The Archdiocese of Milwaukee suffered a “setback,” according to Archbishop Jerome E. Listecki, in its Chapter 11 reorganization Friday, June 20, due to a motion granted by Judge Susan V. Kelley of the U.S. Bankruptcy Court for the Eastern District of Wisconsin.
The motion, made by the Official Committee of Unsecured Creditors (the committee) which represents victims of sexual abuse by clergy, challenged the court’s “subject matter jurisdiction” in approving the archdiocese’s plan for Chapter 11 reorganization while an appeal was pending.
In her 13-page memorandum decision, Kelley wrote, “In the pending motion, the committee argues that its appeal to the Seventh Circuit Court of Appeals stripped this court of jurisdiction to enter an order dismissing the Cemetery Trust Litigation or otherwise impact the court of appeals’ ability to adjudicate the appeal.”
The matter under appeal dates to May 25, 2012, when the committee filed a motion for summary judgment of whether inclusion of the cemetery trust funds in the bankruptcy estate would “substantially burden the free exercise of religion” in violation of the Religious Freedom and Restoration Act of 1993 (RFRA), according to Kelley’s analysis.
She accepted the committee’s motion, but on July 29, 2013, U.S. District Court Judge Rudolph Randa reversed her decision and sent it back to her court “for further proceedings consistent with this opinion.” Randa’s decision meant that more than $50 million held in trust for the perpetual care of Milwaukee Archdiocesan cemeteries could not be used to settle bankruptcy debts.
The archdiocese has maintained throughout Chapter 11 proceedings that the Cemetery Perpetual Care Trust was separate from the archdiocese. Being a trust, the money has been used solely for the purpose designated — the perpetual care of Catholic cemeteries, stipulated in church law.
On Aug. 1, 2013, in accordance with Randa’s ruling, the district bankruptcy court dismissed the Cemetery Trust Litigation, but on Aug. 25, the creditors’ committee appealed to the Seventh Circuit Court of Appeals, where oral arguments were held on June 2, 2014. The archdiocese filed the disclosure statement for its plan of reorganization Feb. 12 of this year.
Kelley wrote that “the court remains hopeful that the confirmation process need not completely grind to a halt until the appeal is decided.” She noted that other issues that could be addressed are the committee’s objections to “numerous confirmation issues” in the proposed reorganization plan; whether all sexual abuse survivor claims should be in one class; and whether the archdiocese’s “bankruptcy case was filed in good faith.”
Kelley canceled the confirmation hearing on the plan scheduled for Oct. 14-17. That hearing could have brought resolution to the Chapter 11 proceedings, and ended the case that has been in her court since Jan. 4, 2011.
In the June 23 issue of Quo Vadis, Archbishop Listecki’s monthly mailing to priests serving in the archdiocese, in which he noted the “setback,” he wrote, “I’ve preached about prayer and patience in this proceeding. Keep praying that we can continue to move forward and bring some resolution soon. Regardless, we continue to move forward as a church and our commitment to abuse survivors continues. We must remain vigilant in our policies and safe environment protocols.”