Milwaukee archdiocese asks Supreme Court to consider ruling on cemetery fund

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

Lawyers for Milwaukee Archbishop Jerome Listecki have asked the U.S. Supreme Court to reconsider a federal appellate court ruling that a $55 million-plus cemetery trust fund is not shielded in bankruptcy court by the federal Religious Freedom Restoration Act (RFRA) and the First Amendment.

Chances that the court will accept the case are slim. Of the more than 10,000 requests, the Supreme Court only accepts about 80 a year. A key factor in deciding what cases to accept is whether there are contradictory opinions on the key issues among the 13 federal appellate courts.

"That split does not exist," said Marci Hamilton, a law professor at the Cardozo School in New York*, where she specializes in cases involving the religious freedom act. "The 7th Circuit wrote a complete and virtually unassailable decision in the Milwaukee case."

Timothy Nixon, a lawyer for the cemetery trust fund, disagreed. In a written statement, he said:

"The 7th Circuit decision encroaches on religious freedom and curtails the protection in the First Amendment for the free expression of religion. The 7th Circuit decision is also directly at odds with previous decisions rendered by at least three other federal appeals courts in different parts of the country."

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He added that disagreement among the lower court means that "the Supreme Court's intervention is urgently needed to protect religious freedoms the 7th Circuit's decision threatens and to restore the free exercise of religion protections the decision rolls back."

The key feature of the decision in the Milwaukee case was the question of whether RFRA can be used by a religious institution in lawsuits involving nongovernment litigants. The three-judge panel in the Chicago-based 7th Circuit found that the protections provided by the act only applied to the government.

The Milwaukee dispute is between the Milwaukee archdiocese's cemetery trust fund and the committee representing those who have filed financial claims, most of them survivors of sexual abuse by priests and others associated with the church. Listecki, as archbishop, is the sole trustee for the fund.

The cemetery trust was established in 2007 by then-Archbishop Timothy Dolan, now cardinal of New York, for the perpetual care of nine cemeteries owned by the archdiocese. Parish-owned cemeteries are not covered.

The fund is the single largest asset in the bankruptcy that was filed nearly five years ago.

The creditors committee argues that the money should be considered in settling the claims against the archdiocese.

The archdiocese argues that the trust fund supports an essential element of the Catholic faith, the belief in the bodily resurrection after death.

The decision could have far-reaching implications, including implications for other dioceses and religious orders that file for bankruptcy protection.

James Stang, a lawyer representing the claimants in the Milwaukee case, said a number of states have local laws similar to the federal RFRA that allow some cases to be handled at the state level.

"In states that do not have these laws, bankruptcy is seen as a way of shielding assets from creditors," he said. "This decision means they can't hide under RFRA anymore."

Hamilton agreed but added that if the Supreme Court takes the case and rules in favor of the archdiocese, it could have another impact: It could affect the same-sex marriage, particularly in the 20 states that have a state version of the religious freedom law*.

"They will argue that florists, bakers and others not affiliated with the government can discriminate and refuse to provide services for gay weddings because their statute is modeled after the federal law," she said, adding that the cases would be filed in state courts.

"Their opposition to same-sex marriage is the real subtext to why they are bringing this action," Hamilton said. "It's really very clever."

Last year, the Supreme Court found that the RFRA protection applies to corporations in a case brought by family-owned business, Hobby Lobby. Based on the religious beliefs of the owners, the corporation objected to providing contraception as part of its employee health insurance coverage as required by federal law. The court ruled that there are other ways in which the government could ensure that women have access to contraceptives.

After the 7th Circuit ruling on the Milwaukee bankruptcy, the archdiocese announced that it was revising its reorganization plan, its proposal for satisfying its debts and emerging from bankruptcy. That revision is expected to be filed in August and a confirmation hearing is scheduled to begin Nov. 9.

While the archdiocese maintains the trust fund is off limits, it did borrow $2 million from it for the reorganization. Lawyers have not said if additional funds will be included in the revised plan.

 "The archdiocese plans to move forward to bring this proceeding to closure as quickly as possible according to the timetable put in place by Judge Kelley and we are working diligently toward an amended Plan for confirmation by the court in November," said Jerry Topczewski, a spokesman for the archdiocese.**

Stang, the lawyer for the claimants, said "legally, he's right, but I don't know what [Bankruptcy Judge Susan V.] Kelley will do."

Peter Isely, speaking for the Survivors Network of those Abused by Priests, said the appeal to the Supreme Court was a continuation of the archdiocesan lawyer's "verbal threat in open court to spend down the remaining money left in their estate to prevent 575" claims from receiving restitution. While not denying the abuse occurred, the archdiocese has claimed that none of the 575 claims have legal merit and are willing to compensate only about 125 of those filed.

"The bankruptcy was filed to prevent restitution to victims by deploying the federal bankruptcy system and so-called 'religious freedom' to shield Listecki, Dolan and dozens of child sex offenders from the consequences of their criminal conduct and cover-ups," Isely said.

Hamilton said she would file a response to the request by the cemetery trust within 30 days*.

The Supreme Court can take several months to decide whether it will accept a case.

*This story has been updated with various corrections.

**This story has been updated with Topczewski​'s comments.

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

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