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Martin Moylan

Judge rejects archdiocese bankruptcy plans, orders return to mediation

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Updated: 5:34 p.m. | Posted: 1:43 p.m.

A federal judge has rejected competing reorganization plans for the the bankrupt Archdiocese of St. Paul and Minneapolis and ordered the church and its creditors back into mediation.

In orders released Thursday, Judge Robert Kressel said plans put forth by the archdiocese and a creditors committee made up largely of sexual abuse victims both had shortcomings.

Among other things, the judge noted that the archdiocese plan offering about $155 million had been overwhelmingly rejected in a vote of abuse victims. And Kressel said flaws in the plan advanced by abuse victims included an unrealistic reliance on lawsuits against third-parties to raise money for victims.

Kressel said he expects all parties to reach a consensual plan "providing appropriate and timely compensation to those who have suffered sexual abuse at the hands of those employed by or affiliated with the Archdiocese."

An attorney representing victims of clergy sex abuse welcomed the nudge to resume settlement discussions.

"This order gives us and the survivors the opportunity to expedite a resolution and reach a consensual plan," said attorney Jeff Anderson.

Anderson also said he'd consider Kressel's suggestion that his team lower its fees. Attorney fees for all parties had topped $12 million at the end of 2016.

In a statement, the chair of the archdiocese's reorganization task force said he's committed to moving the process forward.

"We note and are gratified that Judge Kressel has once again directly dismissed the assertions by creditors' counsel that the Archdiocese has acted or is acting in bad faith regarding the reorganization," said chair Tom Aboud. "We look to engage with all participants in mediation as directed by the judge to bring a prompt and fair resolution."

In a filing earlier this year, the archdiocese objected to the creditors plan as "an unlawful dismantling of the Catholic Church in the Twin Cities" that would strip it of all assets required to pursue the church's mission.

The Twin Cities archdiocese filed for Chapter 11 bankruptcy in January 2015, motivated by hundreds of claims of sex abuse against archdiocesan priests.