Creditors of the archdiocese accused Cardinal Timothy Dolan, who was then the diocese's archbishop, of creating the fund to protect the archdiocese's money from abuse payouts.
Judge Rudolph Randa said the archdiocese had a duty under canon law to use cemetery funds for their stated purpose.
Milwaukee cemeteries cover nearly 1,000 acres of land, in which more than 500,000 people are buried.
Highlighting Catholics' belief in bodily resurrection, the judge commented: "The sacred nature of Catholic cemeteries - and compliance with the Church's historical and religious traditions and mandates requiring their perpetual care - are understood as a fundamental exercise of this core belief."
"Theologically, the deceased must be treated with respect and charity in the Catholic faith with the hope of resurrection."