Now Might Be the Time for the Longest Pending Catholic Diocese Chapter 11 Case to Settle

The Archdiocese of Milwaukee is one of 11 dioceses (plus 2 other Catholic-affiliated religious orders) to file under Chapter 11 -- and it likely will not be the last. All of the cases were filed in hopes of achieving global settlements of sexual abuse claims. The Milwaukee Archdiocese filed over 3.5 years ago, in January 2011, making it the longest running Diocese case. 6 of the 7 other dioceses that filed before it confirmed reorganization plans in an average of about 2 years after filing. The shortest time to confirmation was 10 months, while the longest was 2.75 years. The other diocese, San Diego, negotiated a settlement, via mediation, in approximately 9 months.

The Milwaukee Archdiocese and its creditors (predominately abuse claimants) have spent the last 3.5 years, despite a trip to mediation in 2012, primarily fighting over a $55 million trust fund established to pay for upkeep of the diocese's cemetery. Without the $55 million, abuse claimants are likely to receive no more than $4 million. The $4 million figure would be smallest settlement paid to abuse claimants in any of the Catholic Church bankruptcies so far. The cemetery trust issue is pending before the 7th Circuit. Meanwhile, attorneys' and other professionals' fees are rising, leading Judge Kelley to order the parties back to mediation, starting tomorrow.

The outcome of the trust litigation likely will affect the future Chapter 11 cases of other dioceses and Catholic religious orders -- that is, if the parties do not settle before the 7th Circuit hands down its decision. Though it may seem like there are good reasons for both sides to come to some agreement that moves the case forward significantly, given its potential to be a game changer, I think that the Archdiocese might be willing to wait for the 7th Circuit's decision. Earlier this week, I talked with the Associated Press about this and the other main issues that might come up during the mediation. To read more, see here and here.