whether the parish is an alter ego because of constitutional issues arising from the First Amendment. What will be of interest to the court is the extent to which the Archbishop’s authority over the temporal operations of the parishes and institutions exceeds that which is permitted by those corporations’ governing documents.
As I have already mentioned, the alter ego claim was posited by the Creditors Committee in the bankruptcy proceedings of the Archdiocese of Milwaukee, but the Committee’s motion for an alter ego judgment and substantive consolidation failed. The Committee’s argument for the determination was ‘that the Parishes and the Debtor are part of a single enterprise, both financially and operationally, and that the Parishes are incapable of surviving as independent entities without the Debtor’s financial and operational support.’ The Committee also noted the overlap between the leadership of the Archdiocese and each Parish. Furthermore, while the Committee conceded that each of the Parishes was separately incorporated, it alleged that the Debtor and the Parishes do not adhere to typical corporate formalities and separateness.
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