Judge strikes church sex abuse settlement

The Associated Press/April 23, 2006

Spokane — A federal bankruptcy judge says the nearly $46 million settlement between the Roman Catholic Diocese of Spokane and sex abuse victims is legally unacceptable.

In a hearing Friday, Judge Patricia Williams said the deal can’t be approved because it favors one group of victims over another.

“This settlement violates a rule that requires fair treatment,” Williams said, adding that bankruptcy “can’t treat people differently.”

The diocese filed for Chapter 11 bankruptcy protection in 2004 because of sex abuse claims and has offered to settle the claims of 75 victims for $45.7 million. More than 100 other claims have been filed since.

The diocese is reviewing “claims of proof” filed by claimants not covered by the so-called “universal settlement,” but no sum has been attached to their claims.

Williams stopped short of ruling against the settlement offer, but warned attorneys for both sides that she expected the matter to be settled quickly.

“If we don’t have a confirmed plan by this fall, I will seriously entertain a motion to dismiss this case,” Williams said.

A hearing is scheduled for May 15.

Shaun Cross, a lawyer for the diocese, said he’s confident the settlement can be restructured.

The diocese serves about 90,000 Catholics in 82 parishes in 13 Eastern Washington counties.

The parishes, represented by the Association of Parishes, were largely left out of discussions during settlement negotiations.

They have appealed a ruling governing the ownership of churches and schools.

Williams agreed that they must play a part, and said she doubts that she could legally order the association to withdraw or terminate its appeal of her ruling that parish property belongs to the diocese.

“I think the parish is a 900-pound gorilla in the settlement,” she said. “If the Association of Parishes doesn’t agree with this settlement, I think it’s a futile act because I don’t think I can impose on the AOP a requirement that it withdraw its appeal.”

John Munding, an attorney for the association, said parishes are clearly opposed to the current offer. It forces them to act as unlimited guarantors of the diocese, a position that isn’t acceptable.

“Maybe it’s time to invite the Association of Parishes and (other victims) into the negotiations,” said Ford Elsaesser, another attorney representing parishes.

Bishop William Skylstad has said church officials are working to find ways to pay the claims, but there are no plans to sell church assets.

On Thursday, Skylstad announced a settlement with two of its insurance carriers in a dispute over coverage of sex-abuse claims.

Indiana Insurance Co. will pay the diocese $2.75 million for policies issued between 1977-79 and Aetna Insurance Co. will pay $1.5 million to settle claims for a policy issued in 1981.

Last month, the diocese reached a settlement with General Insurance Co. of America, a subsidiary of Seattle-based Safeco Insurance, for $5.25 million.

The diocese has claims pending against three other insurers, and a trial to resolve them is scheduled to begin in October, said attorney Greg Arpin, who represents the diocese in its bankruptcy case.