Don’t Let This Happen to You: Milwaukee Archdiocese Bankruptcy – Part Two, The Confirmed Plan

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By Donald L. Swanson

By mid-November 2015, the Archdiocese of Milwaukee  has been battling its sex abuse claimants in Bankruptcy Court for nearly five years.  The fight has been tough: described as “scorched earth.”

The Archdiocese has been fighting to limit payouts on sex abuse claims to the low single-digits of millions of dollars.  But the Archdiocese finally abandons this part of the fight and decides to pay much, much more.

The result is a mediated Chapter 11 plan in the bankruptcy proceeding that is confirmed on November 13, 2015, (Doc. 3322).

Following confirmation, the what-ifs and if-only-they-had questions and regrets are many and profound for everyone involved.  Hindsight provides 20/20 clarity.

The following plan details and comparisons show why the Archdiocese of Milwaukee bankruptcy stands as an example of how-not-to handle a case like this and a don’t-let-this-happen-to-you symbol for other cases.

CONFIRMED PLAN TERMS

The Milwaukee Journal Sentinel explains the terms of the confirmed plan like this:

PAYOUTS

–The plan will pay about $21 million to abuse claimants — of which the claimants’ own lawyers will take a share.
–The plan also establishes a $500,000 fund for continued therapy.
–An additional $8 million will pay the Archdiocese’s legal fees plus those of the Creditors Committee: that’s on top of about $12 million already paid out.

RELEASES

–The Archdiocese, its parishes, schools and other institutions all get releases from liability for future lawsuits relating to sex abuse claims that were, or could have been, part of the Chapter 11 case.
–Insurers providing funds for the settlement will also be released.

SOURCES OF FUNDS

–$11 million comes from various insurers that bought back their policies.
–$16 million comes from a trust fund established to care for Catholic cemeteries.
–The Archdiocese emerges with $7 million of debt.
–The balance comes from various other Archdiocesan and parish funded resources, such as a continuing education fund for priests.

THE SEX ABUSE CLAIMANTS

–Ultimately, 575 people make claims for sex abuse suffered as children.
–The confirmed plan puts them in different classes:

–More than 120 claims are disallowed because the claimants had reached an earlier settlement, the allegations didn’t involve sex abuse, or the perpetrator was not a priest or member of a religious order or layperson working for a Catholic entity.
–104 people abused by a priest not on a list of known abusers, or by someone working for some group that was not a Catholic entity, can each get a $2,000 payment.
–About 350 will get payouts as determined by a mediation process.

The mediation process for allocation of available money among sex abuse claimants works like this, according to James I. Stang, legal counsel to the Official Creditors Committee: professionals with expertise in valuing personal injury claims of this type evaluate all available information for each claim and use a list-of-factors and a points-system to prepare an allocation proposal for review and input by the parties.  This process and its conclusion are not subject to judicial review

If the money available to sex abuse claimants against the Archdiocese were distributed evenly, each abuse claimant would receive about $58,500.

SOME NEGATIVES

–Abuse claimants in other Catholic bankruptcies receive an average distribution of $300,000 each.
–One survivor, Charles Linneman, who chairs the Official Creditors Committee, doesn’t expect many takers on the therapy option because: (1) anyone inclined to such therapy “has probably already tried that,” and (2) many won’t trust the therapy because “the Archdiocese controls it.”

BLAME

As to assigning blame for what happened in this bankruptcy, the Milwaukee Journal Sentinel reports:

–Each side blames the other, with the Archdiocese accusing creditors of pursuing assets they should never have gone after, and creditors accusing the Archdiocese of blocking abuse claims and shielding assets at every turn.
Jonathan Lipson, a bankruptcy professor at Temple University’s School of Law, says: “The Archdiocese of Milwaukee has been far more aggressive, far more litigious than any other diocese I’ve observed. They would rather pay their lawyers than pay claimants.”

SOME NUMBER COMPARISONS

$4 million: Benefits to abuse claimants proposed in Debtor’s February 2014 Plan
$21.5 million: Benefits to abuse claimants provided in Confirmed Plan

$20 million: Professional fees incurred by the bankruptcy estate
$41 million: Total payments to professional fees and benefits to abuse claimants

$58,500: Average benefit to abuse claimants in this case
$300,000: Average benefit to abuse claimants in similar cases

4.8 years: Time from bankruptcy filing to confirmed plan

A POSITIVE

A positive development from the Archdiocese of Milwaukee case is this:

It appears that all parties in similar cases are taking note of lessons learned the hard way in the Milwaukee Archdiocese case — and are adjusting positions and actions accordingly.

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2 thoughts on “Don’t Let This Happen to You: Milwaukee Archdiocese Bankruptcy – Part Two, The Confirmed Plan

Add yours

  1. Faith is the assurance of things hoped for, the conviction of things not seen. Faith and trust go hand in hand. Having tried, and also settled, abuse cases, it was clear that gaining, keeping and helping restore abuse victims’ trust, both spiritually and relationally, is paramount. Having used Don Swanson’s Firm in mediation, albeit not abuse cases, I would trust him completely to expertly mediate the most complex of Bankruptcy matters.

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