Milwaukee Archdiocese, insurers may be near settlement on abuse claims

(Journal Sentinel) The Archdiocese of Milwaukee and its insurance companies may be poised to reach a settlement that could fast track a resolution of its nearly 3-year-old bankruptcy, but lawyers for sex abuse victims with claims against the church are objecting, saying any settlement talks must include victim-survivors.

The archdiocese has asked U.S. District Judge Rudolph T. Randa to stay its lawsuit against Stonewall Insurance Co. and others carriers for 60 days so the parties can enter mediation, a move that would presumably also put on hold Randa’s pending decision on whether the insurers are liable for sex abuse claims against the archdiocese.

Attorneys for victims oppose the stay, saying any delay would prejudice those creditors and that a definitive decision from Randa on the insurance question is needed to move the case forward.

“We need a decision on the insurance coverage to guide the parties,” said attorney Michael Finnegan, whose firm represents most of the 570-plus sex abuse victims with claims in the bankruptcy. “And we are concerned about any talks between the insurers and the archdiocese that do not include survivors.”

The archdiocese’s attorneys were not permitted to comment on the case. However, church spokesman Jerry Topczewski said in an email that the church “is committed to doing whatever it can… to move the bankruptcy forward.”

James Stang, who represents the bankruptcy creditors committee composed of victims, declined to comment on the archdiocese’s motion, saying the committee is not a party to the dispute. But he agreed with Finnegan that any settlement talks need to include the creditors.

The archdiocese’s motion comes at a critical juncture in the bankruptcy. Randa is expected to rule soon on whether the church can tap its insurance policies to help fund a settlement in the bankruptcy.

Those policies, which could be worth tens of millions of dollars, are one of the last large pools of money currently available for a settlement.

Randa has already ruled that forcing the church to tap any of the $50 million or more it holds in a cemetery trust would substantially burden its free exercise of religion under the First Amendment and a 1993 law aimed at protecting religious liberty. The creditors have appealed that decision, but that is on hold while Randa decides whether to set aside his ruling and recuse himself from that case, as the creditors have asked him to do.

Bankruptcy Judge Susan V. Kelley has ruled that the archdiocese’s parishes are off limits because they are separately incorporated. And the church and its creditors have agreed to postpone any potential fight over what is known as the Faith in Our Future Fund, a trust created by the church to hold the proceeds of a $105 million capital campaign it launched in 2007.

The archdiocese filed for Chapter 11 bankruptcy protection in January 2011 to deal with its mounting sex abuse claims, one of nine Catholic dioceses in the United States to do so. The Milwaukee case has been one of the most contentious, with victims and the church blaming each other for the protracted proceedings.

Since the beginning, both sides have engaged in what one court official called a “scorched earth battle” over which claims are eligible for compensation and the church assets available to pay them.