Milwaukee archdiocese seeks settlement that would double money for abuse survivors

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

by Marie Rohde

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The Milwaukee archdiocese has asked a bankruptcy judge to approve a $10.3 million settlement with three insurance companies, saying that half would go into a fund for the survivors of clergy sexual abuse, but a lawyer representing survivors said all but about $2 million has already been accounted for in the archdiocesan plan to end the bankruptcy.

St. Paul, Minn., lawyer Michael Finnegan said in an interview with NCR that the motion to approve the settlement is deceptive in that it implies that there will be $10.3 million in additional funds. However, the archdiocese earlier listed $8 million in an earlier proposal. "It's very hard to read," he said."We are going to ask the judge not to approve the settlement."

The archdiocese and the insurance companies -- London Market, OneBeacon, and Stonewall -- have been negotiating for more than four years and entered into mediation several times. According to the proposed agreement, the insurance companies will buy back policies for a total of $10.3 million. Half of the money will go to a fund for victims, and the other half will go toward legal fees that now amount to more than $18 million, some of which has already been paid.

The settlement agreement will not be finalized until approved by the bankruptcy judge, Susan V. Kelley, and is likely to be opposed by survivors who have filed claims, according to a lawyer and a survivor representative. Kelley could approve the agreement without the go-ahead, but it is unlikely, as no other diocesan or religious order bankruptcies have proceeded in the face of such opposition.

Jerry Topczewski, a spokesman for the Milwaukee archdiocese, said in a statement: "Because of the archdiocese's relentless pursuit of a settlement with insurance carriers, it has brought more than $10 million into the plan of reorganization which benefits abuse survivors and it brings us another step closer to a resolution of the Chapter 11 proceeding."

But Peter Isely, Midwest regional director for Survivors Network of those Abused by Priests and one of the claimants in the bankruptcy, described the proposed settlement as "a Christmas gift for lawyers" and said it likely would not be approved by the committee of creditors.

"I suppose that we can safely conclude that after almost four years where justice for victims has not been pursued much in court we can always have confidence the billable hours [of the lawyers] will be."

He said the $10 million would amount to $15,000 for each of the 575 claims. "If you figure about a dozen lawyers working in earnest, more or less, that's about $1.2 million [billed] per lawyer. But again, the fees are still rising."

Topczewski did not respond to a question about how the additional legal fees would be covered.

The lawyers for the insurance companies have denied that they have any liability for the claims and state court decisions and, at least for now, back that position.

A pair of Wisconsin Supreme Court rulings in the mid-1990s found that the archdiocese could not be sued for negligent supervision of its priests, decisions that effectively stopped a number of lawsuits in their tracks. After the high court decision, lawyers for the archdiocese obtained judgments against some victims for court costs. Several years later, the door to lawsuits was opened slightly when the state's high court ruled that the archdiocese could be sued for fraud if it knew a priest was an abuser but allowed him to remain in ministry and he abused again. In the bankruptcy court proceedings, the archdiocese has argued that under this legal finding, the first victim of a priest, even a notorious abuser, is not eligible for a financial settlement.

State trial and appellate courts ruled that the insurance companies were not required to pay damages in the fraud cases because fraud is considered an intentional act. That and the specter of additional claims resulted in the archdiocese demanding that the cases go to mediation. The archdiocese offered about $4 million to settle the claims. When the offer was rejected, the archdiocese filed for bankruptcy in January 2011.

A score of cases brought by survivors were about to go to trial when the archdiocese filed for bankruptcy protection, and the filing put the state court lawsuits brought by those victims on hold. The proposed reorganization would end all of those lawsuits and prevent others from going to court.

Lawyers for both the archdiocese and the insurers said the agreement is the best deal possible for the archdiocese and the claimants.

Said lawyers for the archdiocese in a recent court filing: "If the court does not approve the settlement, the chances of recovery from any of the settling insurers is slim."

Noting that the insurers had already won a significant battle in state court -- that they did not have to pay damages for intentional acts -- lawyers for the insurers also noted that they only have to pay a claim after a court rules on the validity of a specific claim.

While lawyers for the archdiocese argued that Lloyd's of London, which operates under London Market Insurers, was responsible for up to $10 million for each occurrence of abuse, the insurer could be responsible for $1.32 billion if each claim won a judgment for only one instance of abuse.

The insurer responded that the majority of the claims are without legal merit, a position the archdiocese has also taken in the bankruptcy court. (Of the 575 claims, the archdiocese has said that only 120 or so are eligible for financial settlements and continues to deny that any of the claims are valid.)

Lawyers for Lloyd's said in court documents that they do not have to pay claims but that they agreed to enter into the settlement to bring an end to the continuing litigation and the pursuant costs. Noting that the Lloyd's portion of the settlement is $8 million, the lawyers said continuing the litigation could result in a less expensive resolution but that they "wish to bring all litigation, current and future, to a halt now" and that they prefer to provide money for claims rather than court costs.

The deal is contingent on all people who have claims to release the insurers from further legal action.

A decision on the bankruptcy was put on hold pending a decision by the U.S. 7th Circuit Court of appeals on other matters, most importantly the fate of an estimated $57 million that had been moved by then-Milwaukee Archbishop Timothy Dolan into a fund for the perpetual care of nine archdiocesan cemeteries. Kelley, the bankruptcy judge, ruled that the money could be considered part of the bankruptcy estate and used to pay claims, but she was overruled by a federal district judge in Milwaukee, Rudolph Randa. The appellate court is also considering a request that Randa be removed from the case because of a conflict of interest: Several of his family members are entombed in one of the cemeteries, and he owns plots there. Those decisions are expected to be released soon.

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

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