Archdiocese of Santa Fe’s bankruptcy case plods along

KRQE - CBS/Fox 13 [Albuquerque NM]

December 24, 2021

By Rick Ruggles

The Archdiocese of Santa Fe’s Chapter 11 bankruptcy efforts have plodded along for three years with no end visible in the case involving more than 400 clergy abuse victims. Lawyers say three years is a comparatively long time for Chapter 11 proceedings but is far from unheard of. It’s in everyone’s interests — the archdiocese’s and the victims’ — to resolve it through Chapter 11, attorneys say. Therefore, an eventual settlement is still expected.

“The alternatives are so bad that it’s worth it to stay in the game,” Laura Coordes, associate professor of law at Arizona State University, said of Chapter 11.

The archdiocese seeks to raise an adequate sum, through property sales, donations and insurance, to reach settlements with the victims.

In a blog this month, Archbishop John Wester wrote: “We knew when we filed for Chapter 11 that it would not be easy. We are making progress, albeit slow progress. Please pray that this arduous and drawn-out process will bring healing to the victims of sexual abuse, to their families, our parishes and this local Church.”

Chapter 11 allows the entity in financial hardship to work with the claimants in search of a settlement.

Coordes and Albuquerque bankruptcy attorney Dave Giddens told the Santa Fe New Mexican that the alternatives to a settlement typically would be for the case to be converted to Chapter 7 bankruptcy, in which a trustee would call the shots on the sale of assets. Or the case could be dismissed, and many victims then would file lawsuits individually.

Giddens, who is not involved in the Archdiocese of Santa Fe case, called three years in Chapter 11 bankruptcy relatively lengthy.

“Most of them don’t make it that long, if they’re going to make it,” he said.

But he added this is a big case with many “skilled pros” working on it, and it’s likely they will find a way to settle. Among those involved in the case are James Stang of Los Angeles, representing some of the victims, and Idaho-based Ford Elsaesser, representing the archdiocese. Both are experienced in these kinds of cases.

Merit Bennett, a Santa Fe attorney who represents four victims, said the finish line isn’t in sight.

“There are so many what-ifs that it’s really impossible to predict anything,” he said. “It’s like anything could happen.”

The archdiocese has indicated it’s working to receive acceptable payouts from insurers, who are vital players in these cases. The Rev. Glennon Jones, archdiocese vicar general, wrote this fall negotiations with insurers “may take a while, but there’s no way to speed it up.”

Meanwhile, the archdiocese held one online auction this year to sell off small, donated properties and generated about $1.4 million. A second auction is scheduled for Jan. 31 to Feb. 7.

An infusion of $1.4 million won’t change the picture, a Santa Fe attorney said.

“The answer is the insurance,” said Aaron Boland, who represents one victim.

Two high-profile national Chapter 11 cases involving sexual abuse reported breakthroughs last week. The Boy Scouts of America announced insurer Chubb Ltd. agreed to pay $800 million.

And USA Gymnastics agreed to pay $380 million to more than 500 gymnasts who were sexually abused by a team doctor, Larry Nassar, and others. USA Gymnastics filed for bankruptcy protection about the time the Archdiocese of Santa Fe filed., a website that monitors pedophile priest cases and Catholic organization bankruptcies because of abuse, lists 26 dioceses that filed Chapter 11 bankruptcy beginning in 2004. Most but not all were settled within three years.

The Diocese of Gallup settled within three years for more than $20 million for about 55 victims.

It took the Diocese of St. Paul and Minneapolis more than three years to agree in 2018 to pay $210 million to 450 victims.

The website collects statements from attorneys and dioceses and mainly media reports in its archive of cases. Seven dioceses, including those in New Orleans and Buffalo, N.Y., filed for Chapter 11 bankruptcy in 2020.

Some dioceses have settled for big numbers, such as $198 million in San Diego, and some for far smaller amounts, including Fairbanks’ roughly $12 million. None of the 26 cases has been replaced by another means of addressing the crisis, such as Chapter 7 or individual lawsuits.

Giddens said a judge might threaten to convert the case to one of those options as a way of getting adversaries back into negotiations.

Coordes said reaching an agreement through Chapter 11 bankruptcy is the best way.

“You’re pretty much putting your hopes or putting your money on this working out,” she said.

The Archdiocese of Santa Fe case has been contentious at times. One mediator was replaced. U.S. Bankruptcy Judge David T. Thuma ruled this year that victims could continue their legal claim the archdiocese had transferred property and cash to its 93 parishes in the last decade to hinder victims’ access to those assets.

When Wester told his constituents in the spring that St. Pius X High School in Albuquerque would be preserved in the process, one of the attorneys for victims, Levi Monagle of Albuquerque, said not so fast.

Monagle said at the time that until the archdiocese accumulates an adequate sum, “all diocesan assets are on the table.”

And Monagle’s partner, Brad Hall, said of the case in July, “If it blows up, it blows up.” Monagle and Hall represent about 140 victims.

Bennett said he will feel the end is near when those involved start talking about allocating money to victims.

That, too, might be a challenge. He said he didn’t know if each victim would get the same amount of money or if that would be based on the number of times molested or the victim’s emotional state today.

One man might have been abused once but attempted suicide 30 times, Bennett said, while another might have been abused 30 times and is successfully running a company now.

Perhaps splitting it equally would be best, he said. “That way you don’t have to go through the hellish process of who was injured more, and how do you put a price on that?”

Coordes said getting insurance companies to pay up puts a Chapter 11 case on much better footing. At least until then, the case putters on.

“I’m sure it is phenomenally frustrating for the victims,” she said. “Really, for everyone.”