Creditors claim that the St. Paul-Minneapolis archdiocese's just-released reorganization plan represents 1 percent of total assets they say approach $2 billion.
Reaching an agreement with the abuse claimants is a major step toward achieving a consensual plan of reorganization for the diocese, which filed its Chapter 11 petition on Nov. 12, 2013.
Lawyers want the Supreme Court to reconsider a ruling that the archdiocese's cemetery trust fund is not shielded in bankruptcy court.
The Chapter 11 bankruptcy was filed nearly four and a half years ago and has accrued at least $16 million and perhaps more than $20 million in legal fees.
"This has been remarkable. I have never felt better about how a Chapter 11 went from start to finish than this one," one lawyer said of the settlement.
The court also found that U.S. District Judge Rudolph Randa, who ruled in the archdiocese's favor, should have stepped aside because of a conflict of interest.
The $1.35 million will come from surplus cash but covers only a fraction of the archdiocese's legal bills so far, which total close to $14 million.
The legal bills are far greater than the $4 million the archdiocese offered survivors of sex abuse before filing for bankruptcy on Jan. 4, 2011.
Lawyers have asked the appeals court to remove a judge's decision, saying that the concern was for "his endorsement of the religious faith."
There are still major hurdles before the Milwaukee archdiocese's bankruptcy plan is presented for a vote by claimants, of whom 575 are survivors of sexual abuse.