Pressure to settle the bankruptcy filed by the Roman Catholic Diocese of San Diego is building as attorneys for Bishop Robert Brom and those representing about 150 victims of sexual abuse by priests have until mid-August to reach agreement or face the possibility that the now-suspended lawsuits will go to trial.Federal bankruptcy Judge Louise DeCarl Adler set an Aug. 13 deadline for a mediation settlement. Should talks fail, Adler will decide on Aug. 23 whether to set trial dates in state court for an initial batch of abuse lawsuits, Adler ruled this week.
The two sides began mediation talks about three weeks ago.
“She cannot mandate settlement, but she can strongly urge it,” said Fred Naffziger, a business law professor at Indiana University who has studied the five bankruptcies filed by U.S. dioceses. “As an attorney, you don't disregard that, you give it a try.”
Brom's lawyers, meanwhile, are again challenging the constitutionality of a state law that lifted the statute of limitations and opened a one-year window in 2003 to file lawsuits alleging sexual abuse by clergy dating back decades.
At midnight on Feb. 27, hours before the first sexual-abuse trial was to begin, San Diego became the largest U.S. diocese to declare bankruptcy in the face of massive monetary claims.
The filing triggered an automatic stay of the four abuse cases scheduled for trial, ranging in nature from a teenager's allegation of sexual abuse to three cases accusing priests of being serial sexual predators.
Church officials deny that claim and have expressed hope for a mediated settlement. In a letter to parishioners Sunday, the bishop wrote, “The diocese is committed to this mediation process with every hope that it will . . . balance our responsibility to compensate victims and our responsibility to continue the mission of the church.”
More than three years of mediation between the parties in state court failed, however, leading to the bankruptcy filing. Many of those claiming to have been abused by priests prefer a public forum.
“We wish these cases would go to trial,” said Irwin Zalkin, a San Diego attorney representing nearly one-third of local abuse plaintiffs. “I think it's important for the public to witness the events that occurred. These stories should come out.”
Attorney Micheal Webb, who represents Brom, said he does not believe public trials are “the way to resolve the valuation of these cases. But if we are told to go to trial, we will be ready.”
Mediation talks ordered by Adler have been proceeding in secret at a furious pace in recent weeks before U.S. Magistrate Judge Leo Papas, with sessions held in the evening and on weekends.
“Nobody has walked out yet; the process is continuing,” said Jim Stang, a bankruptcy attorney representing a committee of abuse victims. He said lawyers on both sides are barred from directly commenting on the federal mediation.
Two key issues were addressed in a hearing this week before Adler: the value of the approximately 150 abuse lawsuits and whether the 98 Catholic parishes in San Diego and Imperial counties are part of the diocese holdings or separate entities.
Barring a settlement, the question of whether parish churches, schools and other property and assets belong to the diocese is set to be decided in a trial this fall within the bankruptcy process.
Although it has yet to get appraisals that the bankruptcy court requires, the diocese – which says in court papers that it is not insolvent – estimates that its property and other assets are worth less than $150 million.
Should the 98 parishes' property and assets be deemed part of the diocese, plaintiffs lawyers say, its holdings would be worth hundreds of millions more.
In a “reorganization plan” filed early in its bankruptcy, the San Diego diocese offered to settle the roughly 150 cases for $95 million, an average of about $630,000 per case. The amount would be in line with church settlements nationally, according to the diocese, and half would be paid by insurance policies.
But plaintiffs' attorneys say settlements and jury verdicts in some 400 California abuse cases so far have ranged from $1.3 million to $1.6 million each. They insist that the diocese and its insurers can afford payouts totaling $200 million or more without having to sell any church, school or other asset connected to its core mission.
In court papers filed yesterday, diocese attorneys revived their challenge to the 2003 filing window approved by the California legislature and signed into law by former Gov. Gray Davis.
The law was “unjust and oppressive because it imposes massive litigation costs, and potentially monumental judgments, on Catholic institutions, including (the San Diego diocese), for cases which are so old that virtually no evidence remains,” the diocese asserted.
Church attorneys in Los Angeles and San Diego, whose dioceses together face more than 650 lawsuits, have lost challenges in both state and federal court over the law's constitutionality.
Federal law prevents issues that have already been settled from being litigated again, said attorney Andrea Leavitt, who represents 14 of the sexual abuse plaintiffs.
“It's a non-starter for Mr. Webb,” she said, referring to Brom's attorney.
In the four months since the diocese declared bankruptcy, bills for attorneys and accountants have exceeded $2.1 million.
Under Chapter 11 rules, the diocese must foot the bill for nearly all bankruptcy costs.
Webb expects bankruptcy costs to be about $4 million by the end of August.
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