ST. PAUL -- The Archdiocese of St. Paul and Minneapolis filed for Chapter 11 bankruptcy in federal court Friday morning.
The move wasn't unexpected. Archdiocese officials had said in recent months that they were considering bankruptcy, after news of a $9.1 million operating deficit for fiscal year 2014 and expectations of more lawsuits by people who say they are victims of clergy sexual abuse, in addition to the more than two dozen that have already been filed lawsuits.
Bankruptcy protection will put any current lawsuits against the archdiocese on hold, including three sex abuse trials that were slated to begin at the end of the month. However, new claims can be filed while the bankruptcy case is active.
In November, the archdiocese said its operating deficit can be partly attributed to $4.1 million spent to address allegations of clergy sexual abuse since May 2013, when a three-year window opened for abuse victims to file claims that were otherwise barred under the statute of limitations.
Archbishop John Nienstedt said at the time that since the statute of limitations was lifted, the archdiocese has settled two cases and 20 trials are scheduled. Victims of past abuse have until May 2016 to pursue litigation.
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"We have no idea how many more legal claims may be made against us in the time that is left," Nienstedt said.
Archdiocese officials said that they have received a "significant number" of notices that more claims will be filed and that the archdiocese could no longer draw from budget reserves.
Total operating revenue for the year ending June 30, 2014, was $25.5 million, compared with $32.7 million in 2013.
That decrease was largely due to a $7.7 million drop when the Catholic Services Appeal was shifted into a separate nonprofit organization at the start of 2014. The move assured donors that their contributions would go directly to specified ministries, instead of flowing through the chancery.
The archdiocese's chief financial officer, Thomas Mertens wrote in the Nov. 20 issue of the Catholic Spirit, the official newspaper of the archdiocese, that bankruptcy reorganization of the Chancery Corporation would not be used "as a tool to avoid compensating victims/survivors."
Instead, he wrote, "it would be a way to respond to all victims/survivors by allowing the available funds to be equitably distributed to all who have made claims, not just those who have the earliest trial dates or settlements."
Merten's piece in the newspaper explained how a reorganization would affect operations:
-- There's an expectation that the court would allow the Chancery Corp. to function as usual.
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-- Parishes and Catholic schools are independently incorporated and would not be part of the reorganization.
-- It's premature to say how the bankruptcy would affect pensions and employee benefits, though a request would likely be made to maintain the plans, something that's been granted in other diocesan reorganizations.
Less than a week after releasing its financial information, the archdiocese filed a federal lawsuit against some 20 insurance companies in an attempt to force them to cover its liabilities for clergy sex abuse claims.
The complaint, filed Nov. 24 in federal court, said the carriers provided liability coverage to the archdiocese going back to the late 1940s through 1986, but had not agreed yet to contribute toward a broad settlement that it's now trying to reach in more than two dozen lawsuits and numerous other claims filed by people who say they were sexually abused by priests.
The suit asks the court to order the carriers to cover the claims and the archdiocese's legal fees.
It remains an open case.
The Pioneer Press is a media partner with Forum News Service.
