Diocese Mediation Starts Today
No Major Breakthroughs Expected in Meeting with Bankruptcy Judge
By John Stucke
Spokesman-Review [Spokane WA]
July 7, 2006
Mediation of the Catholic Diocese of Spokane's bankruptcy case is scheduled to begin today in Nevada following several major legal developments that have reshaped the case.
The region's Catholic parishes, worried about the potential sale or mortgage of churches and other properties to settle clergy sex-abuse claims, enter into the mediation with more leverage as a result of recent legal rulings.
The one-day mediation session led by U.S. Bankruptcy Judge Gregory Zive of Reno is not expected to achieve a breakthrough.
The sides have already agreed to a weeklong August session in Spokane.
But after a sluggish start, the year-and-a-half-old case has taken dramatic turns during the past several months.
The first was rejection by U.S. Bankruptcy Court Judge Patricia Williams of a $45.7 million settlement that Bishop William Skylstad offered to a group of 75 sexual-abuse victims. Despite Williams' ruling, the bishop and the 75 victims had continued working together to salvage at least part of the agreement.
Last month, however, in the run-up to today's mediation, the bishop formally rescinded the offer.
The second big development is an appeal ruling by Senior U.S. District Judge Justin Quackenbush last month.
He reversed an earlier finding by Williams and ruled that parishes own their churches and schools, rather than the diocese, and sent the case back to Williams for further proceedings.
Attorneys for the diocese and parishes say Quackenbush's reversal was so sweeping and strongly worded that Williams has little room to find once again that the diocese owns parish property such as churches and schools.
Victims' attorneys, who argued successfully last year that the diocese owns the property, urge caution in interpreting the ruling.
They insist Quackenbush simply remanded the case to Williams to conduct evidentiary hearings and perhaps order 82 separate trials to resolve the ownership dispute parish by parish.
The question of who owns the parishes is at the financial heart of the case and could determine how much money victims are entitled to in the bankruptcy.
As the case enters its mediation phase, the diocese announced late Thursday that it had secured another $4.5 million from its two remaining liability insurers.
Conglomerate CNA will pay the diocese $3.5 million. The Washington Insurance Guaranty Association, which took over the policies of defunct Home Indemnity Co., will pay the diocese $1 million.
The CNA and Guaranty Association deals bring the insurance pool to about $20 million.
When combined with an expected $8 million to $10 million from the sale of diocese property, such as the chancery in downtown Spokane, and 92 acres of rural land outside the city limits, along with an additional $7 million in financing from associated Catholic groups such as nonprofit Catholic Charities and Catholic Cemeteries, the diocese is approaching $35 million to $40 million to pay settlements with victims and accrued lawyer fees.
The mediation will attempt to determine a final number to settle the case.
The Association of Parishes has said it expects to contribute a substantial sum.
Lawyers representing the AOP, along with the member priests and parish leaders, have declined to speculate how much money that might be.
Yet the AOP strongly objected to the $45.7 million settlement, saying that is far too much money for what is considered a poor diocese.
The parishes were fearful that the diocese settlement offer would set the bar so high that other victims – perhaps more than 50 – would also be entitled to similar settlement amounts averaging more than $600,000 per person.
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