Louisiana Voice

Why are there 39 separate bankruptcy cases filed by Catholic dioceses and archdioceses across the U.S.?

The obvious answer is that there are 39 separate Catholic dioceses and archdioceses involved in litigation involving accusations of sexual abuse of children. (The New Orleans Archdiocese is even under investigation for child sex trafficking.)

Given the obvious fact that sexual abuse claims in the Roman Catholic Church are so widespread, why then hasn’t some effort been made to consolidate all 39 defendants into one gigantic landmark lawsuit?

And if 24 of these cases have already been concluded (leaving 15, including New Orleans, still open and scores of lawyers still being paid), why couldn’t they all have been settled under the larger umbrella of the entire Roman Catholic organization with the defense streamlined with the same attorneys and experts to cut costs?

After all, the church is the church is the church, is it not?

Well, that’s an over-simplification so, not exactly. You see, just as New Orleans Archbishop Gregory Aymond initially informed area Catholic churches, schools and other ministries that they would not be subject to any legal exposure only to later reverse himself and inform the apostolates that they would, after all, be required to chip in significantly to any settlement, so, too, is the Catholic Church structured worldwide in such a way that each archdiocese is considered to be a separate entity unto itself.

Bankruptcy is intended to serve as a shield, not a sword, according to PNC BANK N.A. v WILSON, a 2017 case decided by an Illinois court. The Yost Legal Group of Baltimore, Maryland., says on its Web page, “…[C]ourts are very clear that bankruptcy is a shield, not a sword.” This is discussed in greater detail by Linda E. Coco of the BARRY UNIVERSITY SCHOOL OF LAW in Orlando, Florida.

A one-time attorney who no longer practices said he sees the New Orleans Archdiocese bankruptcy filing as something of “a deliberate preplanned litigation strategy,” a “master plan” by the church to defend clergy abuse cases in the U.S. on a nationwide basis.

“The Vatican enjoys sovereign immunity, according to a December 2021 decision by the European Court of Human Rights” in Strasbourg, France, he said. “However, the United States is not a signatory to the Human Rights Treaty because only members of the Council of Europe are eligible to be a party to the treaty. The U.S. is merely an observer state to the council.

In 2010, the U.S. Supreme Court ruled in JOHN DOE v HOLY SEE that the Vatican could not invoke the provisions of the Foreign Sovereign Immunities Act to seek dismissal of a sexual abuse claim involving a pedophile priest.

The New Orleans Archdiocese alone owns property (directly or indirectly) valued at more than $2.1 billion and the other 38 dioceses and archdioceses, along with the Vatican itself, have holdings of inestimable value and every effort is being expended to protect those assets at the expense of more than 500 claimants just in the New Orleans case. And the best way to protect the Vatican itself from exposure is to insist that each diocese and archdiocese is an island unto itself and not its brother’s keeper.

And does anyone believe for one moment that the Catholic Church, with its worldwide operations and its headquarters in Rome, will be amenable to conforming to the whims of the Eastern District Bankruptcy Court’s appointed “restructuring” experts?

Or is it beyond the realm to wonder if the appointment of restructuring experts might be an indication of some hidden agenda by individuals whose personal interests may be at loggerheads with the Catholic laity and those who wish to see justice for the victims and punishment of the wrongdoers?

That is precisely why the former attorney alluded to earlier believes that the New Orleans Archdiocese bankruptcy case “should be disqualified on grounds of fraud, CORPORATE VEIL PIERCING and ALTER EGO STATUS or to compel what bankruptcy law calls SUBSTANTIVE CONSOLIDATION.”

Piercing the corporate veil is a legal term that gives a court the power to hold an entity’s shareholders or directors personally liable for the organization’s debts or actions. This means that the organization loses the limited liability protection and that their personal assets can be used to pay off obligations.

Alter ego is a legal doctrine whereby the court may find that an organization lacks a separate identity from an individual or principal. The court applies this rule to ignore the corporate status of a group of stockholders, officers, and directors of a corporation with respect to their limited liability. In this case, it would be the church hierarchy instead of a corporate board.

Substantive consolidation is a bankruptcy procedure that allows a court to combine the assets and liabilities of multiple entities into one. This is done to treat the entities as if they were a single entity, and to make distributions to creditors under a plan of reorganization or liquidation. This would appear to be what the Catholic Church most wants to avoid because of the potentially far-reaching repercussions.

NEXT UP: Think Catholic priests have the market cornered on child abuse? Think again. The Southern Baptist Convention has its own skeletons it would very much like to keep closeted and the Mormons are not exactly lily-pure.