Nearly four years after filing for bankruptcy, the Diocese of Duluth will go before a judge Monday for final confirmation of a reorganization plan that would provide approximately $40 million in compensation to victims of child sexual abuse.
U.S. Bankruptcy Judge Robert Kressel will review the proposed settlement at an 11 a.m. hearing at the federal courthouse in Duluth. If he signs off, up to 125 survivors who filed claims could soon begin receiving payments and the diocese would finally emerge from bankruptcy protection.
The diocese voluntarily filed for Chapter 11 bankruptcy in December 2015 in the wake of a $4.9 million jury verdict. That award came in the first lawsuit in the state to go to trial under the Minnesota Child Victims Act, which opened a three-year window for victims of decades-old abuse cases to file suit. An onslaught of claims followed in the bankruptcy process.
The case, however, was mired in litigation for years as the diocese sued to force coverage from five insurance companies — a matter complicated by the fact that the abuse claims date as far back as the 1940s. All five insurers eventually settled, with contributions ranging from $250,000 to $15 million.
Under the reorganization plan announced in May, the diocese itself would provide more than $10 million to a distribution trust, with contributions expected from most or all of its 75 parishes as well as other Catholic entities. Insurers are covering the remaining sum.
That settlement was reached between the diocese and a creditors' committee representing the survivors. Ballots were sent to the 125 claimants, who returned near-unanimous support for the plan. While their vote is not binding, attorneys have said they expect the judge will confirm the plan.
Once approved, a claims evaluator would be appointed to determine specific award amounts for each victim.
Mike Finnegan, an attorney at St. Paul-based Jeff Anderson & Associates, represents many of the survivors. He said compensation isn't the only important component of the reorganization plan.
As part of the settlement, the diocese also would be required to release files on more than three dozen priests deemed "credibly accused," making information public on abuse allegations and how they were handled by the church. In addition, the plan requires the diocese to have child protection protocols in place.
"I think it will help get some closure for them," Finnegan said this week. "A big piece of this is the documents, and that is something we will be working on in the coming months to get those redacted and make them public. That was something that was really important to survivors and to us."
Diocese officials have repeatedly stressed that they have had child protection measures in place for several years, and any new allegations of abuse are promptly turned over to proper authorities.
The Diocese of Duluth includes more than 56,000 Catholics across a 10-county region of Northeastern Minnesota.
Duluth was the 15th diocese or religious entity in the country to file for bankruptcy. That number has since grown to 25, according to data maintained by Penn State Law.
The step has been taken by all but one diocese in Minnesota. Last year, Kressel approved a $210 million settlement for more than 400 survivors in the Archdiocese of St. Paul and Minneapolis. The Diocese of New Ulm is awaiting approval of a $34 million agreement with 93 victims. The Diocese of St. Cloud faces 74 claims, while the Diocese of Winona-Rochester faces 115 claims in still-unresolved cases. The Diocese of Crookston avoided bankruptcy by reaching a $5 million settlement in 15 lawsuits filed under the Child Victims Act.