Archdiocese asks Supreme Court to weigh in on cemetery trust

By Annysa Johnson
Milwaukee Journal Sentinel
July 07, 2015

Catholic Archbishop Jerome Listecki on Tuesday asked the U.S. Supreme Court to weigh in on a key issue of the Archdiocese of Milwaukee's bankruptcy: whether the First Amendment and a federal law aimed at protecting religious liberty can be used to shield an estimated $70 million held in trust for the care of its cemeteries.

Lawyers for Listecki, who serves as sole trustee of the fund, filed a writ of certiorari asking the high court to review a March ruling by the 7th Circuit Court of Appeals.

In that decision, a three-judge panel ruled that neither the First Amendment nor the 1993 Religious Freedom Restoration Act could be used to keep the funds out of the bankruptcy estate, where they would be used in part to fund a settlement with sex abuse victims.

The writ filed Tuesday argues that the 7th Circuit ruling is at odds with decisions in at least three other federal courts around the country.

Timothy Nixon, the attorney who represents the trust, said a Supreme Court review is needed to resolve those so-called circuit splits and to restore protections intended by the framers of the Constitution and by Congress.

"The 7th Circuit decision encroaches on religious freedom and curtails the protections in the First Amendment," Nixon said in a statement provided to the Journal Sentinel. "Our request is that the Supreme Court agree to review this case so that the substantial protections that are being threatened can be protected."

Marci Hamilton, the First Amendment scholar representing the creditors committee, called their arguments "slim pickings for a certiorari brief," and she said it was unlikely the Supreme Court would take the case so soon after last year's Hobby Lobby decision, which also turned on the Religious Freedom Restoration Act.

"In this circumstance, there are some minor disagreements over some of the issues but no deep-seated circuit split that would invite the court's attention," Hamilton said. "It's unfortunate that they have decided to draw out this (bankruptcy) process even further for these survivors."

Jerry Topczewski, chief of staff for Listecki, said the filing would have no effect on the archdiocese's reorganization plan, which is scheduled for a confirmation hearing beginning Nov. 9. The archdiocese is in the process of revising that plan, which is scheduled to be submitted to U.S. Bankruptcy Judge Susan V. Kelley on Aug. 3.

Statistically, Tuesday's filing is a long shot. The court grants certiorari in fewer than 5% of the cases submitted for review.

Seeking clarification

The writ seeks clarification on the scope of the Religious Freedom Restoration Act, which prohibits government from substantially burdening a person's free exercise of religion without a compelling governmental interest.

The 7th Circuit decision reinstated a lawsuit, brought by Listecki, in an effort to protect the cemetery trust, which was established in 2007 by then-Archbishop Timothy Dolan with approval from the Vatican.

It is the largest single asset currently in play in the nearly 5-year-old bankruptcy and a lynch pin of its reorganization plan, which is scheduled for a confirmation hearing in November. Dolan is now cardinal of New York.

The creditors committee argues that the movement of $55 million into the account in 2008 was intended to shield it from legal liability and constituted a fraudulent transfer of funds in advance of the bankruptcy. It argues that a significant portion of that money should be made available to compensate abuse victims who have filed claims in the bankruptcy.

The archdiocese maintains that the funds support an essential element of the Catholic faith — the belief in the resurrection of the body after death — and that to force it to tap even $1 for the bankruptcy is a violation of its religious freedom. However, it has agreed to use at least some of the funds as part of its reorganization plan required to exit its bankruptcy. Under the original plan, which is now being revised, the trust would lend the archdiocese $2 million and provide an additional $2 million annually toward the cost of running its cemeteries.

The archdiocese filed for Chapter 11 bankruptcy protection in 2011 to address its sex abuse liabilities. Of the 14 Catholic dioceses and religious orders that have filed such bankruptcies since 2004, it is the longest running to date in terms of the time between the initial filing and confirmation of the reorganization plan. Legal fees in the case have totaled about $17 million for the bankruptcy proceedings alone. The archdiocese has declined to say how much it has spent on the cemetery trust litigation.




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