Spokane Diocese Appeals Bankruptcy Ruling

SPOKANE, Wash. (AP) — Victims of sexual abuse by priests were sharply critical on Wednesday of the Catholic Diocese of Spokane for appealing a bankruptcy judge's ruling that churches and parochial schools can be sold to pay claims filed by victims.

In an appeal filed late Tuesday in U.S. District Court here, lawyers for Bishop William Skylstad wrote that U.S. Bankruptcy Judge Patricia C. Williams erred in her analysis in 11 areas and wrongly ignored evidence and centuries of religious law.

Lawyers for individual parishes facing potential loss of churches and schools joined in the appeal. Skylstad is the head of the U.S. Conference of Catholic Bishops, and the outcome of the Spokane case is likely to have national implications.

"Sadly, Skylstad is choosing combativeness over compassion, delay over closure, hardball over healing, and his own selfish needs over the needs of his diocese and its child sex abuse victims," said David Clohessy, national director of Survivors Network of Those Abused by Priests, an advocacy group for victims.

Skylstad was out of town Wednesday and not available for comment, his office said. He said previously that he had to appeal because he has an obligation to the parishioners to continue the ministry of the Spokane Diocese.

Skylstad's decision to file for bankruptcy is being closely watched by other dioceses that are facing lawsuits in the national clergy sex abuse scandal.

The Spokane Diocese contends that Skylstad does not own or control more than 80 individual parish churches and other Catholic institutions in his diocese, and cannot sell them to raise money to pay victims.

An editorial in the National Catholic Reporter this week sharply criticized the Diocese of Spokane and the Archdiocese of Portland, Ore., for seeking bankruptcy protection and for trying to limit the size of the pot of money available to victims.

"Power in the U.S. church, ownership if you will, clearly resides with individual bishops in their dioceses," the editorial said. "It is disingenuous to say that it doesn't exist. Bishops answer to Rome and, presumably, to God, but not to their pastors and certainly not to the people in the pews."

In a related development, the Roman Catholic Diocese of Tucson, Ariz., plans a series of meetings next month for parishioners and parish leaders that will pave the way for separately incorporating parishes, a move aimed at protecting them from being sold off to pay diocesan debt.

The Tucson diocese filed for bankruptcy reorganization last year, and recently settled with victims.

At least seven other U.S. dioceses have already made their parishes separate, corporate entities. They include the archdioceses of New York and Milwaukee, and the dioceses of Rhode Island; Davenport, Iowa; Stockton, Calif.; Lincoln, Neb.; and Baker, Ore.

In Portland, where the archdiocese was the first in the nation to file for Chapter 11 protection because of sexual abuse claims, a bankruptcy judge has ordered mediation to try to resolve the lawsuits without ruling on the ownership of churches and schools.

The Diocese of Spokane, which serves more than 90,000 Catholics in more than 80 Eastern Washington parishes between British Columbia and Oregon, sought Chapter 11 protection in December, listing $11.1 million in assets and $81.3 million in liabilities, mostly sexual abuse claims.

Church officials believe the diocese also can muster about $15 million from insurance policies to pay claims.

After two months of deliberation in a largely uncharted area of the law, Williams on Aug. 26 ruled that all of the real estate under the control of the Spokane Diocese could be available to victims who have sued the church. The value of that real estate has been estimated at some $80 million, although formal appraisals have not been conducted.

The judge had previously acknowledged that she expected her decision to be appealed.

Shaun M. Cross, a lawyer for the diocese, said the outcome of the Spokane case will have major implications.

"Whether the assets of the parishes and schools are property of the bankruptcy estate is an issue of national significance," the appeal said.

Moreover, the Spokane Diocese cannot produce a detailed plan to emerge from bankruptcy, which is due in mid-October, without a clear determination of the value of the estate that would be available to creditors, the appeal said.

Cross said that filing for bankruptcy protection was likely inevitable, because there are 19 lawsuits scheduled for trial in state courts and at least one judgment likely would have attached parish ownership to the diocese anyway.

But victims and their lawyers said the appeal smacked of intimidation.

"The diocese has threatened to delay justice and healing for years, taking full advantage of the appellate process," attorney James I. Stang of Los Angeles said in a written statement. "Skylstad's 'take no prisoners' strategy is misguided and ultimately will fail."

Copyright 2005 Associated Press. All rights reserved.