Judge dismisses nine claims brought by sex abuse survivors in Milwaukee bankruptcy case

This article appears in the Milwaukee bankruptcy feature series. View the full series.

Milwaukee — The judge in the Milwaukee archdiocese bankruptcy case on Wednesday dismissed nine claims brought by sexual abuse survivors, a move that a church spokesman said could affect many of the more than 570 claims filed against the archdiocese.

Another claim was allowed to go forward.

Judge Susan V. Kelley found that there was no evidence supporting the contention in the nine cases that the archdiocese knowingly allowed abusers to work in parishes or other settings where they came into contact with additional victims. She refused to dismiss a 10th case, finding that there was evidence to support the prior-knowledge claim.

The distinction is important because the Wisconsin Supreme Court earlier ruled that the archdiocese could not be sued for negligence in supervising its abusive priests and other employees but in a later case found that it could be sued for fraud if it knew of an abuser and continued to allow him or her to work and abuse others. While the ruling applied to state court, it was the basis of several cases that were put on hold after the bankruptcy was filed.

In none of the cases decided Wednesday was the archdiocese disputing that the abuse occurred. Instead, the question revolved around legal issues, including whether the statute of limitations had expired before a claim was filed and whether the archdiocese was responsible for religious order priests and other employees.

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Michael Finnegan, a St. Paul, Minn., lawyer representing a number of the survivors in claims outside of bankruptcy court, said his firm would likely appeal the decision once the judge enters it into the court record. He also disputed the contention that it will have an impact on other claims.

"We did not have an opportunity to gather evidence in any other case," he said.

A spokesman for the archdiocese disagreed, saying these nine and other similar claims would be eligible for therapy through Catholic Charities but not for financial compensation.

"It applies to other claims, but it is not about throwing out claims, it is about how they are classified for compensation in the reorganization plan," said Jerry Topczewski, a spokesperson for the archdiocese.

In court, there was significant discussion about whether the therapy would be at the discretion of the archdiocese, as stated in the reorganization plan submitted by the archdiocese, or whether survivors were automatically eligible for therapy. Kelley voiced concern that the church would determine whether survivors would be eligible for therapy, but lawyers for the archdiocese said they believed the survivors automatically eligible.

The finalization of the bitterly disputed bankruptcy case is awaiting a decision by the 7th Circuit Court of Appeals in Chicago and involves some $60 million that was transferred from the archdiocese's general fund into one fund for the maintenance of nine cemeteries shortly before the bankruptcy was filed. The archdiocese asserts that the money was always maintained separately within the general fund while the claimants say it was a deliberate attempt to protect the money from the bankruptcy.

Kelley ruled that the money should be part of the bankruptcy estate but was overruled by U.S. District Judge Rudolph Randa. Lawyers for the claimants say Randa should have stepped aside because he had a financial interest in the cemeteries, one of which contains a family crypt.

The appeals court heard arguments on the case and is expected to rule on the dispute soon. Kelley said she will not rule on another key issue until the appellate decision is rendered.

The second issue is whether the archdiocese was able to reach an agreement with its insurance companies without the input of the survivors.

Most of the insurance money was to be used to pay some of the soaring legal fees for the case that has been in the courts more than four years.

Exactly how much the bankruptcy case has cost the Milwaukee archdiocese in legal fees is in dispute. Finnegan, a lawyer representing many of the survivors, claimed in court papers last year that the cost exceeded $20 million.

Topczewski, speaking for the archdiocese, disputed the figure but in a recent exchange of emails with NCR acknowledged almost $17 million in legal or related bills as of the end of October 2014, not including the cost of the legal dispute involving the Archdiocesan Cemetery Trust Fund.

Topczewski said the archdiocese, as the creditor in the case, is obligated to pay legal expenses for both the archdiocese and the creditors. He said in most bankruptcies, the bills for the creditors are about 25 percent of the total, but in this case, the legal fees are almost half. He said the archdiocese has accrued $8 million in legal fees and the creditor attorney fees were about $7 million plus an additional $800,000 in professional fees.

"So that would easily get the creditors over the 50 percent mark in creating the expenses, vs. the typical 25 percent," Topczewski wrote.

He also said the archdiocese disputes some of the fees from the other side. 

"Because of the time, I am going to give you approximations," he wrote. "It is too difficult to dig through everything and get exact numbers. We simply don't have time."

Peter Isely, Midwest director for the Survivors Network of those Abused by Priests, said in a statement after the hearing: "One can only wonder: why did it take four years and millions of dollars to figure out only now that these cases don't have legal merit?"

He said the federal court should not have accepted the bankruptcy petition.

"The archdiocese never intended to bring healing and restitution to victims," Isely said in the statement. "What it has done, besides increasing exponentially the pain and suffering of survivors and their families, is bar victims from seeking justice in state courts and herd them into federal bankruptcy. Now, instead of being a victim of child rape or a plaintiff in a terrible negligence act, you're a consumer or a creditor trying to get your bill paid." 

[Marie Rohde is a freelance writer based in Milwaukee.]


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