The 6th U.S. Circuit Court of Appeals gave the go-ahead for the lawsuit filed by three men who claim priests abused them as children.
They allege the Vatican orchestrated a decades-long coverup of priests sexually abusing children throughout the U.S.
Louisville attorney William McMurry is seeking class-action status, saying there are thousands of victims nationally in the scandal that haunts the Roman Catholic Church. He is seeking unspecified damages from the Vatican.
"This is an enormously huge moment," McMurry said. "We're finally going to get to the root of the problem."
Jeffrey Lena, a Berkeley, Calif.-based attorney for the Vatican, said the appeals court's decision narrows the plaintiffs' case because the court upheld dismissing several issues.
"It's gratifying to see the hard work the judges put into the opinion," Lena said.
Lena declined to say if he would appeal the decision. McMurry said he expects the case to wind up before the U.S. Supreme Court.
Several lawsuits around the country have sought damages against the Vatican, but many have been bounced around in lower courts. Attorneys for both sides say the Louisville case is unique.
It centers on a 1962 directive from the Vatican telling church officials to keep under wraps sex-abuse complaints against clergy. The document became public in 2003. McMurry claims that document makes the Vatican liable for the acts of clergy whose crimes were kept secret because of the directive.
U.S. District Judge John Heyburn II ruled in January 2007 that the men may pursue their claim that church officials should have sent out warnings about abusive clergy. But the judge also dismissed a large chunk of the lawsuit.
The appeals court upheld Heyburn's decision to dismiss claims that the Holy See was negligent in failing to provide safe care to the children entrusted to the clergy, along with claims of deceit and misrepresentation by the Vatican.
McMurry also sought to depose Pope Benedict XVI, but Heyburn rejected the request. With Monday's ruling, McMurry said, he would seek documents and possibly renew efforts to depose the pontiff.
"We will get to the bottom of this," said McMurry, who represented 243 sex abuse victims that settled with the Archdiocese of Louisville in 2003 for $25.3 million.
Appeals Judge Julia Smith Gibbons, who authored the 20-page opinion, rejected part of the lawsuit that challenged the constitutionality of the U.S. Foreign Sovereign Immunity Act, which generally gives immunity to foreign countries from most civil actions. McMurry contended that the Vatican as a country and the religious institution were separate, but Gibbons said they are legally the same.
"Consequently, we reject plaintiffs' contention that they are not suing the Holy See that has been recognized by the United States government, but a parallel non-sovereign entity conjured up by the plaintiffs," Gibbons wrote.
The decision makes it tougher for plaintiffs to sue the Vatican as a religious institution without first overcoming the restrictions under the foreign immunity law.
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