Judge Approves First Step of Portland Archdiocese Reorganization

The Roman Catholic Archdiocese of Portland, Ore., can expect nearly $52 million in insurance money after a federal bankruptcy judge approved the first step in the proposed reorganization plan for the church.

The archdiocese can now sell its insurance coverage back to its insurers for $51.75 million in cash. In exchange, the insurers walk away with no further liability for any claims by alleged victims of priest sex abuse.

The insurance money is the bulk of the funding for the bankruptcy reorganization plan, allowing the archdiocese to pay victims without encumbering the assets of its 124 parishes, 42 elementary schools, 10 high schools, two colleges and charitable funds.

About two dozen lawyers representing the archdiocese and eight insurance companies had been fighting over liability and coverage issues since the Portland archdiocese became the first in the nation to file for bankruptcy protection in July 2004.

Advocates for abuse victims have criticized the reorganization plan for the severe limits it appears to place on potential damage awards for victims who choose to go to trial instead of settling their cases out of court.

But comment on the case has been strictly limited by a gag order imposed by the two judges who mediated a settlement announced last December — U.S. District Judge Michael Hogan and Lane County Circuit Judge Lyle Velure.

The archdiocese had already paid $53 million to settle claims of sexual misconduct before it declared bankruptcy on the eve of two trials for alleged victims who sought more than $155 million in damages. Most of about 170 claims against the church are part of the settlement agreement.

Portland lawyer Erin Olson, who represents several of the victims, has asked to have the gag order lifted.

Both the Ninth U.S. Circuit Court of Appeals and U.S. Bankruptcy Judge Elizabeth Perris refused to consider the request until Olson made the request to the judges who imposed the gag order.

It’s not clear whether the gag order may bar Olson from even discussing the gag order. She did not return a phone call on Thursday.

In her request, Olson argued the gag order is an
unconstitutional restraint on free speech and lacks the procedural
safeguards normally required before a gag order is imposed.