Yet another Catholic Diocese heading into bankruptcy following child abuse lawsuits

St. Patrick Co-Cathedral

Billings Gazette

“Survivors of sex abuse by church officials of the Roman Catholic Diocese of Great Falls-Billings are asking a bankruptcy judge to allow two state district court lawsuits to go to trial to determine damages and to move the case along.

 

Settlement talks between the diocese, its insurance carrier, Catholic Mutual, and the sex abuse claimants ended in impasse at the most recent mediation, which was in September in Reno, Nevada.

 

Bryan Smith, a Yakima, Washington, attorney and co-counsel for one of the survivors who sued the diocese in state district court in Great Falls in December 2011, said Monday the motions seeking to allow the state lawsuits to continue is “a desire of the plaintiffs to move the case forward in any way.”

The plaintiffs, Smith said, are ready to proceed with their claims. “They absolutely have waited long enough. If this helps to set values in the bankruptcy case for negotiations, great,” he added.

 

Ultimately, the issue is whether the diocese and its insurance company “are fairly valuing these claims,” Smith said.

 

Seeking to restart a state lawsuit halted by a bankruptcy case is not unusual and has been done in other cases against other dioceses, Smith said. He called the move a tool plaintiffs can use to force a case to move forward when there is an impasse.

 

Daniel Fasy, a Seattle attorney representing a second plaintiff who also sued the diocese in a separate state case, said on Monday the goal of resuming the state cases is “to get justice for our clients.”

 

While the survivor claimants are continuing “to work in good faith” with the diocese, seeking to resume the state lawsuits is “one step in that process,” Fasy said.

 

The survivors have been “patiently waiting for their day in court,” Fasy continued. “They’re ready to hold the diocese accountable for what it allowed to happen,” he said.

 

In addition to the survivors, family members also have been affected by the abuse, Fasy said. “Our goal is to make sure they receive justice and closure in this case,” he added.

 

Plaintiffs’ attorneys said in court records they believe mediation has failed to produce a settlement because the diocese and its insurance carriers “did not conduct a fair, independent claims evaluation.”

 

If allowed to proceed, the trials would help resolve claims by two claimants of the 86 total survivors with claims against the diocese, Smith said. The two claimants, however, represent a cross section of the survivors, he added.

 

Two separate lawsuits initially were filed by survivors of childhood sex abuse against the diocese in 2011 and 2012. The plaintiffs and 70 additional plaintiffs had claims pending against the diocese. The cases eventually were consolidated into a case called the Clergy Abuse Action, which was proceeding to a series of trials, with the first trial set for July 2017.

The diocese, however, filed for bankruptcy reorganization on March 31, 2017, which put the state cases on hold.

 

The diocese has not yet responded to the motion to resume the state cases.

Chancellor Darren Eultgen said in a statement Tuesday that at a bankruptcy hearing Jan. 4 the judge asked for more information from the creditor’s committee on a request for standing to pursue parish assets.

“The Diocese of Great Falls-Billings is awaiting the revised memorandum and amended complaint from the creditors’ committee, which is due to the court later this month, and will respond appropriately after it is filed,” Eultgen said.

 

In the pending issue over assets, the creditors’ committee is seeking a ruling on ownership of about $70 million in real estate assets and $19 million in checking accounts and investments it claims are part of the diocese’s bankruptcy estate and should be available for creditors and survivors.

 

The diocese disagrees and contends it holds the assets in trust for its parishes and that they are not part of the bankruptcy estate and are unavailable to its creditors.

“Bishop (Michael) Warfel and the Diocese are committed to compensate as fairly as possible all victims of these unresolved claims in a single process overseen by the Bankruptcy Court while at the same time ensuring the future of Catholic ministry in Eastern Montana,” Eultgen said.

 

The diocese is the second of Montana’s two dioceses and the 15th U.S. diocese to file for bankruptcy to settle sexual abuse claims. The Diocese of Helena settled its bankruptcy in 2015 with a $20 million payment plan and a settlement that addressed more than 360 abuse claims.

 

Also joining in the request to restart the state cases is the creditors’ committee, which represents eight sexual abuse claimants.

 

The committee’s attorney, James Stang, of Los Angeles, said in court records that the committee and plaintiffs believe the impasse exists because the diocese and Catholic Mutual “attribute unreasonably low values” on all of the claims and that “reducing these two insured claims to judgment in state court is the most efficient way” to determine the value of the claims in order to further settlement talks.

 

Stang called the mediation impasse “especially disappointing” because the diocese “has assets and insurance coverage sufficient to fund a fair and equitable settlement.”

 

Because Catholic Mutual, as the insurer, would have to pay for defending the claims, the diocese’s assets in the bankruptcy would not be depleted by resuming the state cases, Stang said.”

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