Blockbuster, Oriental Trading, Movie Gallery, Lehman, Barzel: Bankruptcy

The Bloomberg
October 29, 2010

Wilmington Diocese and Victims Schedule Dec. 6 Fight

Catholic Diocese of Wilmington Inc. scheduled a hearing for Dec. 6 where the bankruptcy judge in Delaware will consider approving the disclosure statement explaining the Chapter 11 plan filed in September. Objections are due Nov. 22.

The official committee of unsecured creditors, whose constituency includes sexual abuse claimants, says the plan is “unconfirmable.” Although the bankruptcy judge extended the diocese’s exclusive right to propose a plan until Dec. 30, the committee has the right to file a motion at any time to terminate exclusivity.

The committee said it may be necessary to file a creditors’ plan. Among objections to the plan, the committee takes issue with the diocese’s proposal to pay the net present value of pensions to lay employees. The committee says the diocese instead should assume the pension obligations and thus save as much as $27 million cash.

The committee also argues that it’s impermissible for the plan to give release to the parishes because they aren’t in bankruptcy.

The diocese was dealt a defeat in June when the bankruptcy judge ruled that $75 million belonging to the parishes and parochial schools must be shared with sexual abuse claimants. The parishes and schools argued that the money should have been held in trust for them.

Although the bankruptcy judge found that the trust was valid, he said the parishes couldn’t trace their funds as law requires.

The parishes and schools appealed. A U.S. district judge allowed an appeal directly to the U.S. Court of Appeals in Philadelphia, thus avoiding an intermediate appeal in the district court. The Third Circuit in Philadelphia denied a motion to expedite the appeal.

The diocese’s Chapter 11 filing in October 2009 automatically stopped 136 abuse suits involving 147 plaintiffs, according to a court filing by the diocese.

The Delaware diocese is the seventh Roman Catholic diocese to file for Chapter 11 protection to deal with lawsuits for sexual abuse. Previous filings were by the dioceses in Spokane, Washington; Portland, Oregon; Tucson, Arizona; Davenport, Iowa; Fairbanks, Alaska; and San Diego, California.

The case is In re Catholic Diocese of Wilmington, 09-13560, U.S. Bankruptcy Court, District of Delaware, (Wilmington).

To contact the reporter on this story: Bill Rochelle in New York at

To contact the editor responsible for this story: David E. Rovella at


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