c. 2005 Religion News Service

(UNDATED) One year ago, Portland Archbishop John G. Vlazny stood before a knot of reporters, microphones and hot TV lights and announced what he later called “one of the most difficult decisions I ever had to make.”

The normally upbeat clergyman had just directed his lawyers to put the Archdiocese of Portland into federal Bankruptcy Court.

The July 6, 2004, statement was historic: Never before had a U.S. Roman Catholic diocese declared bankruptcy in the wake of sex-abuse claims.

Other dioceses, such as Boston, avoided bankruptcy by selling assets to pay for settlements with men and women who said they had been molested, raped or abused by priests and nuns.

Vlazny though thought he had no choice but to take a dramatically different path.

The Portland archdiocese, facing the opening day of jury trials seeking more than $155 million in damages, chose to use the protection of bankruptcy law to work out settlements with about 60 pending sex-abuse claims while preserving enough money to fund its religious work.

One year later, it’s still too early to tell whether the strategy is working. The archdiocese has spent nearly $4 million in legal fees, its $500 million worth of parish property is still in limbo, its pending sex-abuse claims have quadrupled to nearly 250, and it must comply with a court order that makes it vulnerable to certain future sex-abuse claims for decades to come.

Moreover, the archdiocese faces the possibility of years of legal appeals over its property and won’t emerge from bankruptcy until next year at the earliest.

On the other hand, the case is positioned to move forward, with mediations in the sex-abuse cases beginning next month and legal arguments in the parish property dispute starting as soon as U.S. Bankruptcy Judge Elizabeth Perris certifies a class-action lawsuit. And the archdiocese is continuing its missions, with its new general operating budget showing an 8 percent increase over the fiscal year that ended June 30.

As painful as the past year has been, the archbishop’s only regret is that he didn’t take action sooner.

“In truth, we had no choice,” Vlazny said last week in a statement conveyed by archdiocese spokesman Bud Bunce. “The demands far exceeded our means. They still do. The process has become more contentious among the parties involved and less favorably received by the media and general public, which is disappointing.

“But the possibility of being able to respond fairly to all demands rather than to those first in line and to continue our evangelizing mission, albeit in a more limited way, makes me satisfied with the decision.”

But some archdiocese adversaries _ particularly the dozens of alleged victims who were seeking their day in court, only to see it put on indefinite hold _ think the bankruptcy allowed the archdiocese to dodge responsibility.

“I was befuddled by the decision of the archdiocese to file bankruptcy when it was totally unnecessary,” said plaintiffs’ attorney David Slader, who represents a dozen sex-abuse claimants, “and nothing that has occurred in the last year has changed that view.”

Slader contends the archdiocese, like Boston, had enough assets to compensate victims fairly without having to declare bankruptcy.

Slader’s contention will be tested next month, when four court-appointed mediators try to settle the first 70 pending claims against the archdiocese.

The archdiocese hopes the mediations will resolve most of the cases, with payments coming out of the $19 million the church says it owns in real estate, cash and investments.

“The archdiocese expects the average settlement amount to be significantly less than it has been for previously settled claims,” the church said in a statement last week to The Oregonian newspaper. The archdiocese’s settlements in more than 100 claims before the bankruptcy averaged nearly $400,000 per claim.

“Failure to resolve the claims by settlement could result in years and years of trials, while valid claimants will have to wait to be paid until all trials and appeals are concluded,” the statement added.

One wild card is the possibility of future claimants _ those individuals who file valid sex-abuse claims after the deadline, which ended April 29.

Perris offered no surprises when she ruled that the deadline didn’t apply to two categories of claimants: any sufferer of repressed-memory syndrome who didn’t remember the abuse before April 29 or any minor whose parents or guardians hadn’t filed a claim by that date.

But she handed plaintiffs a controversial victory when she allowed legal representation for a third category of future claimants: those who remembered the child sexual abuse but had not, by April 29, figured out that the abuse caused injuries such as addictions or emotional problems.

“The appointment of a future claims representative over the opposition of the archdiocese and the insurance carriers was a major event in this case,” said Albert N. Kennedy, the lead lawyer for the tort claimants committee, which represents all sex-abuse plaintiffs in the bankruptcy.

Kennedy called it a matter of first impression, meaning that the judge’s order was the nation’s first clear judicial pronouncement on the issue.

The archdiocese has appealed Perris’ order three times _ twice to the U.S. District Court, which upheld Perris, and once to the 9th U.S. Circuit Court of Appeals, where it awaits legal arguments beginning late next month.

Despite its appeals, the archdiocese said it’s not worried about future claims, given its own efforts to protect children, intense publicity, advertising by plaintiffs’ attorneys and widespread notice of the claims deadline.

“We believe that the number of valid, compensable claims that may be filed after April 29, 2005, will be very few, if any,” the archdiocese said in its statement.

If the mediations go as the archdiocese hopes, another controversial issue _ who owns $500 million of parish property _ could become moot. For now, though, the property issue is the central unresolved legal question in the bankruptcy.

The stakes are huge. If the court sides with sex-abuse plaintiffs in finding that the parishes’ real estate, cash and investments are truly under the ownership and control of the archdiocese, those assets become available to pay settlements.

“If there’s a decision on the property issue, the implications go way beyond the Catholic church,” said David Skeel, a law professor and bankruptcy expert at the University of Pennsylvania. “There’s a whole confusing case law (about church property ownership). Who owns the buildings, the congregation or the denomination?”

MO/JL END RNS

(Steve Woodward writes for The Oregonian in Portland, Ore.)

Editors: Search the RNS photo Web site at https://religionnews.com for photos of Vlazny to accompany this story. See sidebar, RNS-BANKRUPT-OTHERS.