The Catholic diocese for Eastern Montana is hoping to back out of the bankruptcy proceedings it entered into a year ago, petitioning instead for a settlement with sex abuse victims in state court.
The move comes after negotiations were stalled by disputes over which church assets are fair game in the bankruptcy.
On Tuesday, the Diocese of Great Falls-Billings filed a motion to dismiss its Chapter 11 case with the U.S. Bankruptcy Court for the District of Montana.
The diocese initiated bankruptcy proceedings roughly a year ago as a way to settle 86 claims by people alleging sexual abuse by Eastern Montana Catholic clergy between the 1940s to the 1980s.
The church and victims twice entered into mediation but stalled both times. The two sides are “a substantial distance apart” regarding an appropriate dollar amount for a settlement, according to a memo the church filed with the court Tuesday.
The victims’ attorneys are arguing that the assets of 14 parishes (out of roughly 50 in the Eastern Montana diocese) as well as assets of Billings Catholic Schools should be included in the bankruptcy estate.
Billings Catholic Schools built a new, $18 million K-8 school on Colton Boulevard that opened to students in the fall. It borrowed $5 million from the Capital Asset Support Corporation to do so, which covered a time lag in pledged donations for the school.
The diocese’s insurance policy with Catholic Mutual, which began in 1974, covers just 22 of the 86 claims.
Beyond the 86 abuse claims, the diocese has listed $14.8 million in unsecured creditors, which mainly stems from health and retirement benefit obligations to retired priests in the diocese’s parishes.
Some church assets have already been sold as a result of bankruptcy proceedings. (The Holy Rosary Church and School in Billings was sold to Head Start, Inc., last year for $1.25 million, but this had been planned prior to the bankruptcy filing and was not a result of the filing.)
In February, U.S. Bankruptcy Judge Jim Papas granted the victims’ request to resume lawsuits two victims had filed in Montana state court, which were on hold pending the bankruptcy proceedings.
Reached by phone Tuesday, Bishop Michael Warfel, who serves the Eastern Montana diocese, said his obligation was to be “fair and just to claimants,” but also to “be mindful” of today’s parishioners and make sure their churches remain viable into the future.
“So it’s a delicate balancing act,” he said.
Warfel has met with some of the claimants to hear their stories. He believes the majority still live in Montana, many in Great Falls. The youngest of the claimants are likely to be in their 50s by now, he said.
The diocese will ultimately have to pay not only its own litigation costs under the bankruptcy proceedings, but the litigation costs for victims as well.
That draws down on resources that might otherwise go to pay victims.
“The cash reserves of the Diocese are a melting ice cube,” attorneys for the diocese wrote in their memo seeking bankruptcy dismissal.
The Great Falls-Billings Diocese was the 15th in the U.S. to file for bankruptcy.
Montana’s other diocese, the Helena Diocese, which serves the western third of the state, filed for Chapter 11 bankruptcy in 2014 after more than 360 claims were made about abuse at the hands of diocese clergy.
The Helena Diocese settled its abuse claims in 2015 for $20 million.