Bishops Blocked Bankruptcy IdeaJan 25, 2003 | The Boston Globe The Vatican gave the Archdiocese of Boston conditional approval to file for bankruptcy in December, but put the decision on hold after influential US prelates objected that such a step by a major archdiocese would cause grievous damage to the US Catholic Church, according to people familiar with the internal church dispute.
With the bankruptcy option temporarily out of reach, the archdiocese is facing initial legal demands for $150 million in damages from the first 390 alleged victims of clergy sexual abuse whose lawyers have filed claims, lawyers involved in the negotiations said yesterday. The claims of an additional 110 alleged victims have yet to be filed.
To fund those claims, the church has determined that its insurance carriers are liable for an estimated $60 million to $65 million, although it is by no means certain the insurers will agree. Bishop Richard G. Lennon, the interim leader of the archdiocese, recently disclosed the church is preparing to sell nonparish real estate to fund a substantial portion of the cost of settling the lawsuits.
With a settlement elusive for now, and the bankruptcy option uncertain, even the prospects for negotiations are snarled. By late yesterday, almost all of the lawyers representing victims had agreed to suspend moving their claims toward trial during a 90-day moratorium Lennon had requested so the two sides could focus on a negotiated settlement.
But Mitchell Garabedian, who said he represents about 110 people with claims against the church, has declined to join in. ''I do not hold out much hope for settling these cases. I am continuing to litigate,'' he said yesterday.
Since Dec. 1, when the Globe reported that the archdiocese planned to seek Vatican approval to file for reorganization under Chapter 11 of the federal bankruptcy code, the issue has been a source of controversy. Archdiocesan advisers have portrayed a Chapter 11 filing as the most logical way to bring all of the claims together in an orderly setting that would suspend all civil lawsuits, force the two sides to agree on an amount, and set a deadline for other victims to press new claims.
Lawyers and advocates for victims have expressed suspicions that the church's plan to file for bankruptcy is a thinly disguised attempt to escape from paying the ''fair and equitable'' settlements that Cardinal Bernard F. Law, and now Lennon, have said they are committed to.
Just before Law resigned on Dec. 13, the Vatican gave conditional permission for a bankruptcy filing, but wanted to solicit the views of other US cardinals and bishops before reaching a final decision, one archdiocesan adviser said yesterday. The adviser asked that he not be identified.
Immediately, several influential US cardinals and bishops objected, according to this adviser and others who are familiar with the issue. The adviser and others said the prelates expressed concerns that a bankruptcy filing by the fourth largest American archdiocese would prompt a serious falloff in donations across the country, damage the church's reputation, and create an ominous precedent by opening the church's secret financial records to public view. No American diocese has ever filed for bankruptcy.
The loudest objections have been raised by Cardinal Roger Mahony of Los Angeles, whose own archdiocese is in serious financial straits. Yesterday, according to the Associated Press, Mahony announced that the Los Angeles archdiocese will close its four-year undergraduate seminary amid a falloff in donations.
The Boston archdiocesan adviser said most of the bishops and cardinals who had opposed a bankruptcy filing have subsequently withdrawn their objections. Cardinal Adam J. Maida of Detroit, who is both a civil and canon lawyer, has been studying the issue on behalf of the other bishops. Boston church officials hope the Vatican will soon give its final approval for the filing.
Yesterday, spokesmen for both Maida and the US Conference of Catholic Bishops said they could not comment on the issue. The Rev. Christopher J. Coyne, a spokesman for the Boston archdiocese, also declined to comment, except to say that the archdiocese still considers bankruptcy an option, but has not yet decided whether to employ it. That leaves the church and the lawyers pressing claims with two options: negotiate a ''global'' settlement with the help of mediators who would place dollar values on each claim; or go to trial.
For now, according to lawyers involved on both sides, both paths are being used. Under the so-called moratorium on the civil litigation, both sides would suspend pretrial preparations that include the taking of depositions and the production of documents. But the church has agreed to allow preparations to continue for two lawsuits, both alleging rapes by the Rev. Paul R. Shanley, since the pretrial discovery is all but done.
The Shanley claimants are both represented by the law firm Greenberg Traurig, which has an estimated 225 of the 390 claims for which the $150 million in monetary demands was made.
Under the negotiating process that was established late last year, it is now up to the church to respond. But the archdiocese has already missed a mid-January deadline to make its first counter-offer.
Garabedian, who won a $10 million settlement last year for 86 plaintiffs against defrocked priest John J. Geoghan, has yet to file monetary demands for his clients. He would not discuss his reasons for refusing to join in the moratorium, but other lawyers say he has told them he also has cases ready for trial, and will only agree to a moratorium if the two Shanley cases are also put on hold.
Joseph G. Abromovitz, an attorney who represents six alleged victims of priests, expressed a common view among plaintiff lawyers that the archdiocese has been slow to settle the claims because it has been unwilling to pressure its insurers. With that in mind, Abromovitz said that he favors having the two Shanley cases move toward trial. ''What pressures the insurers to put up money is the prospect that one of these cases will end up in front of a jury,'' he said. ''So I want those cases to go forward. The insurers need a kick in the butt, and those cases will do it for them.''
At the same time, Abromovitz expressed concern that if one of the Shanley cases produced a jury verdict of $10 million to $15 million, that would take a large chunk of money out of the resources the church would have to settle nearly 500 other claims.