The buried bankruptcy lede in Da Paper is the motivations of plaintiff/creditor attorneys. Featured photo is of Sacred Heart Catholic Church, courtesy Infrogmation.
Buried Bankruptcy Lede
Da Paper did a page one (print) story on the real estate sales the Archdiocese of New Orleans submitted to bankruptcy court. The article (online but paywalled) lists seven properties the Archdiocese wants to sell and have been approved by the court. The article’s headline, describing these properties as “vast” is hyperbolic nonsense. While movement on the bankruptcy is indeed news, these sales aren’t the important part of the story. The buried bankruptcy lede is the issue of new plaintiffs and increasing attorney profits.
What’s for sale
The big-ticket items here are the St Jude Community Center and Sacred Heart Church on Canal Street. the Community Center, located at 400 N. Rampart Street, is the “parish building” for Our Lady of Guadalupe Church. It currently functions as a social services hub and food pantry for the neighborhood. Operations there are affiliated with Second Harvest, the regional food bank owned by Catholic Charities.
The other big item here is Sacred Heart Catholic Church on Canal Street. The parish was founded in 1879. The first church stood at 3200 Canal until 1924. The parish built the current church next to the original. When it was completed, they demolished the original church. The parish built the current school building in its place.
The Archdiocese sold the school building years ago. The school, Sacred Heart High (not to be confused with Sacred Heart Academy on St. Charles Avenue) re-organized as Seton Academy in the 1980s. That school merged with Redeemer High School in Gentilly. The merged school, Redeemer-Seton High School, continued in Gentilly until Katrina. The archdiocese sold the school building. It is now the “3222 Canal Apartments.”
Impact of these sales
While these properties will boost the coffers of the Archdiocese, there are bills to be paid. The bankruptcy is in its third year now. The archdiocese retains outside counsel and an outside accounting firm to oversee the myriad of legal activities and financial reports required for reorganization. A significant amount of the proceeds from these real estate sales will go to paying the lawyers and accountants.
The attorneys for clergy sex abuse victims know this. It’s problematic for them, because they’re working on contingency. Chapter 11 proceedings rolled up all the lawsuits against the archdiocese into the overall action. So, the victims are just creditors now. They hold the same status as the water service and coffee service companies that had outstanding invoices at the time of the filing.
Expanding the victim base
That’s the buried bankruptcy lede. Riegel mentions it in passing in the article. The plaintiff attorneys, seeking new clients and new fee potential, want the court to allow new lawsuits against the archdiocese. want the court to allow new lawsuits, based on a 2021 law passed by the state legislature. That law permits claims from years, even decades ago. The law is a part of a current trend to bring sexual assaulters to justice. A related New York State law enabled E. Jean Carroll to take action against Donald Trump.
The crux of the current argument is, should the federal court recognize new claims based on the state law. Bankruptcy cases usually “ban” new lawsuits during the reorganization phase.The theory is, creditors want to see the entity re-organize, so they can recoup some of what they’re owed.
That’s not the case here. There are two groups at odds with the archdiocese who don’t want it to re-organize. The victims share the assets as of the bankruptcy. It’s not clear how much cash the court requires for this. Since the lawyers work on contingency, their share of these settlements won’t be what they desire.
More plaintiffs expand the payout pool. The lawyers receive the same percentages, but on a higher total amount.
Plaintiff lawyers nurture outrage reporting. They’re loving the coverage of Fr. Lawrence Hecker, the 90-something-year-old priest who admits to raping kids. The lawyers leverage the publicity to draw out victims who haven’t spoken up prior to now. So, more victims means more plaintiffs means higher fees. This case has no doubt been a serious financial drain on the lawyers. This became evident when a plaintiff lawyer leaked sealed documents relating to the archdiocese’s finances to the press, which earned him a half-million-dollar fine.
Or maybe not. The other group of people involved here are folks who want to burn the Catholic Church to the ground. I mean, their anger and pain is certainly understandable. The problem here is that bankruptcy law doesn’t know how to handle this grief. In most cases, creditors either want a re-organization, or they want the assets transferred to an entity that will turn things around.
Burning it down
There’s no transferring the church to another entity. It’s not like the Episcopalians or Methodists can just absorb Catholic parishes. The “burn it down” faction wants to put the archdiocese totally out of business. They desire perpetual proceedings here. The more money the archdiocese spends on lawyers and accountants, the more they have to close churches and schools to raise funds. This faction wants to see it all razed.
At some point, however, the burn-it-down group hits the lawyers head-on. While the archdiocese does have assets to sell, the lawyers need settlements. Look for more leaks from these folks as their sense of urgency grows.
Bringing it to an end
The judge wants this case closed. Being party to the destruction of the Catholic church in a city as Catholic as New Orleans is bad politics. It’s also bad business. If the bankruptcy judge allows further asset liquidation, it won’t be open-ended.