Oregon Archdiocese Reorganization Plan Calls for $75 Million Settlement

Settling nearly 170 claims of priest sex abuse would cost the Roman Catholic Archdiocese of Portland about $75 million under a reorganization plan proposed to end the first bankruptcy in the nation filed by a diocese.

Insurance companies have agreed to pay nearly $52 million under the proposal, with the rest of the money coming from various archdiocese assets — but not its parishes and schools.

The reorganization plan, filed Monday just before midnight in U.S. Bankruptcy Court, said 143 claims had been settled for $40.7 million.

The settlement was announced last week in Eugene by U.S. District Judge Michael Hogan and Lane County Circuit Judge Lyle Velure, who had been acting as mediators in the case. The two judges had said insurance would pay roughly the amount indicated in the reorganization plan, but they did not say how much the archdiocese would add.

The reorganization plan would require the archdiocese to provide up to $13.75 million to pay a remaining 26 claims that have not yet been settled. It also would set up a $20 million fund to pay future claims.

The plan must be approved by U.S. Bankruptcy Judge Elizabeth Perris, along with creditors of the archdiocese — including the alleged abuse victims.

The archdiocese was the first in the nation to file for bankruptcy protection in July 2004, taking the action just as a $135 million priest-abuse lawsuit was scheduled to go to trial.

The Catholic Sentinel reported last Friday that that lawsuit was among the settled cases. But there was no confirmation because all the attorneys and parties involved in the bankruptcy are still subject to a strict gag order Hogan imposed until the plan is approved, which is not expected until late spring.

Fred Naffziger, a professor of business law at Indiana University at South Bend, said having the insurance companies agree to pay a large share was “significant progress” in a bankruptcy case marked by “a high level of animosity” for a long time.

As Hogan had said last week, the plan also would ensure that the archdiocese is reorganized so that the parishes and schools will be legally separate in the future. The plan said they will be restructured into “one or more charitable trusts, endowments, nonprofit religious corporations, or other charitable entities that are, under Oregon law, legally separate and distinct…”

The bankruptcy case pitted the federal courts against church law, or canon law, in a dispute over who owns church property. The archdiocese had claimed it merely holds the property of its individual parishes in trust, and cannot sell it to satisfy any judgments.

Perris, however, had ruled that church property and real estate are under the control of the archdiocese, potentially allowing its sale.

The plan noted the archdiocese had already paid out $53 million by 2004 to settle sex abuse claims.

After the Portland archdiocese filed for bankruptcy in 2004, dioceses in Tucson, Ariz., Spokane, Wash., and Davenport, Iowa, have followed. The Tucson diocese has emerged from its bankruptcy.

The Portland reorganization plan comes on the heels of a $60 million agreement announced Dec. 1 by the Archdiocese of Los Angeles to settle 45 sex abuse claims.

Other large settlements include $100 million paid to 87 claimants last year by the Diocese of Orange in Orange County, Calif., and $85 million paid to 552 claimants in 2003 by the Archdiocese of Boston.