Gallup diocese's bankruptcy hearing starts

Olivier Uyttebrouck
Albuquerque Journal
November 18, 2013

Attorneys who faced off for the first time in a bankruptcy case filed by the Diocese of Gallup warned an Albuquerque judge to expect a difficult and emotional case involving the sexual abuse of children by priests.

The Diocese of Gallup last week became the nation’s ninth Roman Catholic diocese to file for Chapter 11 reorganization bankruptcy in response to a growing number of lawsuits filed by alleged victims of clerical sex abuse.

“Money is an issue,” said James Stang, a Los Angeles attorney who specializes in representing claimants in bankruptcies filed by Roman Catholic dioceses. “But it’s also about fairness, justice, healing – things you don’t ordinarily have to contend with” in a bankruptcy case, he said.

Victims of sexual abuse by priests also expect “transparency and sunshine” from the Roman Catholic Church, Stang told U.S. Bankruptcy Court Judge David Thuma in a hearing Friday.

“There is a general feeling among informed survivors that secrecy is the problem,” Stang said.

The 55,000-square-mile Gallup-based diocese faces 13 lawsuits, in addition to “other claims which are likely to result in lawsuits in the near future,” Gallup Bishop James Wall wrote in court records filed Thursday. The diocese has also settled an undisclosed number of claims, Wall wrote.

The diocese contends it filed for bankruptcy to find an equitable way to distribute funds to all victims of sexual abuse.

It has identified 105 people who may file claims in the case and needed privacy protection in court records, said Susan Boswell, a Tucson attorney representing the Diocese of Gallup.

“There are a lot of things that occurred that frankly are horrible,” Boswell said during the hearing. “Nobody denies that.”

But the diocese has served parishioners in New Mexico and Arizona for decades “and does a tremendous amount of good,” she said.

Boswell, who has represented Catholic dioceses in bankruptcy cases since 2004, said mediation can resolve many of the sex abuse claims and save million of dollars in legal costs.

She warned that some cases have proven long and expensive. Legal fees and expenses had exceeded $10 million by July in the three-year-old Diocese of Milwaukee bankruptcy case.

Thuma urged attorneys to visit the Diocese of Gallup, which includes much of the Navajo Nation and six other Indian tribes and pueblos.

“I wouldn’t be surprised if this is a very poor diocese because that is very poor country out there,” Thuma said. “My guess is this debtor won’t stand a lot of administrative expense.”

The diocese declared income of $2.8 million for 2013 through June 30, court records said.

Thuma handed down orders Friday that will allow the diocese’s approximately 50 employees, including teachers at the Gallup School, to continue receiving pay and benefits.

Attorneys have not had time to estimate the value of the diocese’s assets, Stang said after the hearing. The first major task will be to identify abuse victims who have potential claims against the diocese – a process that typically takes from two to six months, he said.