Saturday, February 17, 2007

"What's Soon To Unfold"

While most of the attention on pending sex-abuse litigation has focused on the archdiocese of Los Angeles, its neighbor to the south has announced that it "may be forced" to seek Chapter 11 bankruptcy as the first of its unresolved claims faces a trial date.

With the first civil trial against the diocese of San Diego slated to begin on 28 February, officials of the SoCal see have spent recent days scrambling. A petition for postponement of the proceedings was filed late last week. Sessions of its Finance Council and College of Consultors were then held on Wednesday, as members of the bodies were briefed on the options and their opinions solicited on the wisdom of bankruptcy and feasible upper limits of a potentially record-smashing settlement. On Monday, a plenary assembly of clergy in the 950,000-member diocese will meet with Bishop Robert Brom on the diocese's fiscal future in light of the 143 unsettled cases. The day was originally planned for spiritual reflection, but the priests will now hear an address from the church's bankruptcy attorney.

Action of some sort is expected sometime before 27 February, a day before the scheduled start of the first trial.

While the mountain of litigation is considerable in itself, its prominence is compounded by the demands of plaintiffs' lawyers for a settlement payment of $2 million per case. The proposal, which would pan out in the range of $300 million, is triple a US diocese's largest payout to date -- the diocese of Orange's $100 million settlement in 2004 -- and easily dwarfs the highest per-victim monetary award for a mass amount of claimants. The dioceses and religious communities of the United States have already spent in excess of $1.5 billion to settle suits brought by survivors of clergy sex-abuse.

This weekend, a letter from Brom read out at Sunday liturgies said that "we must consider how best to fairly compensate the victims while at the same time not jeopardizing our overall mission," warning that a bankruptcy filing could be the chosen option if settlement negotiations fall apart. However, the statement was forwarded with a memo to priests from the diocesan vicar-general's office that presented "what's soon to unfold" as "either a settlement with painful consequences or a Chapter 11 reorganization."

"While we are prepared to continue negotiations and would hope that they would be successful, we have to consider our alternative if they are not," Brom said in his letter to the people.

According to internal diocesan estimates, the chancery can reportedly afford a contribution between $70 and $175 million from its own resources, with an augmentation from its insurance provider expected to add a significant sum to the final amount.

Among several wild cards in the concerns is believed to be the diocese's "designated funds." While senior church officials view it to be safe from court jurisdiction, if exposed to trial without settlements or bankruptcy protection, the potential remains present for the estimated $100 million to be directed toward damage payments, a decision which would likely encite an exhaustive cycle of appeals by the diocese, whose assets are held as a corporation sole.

Since the tidal wave of abuse revelations began rattling US Catholicism in early 2002, four local churches have declared bankruptcy: the archdiocese of Portland in Oregon and the dioceses of Spokane, Davenport and Tuscon, the latter of which was able to put the protection behind it in September, 2005.