Helena diocese reaches sex abuse settlement via 'consensus model'

In what U.S. Bankruptcy Court Judge Terry L. Myers called a "singular achievement," a bankruptcy and reorganization plan for the Helena, Mont., diocese reached via mediation and negotiation rather than protracted litigation has been approved.

It will provide $21 million to compensate more than 360 sexual abuse claimants. Distributions averaging about $40,000 per claimant are scheduled to begin in April, attorneys for the diocese said.

During the three and a half years since the original lawsuit was filed, fewer than three hours were actually spent in court, according to lawyers involved in the case.

Approved by Myers on March 4 at proceedings in Coeur d'Alene, Idaho, the settlement officially went into effect Thursday following a mandatory two-week waiting period for potential appeals.

The plan, which also includes the restructuring of about $17 million in internal diocesan debt, received "nearly unanimous approval in voting by the sexual abuse victims and other creditors, and the confirmation order by Judge Myers resolves all outstanding sexual abuse claims against the Diocese of Helena," according to a diocesan press release.

The plan confirmation also "resolves claims against the Western Province of Ursuline, who joined in the reorganization process and made a substantial contribution to the overall settlement," the release stated.

A set-aside of $920,000 for potential future claims was part of the agreement.

The settlement includes non-monitory requirements aimed at preventing future abuse of children, such as intensive background checks and screening of potential seminarians, and the release of names of all known current and past abusers listed in abuse claims or the lawsuits.

The proceeding has been watched closely across the country by trial lawyers, bankruptcy courts, victims' groups, dioceses and archdioceses, and the U.S. bishops' conference, according to attorneys interviewed by NCR.

Mike Patterson, lead attorney for the Helena diocese, described the negotiations that led to the settlement as "a conciliatory process" marked by the diocese openly sharing its financial picture and personnel files, by "compassionate and respectful" treatment of sex abuse plaintiffs, and by open sharing of information between all parties.

"It is not just us who are talking about" how fairly and efficiently the settlement was achieved, Patterson said, "but we have been contacted by many dioceses and bishops reaching out for guidance on how to handle this type of litigation" as well as by the general counsel of the bishops' conference.

Attorney Ford Elsaesser, who handled details of the bankruptcy for the diocese, said Patterson and Helena Bishop George Thomas insisted on "putting the litigation on a mediation tract with full disclosure from the beginning."

"I have been doing Chapter 11s for almost 33 years," Elsaesser said, "and this has been remarkable. I have never felt better about how a Chapter 11 went from start to finish than this one."

Patterson agreed. "This has certainly been the smoothest sexual abuse litigation that I have been involved with, and that includes [cases involving] the Mormons, Boy Scouts, school districts, other churches and public entities."

"All sides," Patterson added, "recognized that the scorched-earth posture does not work. It does not benefit the victims or the diocese and it leads to a tremendous amount of animosity and mistrust, and it emasculates the transparency that should prevail."

Elsaesser, who teaches bankruptcy law at the University of Idaho and at St. John's University, said he plans "to incorporate a lot of what we learned in the Helena process" into courses.

Most of the diocese's portion of the settlement, about $14.4 million, will be paid by insurance. The diocese will be responsible for about $2.6 million, part of it to be generated from the sale of its youth camp and retreat center to an independent foundation with close links to the diocese, a diocesan official said. Thus, the facility will be able to continue to operate.

The Ursuline province will contribute about $4.5 million.

Elsaesser said it is critical for a party seeking Chapter 11 protection to be able to "show it can not only pay claimants what has been agreed, but to also prove it can survive and keep going forward."

The Helena diocese is "coming out of the process in a reasonably strong financial condition," Elsaesser told the Wall Street Journal.

The diocese enlisted the help of an "insurance archeologist" to research what insurance carriers and coverages might have been in place when the bulk of the abuse events took place, 30 to 60 years ago, Elsaesser said. Ultimately, seven insurers were involved in the settlement.

Elsaesser and Patterson as well as most plaintiff attorneys lauded Thomas' leadership and pastoral approach.

In testimony at the March 4 hearing, Thomas expressed "profound sorrow for what victim survivors have experienced over the past decades" and praised the "tremendous amount of courage" they displayed "to come forward."

He said he wanted "to be on record as saying that the victim survivors in our diocese of Helena are believed and deeply respected."

In meeting with clergy sexual abuse victims, Thomas told NCR, "the pain they experienced is not yesterday, but in the present tense. The church needs to acknowledge that."

Thomas said that "early on, when I was first made aware of the cases coming at us, my first instinct was pugnacity, that we would fight this thing through, circle the wagons. But as I talked with priests and attorneys and victims and prayed for wisdom and guidance, it became clear pugnacity was not the key."

The bishop testified that he "really rejected the idea of prolonged, acrimonious litigation. I believe that the strong suit of the church should be healing and conciliation and not long-term litigation. So I really hope that the pastoral care approach we have taken will be effective."

In court, Thomas complimented Milton Datsopoulos and Molly Howard, the attorneys for the bulk of the plaintiffs, for being "pivotal in creating what I would describe as a consensus model. This has been a cooperative venture from the beginning, and for me it has led to this day where there's the possibility of a healing and mediated process that comes both to a conclusion today and affects the healing process for the future."

Thomas said in court and in an interview that "complacency is a danger" and that the church "must re-double prevention education" and other efforts to combat future sex abuse.

Elsaesser described the legal path taken as "the exact polar opposite of what is going on in Milwaukee."

The Milwaukee archdiocese's contentious sex abuse litigation was also mentioned during the March 4 hearing.

James Stang, who represented the committee of uninsured creditors, said: "It's no secret that the archdiocese in Milwaukee, where we [also] represent the creditors committee, is going into its fourth year with very large administrative expenses and no resolution in sight."

Stang described church cases in which he had been involved in which church officials sought to "hinder, delay and defraud" abuse victims and creditors.

Stang also spoke highly of the Helena and Ursuline claimant attorneys. While the media and some church officials "talk about 'greedy trial lawyers,' " he said, "If it weren't for those lawyers, all of whom work on a contingency, the crimes that have been hidden in the dark for decades would have stayed in the dark."

In remarks at the end of the Coeur d'Alene session, Judge Myers said, "Mr. Stang was absolutely correct in noting that this case is unlike many of the cases throughout the country on church Chapter 11 bankruptcies."

He portrayed the overall process as "an enlightened as well as diligent, talented effort to reach an optimum solution for all concerned."

[Dan Morris Young is NCR West Coast correspondent. His email address is dmyoung@ncronline.org.]