Judge Rules Trust Fund Off-Limits to Settle Any Abuse Claims

The Associated Press, carried in KGW [Portland OR]
July 21, 2006

A federal bankruptcy judge has ruled that the Roman Catholic Archdiocese of Portland cannot be forced to liquidate a $36 million trust fund to pay any claims resulting from sexual abuse lawsuits against priests.

The decision Thursday by U.S. Bankruptcy Judge Elizabeth Perris was considered a victory for the archdiocese, which two years ago became the first Catholic diocese in the United States to seek bankruptcy protection from priest abuse lawsuits.

Dioceses in Spokane, Wash., and Tucson, Ariz., followed with bankruptcy filings of their own.

Late last year, Perris ruled that a test group of nine Catholic churches and one school could be sold, a major victory for those who claim to be victims of priest sex abuse.

The archdiocese appealed, and a federal judge is expected to review the ruling in the fall.

Last month, U.S. District Judge Justin Quackenbush reversed a federal bankruptcy judge in Washington state by ruling that Catholic churches were off-limits in the Spokane bankruptcy because the diocese held them in trust for the parishes.

Church lawyers have argued that most of the assets are held in trust and cannot be used to pay claims while attorneys for priest accusers contend the church has hundreds of millions in real estate and cash available.

Part of their argument the church has plenty of cash was the existence of the $36 million Perpetual Endowment Fund, which Perris took off the negotiating table.

Perris, however, said that income the archdiocese receives from the fund might be available for settling priest abuse claims.

The archdiocese has proposed that about $40 million would be enough to settle about 125 pending priest-abuse claims.

Lawyers for priest accusers have not said how much it will cost, but they oppose any cap on payments, saying the church has more than enough money.

The immediate impact of Perris' ruling on the Portland bankruptcy case is unclear. More than two years into the bankruptcy, there is no indication the two sides are close to an agreement on how to settle the case. If there is no settlement, the litigation with appeals could take years.

While the bankruptcy case continues, priest abuse suits are expected to begin going to trial in the fall. Perris said she hopes a few verdicts will help both sides see the true value of the cases and reach a settlement.

Church officials said they wanted to settle the case soon.

Albert Kennedy, lead bankruptcy attorney for the priest accusers, did not return a call seeking comment.


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