Lawsuits, insurance companies at the heart of the New Mexico Archdiocese bankruptcy case
The Archdiocese of Santa Fe’s Chapter 11 bankruptcy efforts have been going on for three years without ending in the case, which includes more than 400 victims of clergy abuse.
Lawyers say three years is a comparatively long time for Chapter 11 proceedings, but it is by no means unknown. It is in the interests of everyone – the archdiocese and the victims – to get Chapter 11 resolved, lawyers say. A possible agreement is therefore still expected.
“The alternatives are so bad it’s worth staying in the game,” said Laura Coordes, associate professor of law at Arizona State University, of Chapter 11.
The archdiocese is trying to raise an adequate amount through property sales, donations and insurance to reach an agreement with the victims.
On a blog this month, Archbishop John Wester wrote: “We knew when we moved to Chapter 11 that it would not be easy. We are making progress, albeit slowly. Please pray that this arduous and lengthy process will bring healing to the victims of sexual abuse, their families, our communities, and this local Church. “
Chapter 11 allows the company in dire financial straits to work with plaintiffs to reach an agreement.
Coordes and Albuquerque bankruptcy attorney Dave Giddens told the Santa Fe New Mexican that the alternatives to reaching an agreement would typically be to convert the case into Chapter 7 bankruptcy, with a trustee in charge of the sale of assets would. Or the case could be closed and many victims would then file lawsuits individually.
Giddens, who is not involved in the Archdiocese of Santa Fe, said three years in Chapter 11 were relatively tedious.
“Most of them don’t make it that long if they can,” he said.
But he added that this is a big case that many “skilled professionals” are working on and it is likely that they will find a way to come to an agreement. Involved in the case are James Stang from Los Angeles, who represents some of the victims, and Ford Elsaesser from Idaho, who represents the archdiocese. Both are experienced in such cases.
Merit Bennett, a Santa Fe attorney representing four victims, said the finish line was not in sight.
“There are so many what-ifs that it is really impossible to predict anything,” he said. “It’s like anything could happen.”
The Archdiocese has signaled that it is working to get acceptable payouts from insurers who are key players in these cases. Rev. Glennon Jones, Vicar General of the Archdiocese, wrote in the fall that negotiations with insurers “can take a while, but there is no way to accelerate them”.
Meanwhile, the Archdiocese held an online auction this year to sell small, donated properties for approximately $ 1.4 million. A second auction is planned for January 31 to February 7.
A $ 1.4 million infusion won’t change the picture, a Santa Fe attorney said.
“The answer is insurance,” said Aaron Boland, who is representing a victim.
Two high profile national Chapter 11 sexual abuse cases reported breakthroughs last week. The Boy Scouts of America announced that insurer Chubb Ltd. has 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 was filing for bankruptcy protection around the time the Archdiocese of Santa Fe was filing for bankruptcy.
BishopAccountabiility.org, a website that monitors cases of pedophile priests and Catholic organizations bankruptcy due to abuse, lists 26 dioceses that have filed for Chapter 11 bankruptcy since 2004. Most, but not all, were settled within three years.
Gallup Diocese paid more than $ 20 million for about 55 victims in three years.
It took the Diocese of St. Paul and Minneapolis more than three years to agree to pay $ 210 million to 450 victims in 2018.
In its case archive, the website collects statements from lawyers and dioceses and, above all, media reports. Seven dioceses, including those in New Orleans and Buffalo, NY, filed for Chapter 11 bankruptcy in 2020.
Some dioceses have settled for large amounts, such as about $ 198 million in San Diego, and others with much smaller amounts, including about $ 12 million from Fairbanks. None of the 26 cases have been replaced by any other means of crisis management, such as Chapter 7 or individual lawsuits.
Giddens said a judge could threaten to convert the case into one of these options in order to get opponents back into negotiations.
Coordes said the best way to do this was to reach an agreement on Chapter 11 bankruptcy.
“You pretty much bet your hopes or your money on making it work,” she said.
The case of the Archdiocese of Santa Fe has been controversial at times. A mediator has been replaced. U.S. bankruptcy judge David T. Thuma ruled this year that victims can continue their legal claim that the archdiocese had transferred property and cash to its 93 parishes over the past decade to prevent victims from accessing those assets.
When Wester announced to voters in the spring that St. Pius X High School in Albuquerque would be retained, one of the victims’s lawyers, Albuquerque’s Levi Monagle, said not so quickly.
Monagle said at the time that “all the assets of the diocese are on the table” until the archdiocese piles up an appropriate amount.
And Monagle’s partner Brad Hall said of the case in July, “If it explodes, it explodes.” Monagle and Hall represent about 140 victims.
Bennett said he would feel like the end is near when those involved start talking about allocating money to victims.
That too could be a challenge. He said he did not know if each victim would get the same amount of money or if it was based on the number of harassments or the victim’s emotional state today.
One man could have been molested once but attempted suicide 30 times, Bennett said, while another man could have been molested 30 times and now successfully run a business.
Maybe it would be best to split it up evenly, he said. “That way, you don’t have to go through the hellish process of who was hurt more, and how do you quantify that?”
Coordes said getting insurance companies to pay puts a Chapter 11 case on a much better footing. At least until then, the case rumbles.
“I’m sure it’s phenomenally frustrating for the victims,” she said. “Really, for everyone.”
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