PORTLAND, Ore. -- The Archdiocese of Portland, the first in the country to file for bankruptcy because of abuse settlements, is at the heart of a debate that could affect future claims by alleged victims of priest sex abuse.
Attorneys are fighting over who owns the churches and the land upon which they are situated.
A hearing was scheduled for today on whether the individual parishes and Catholic schools own their assets, as the archdiocese argues, or whether those assets belong to the archdiocese itself, as the plaintiffs say.
The case before US Bankruptcy Judge Elizabeth Perris could set a precedent over whether federal law trumps Roman Catholic doctrine when it comes to church property, legal observers say.
If the alleged victims win their argument, the property could be made directly available to help pay for any settlements. If they lose, it could force them to go after the individual parishes, delaying and complicating the process while likely increasing the legal costs.
The archdiocese is responsible for 124 Catholic parishes and about 50 schools scattered across western Oregon, the most populous area of the state.
Archbishop John Vlazny decided in July 2004 that bankruptcy was the only way to cover claims by alleged sex abuse victims while making sure that church doors remain open for nearly 400,000 Catholics. He has insisted there was no other way to protect church property.
''It was only when insurance companies failed to provide the financial support owed us and lending institutions would no longer make funds available to us that we had to seek bankruptcy protection," Vlazny said in a column published last month in the Catholic Sentinel.
David Slader, who represents several victims, disputes the archbishop. He says the archdiocese had access to an investment fund worth some $40 million that could have been used to settle pending claims.
''If they had done that, there would be no need for filing bankruptcy," Slader said. ''And it was unlikely the assets of the parishes and schools would ever have been in jeopardy."
Now the archdiocese has dug in its heels, with Vlazny saying the victims should not be allowed to go after the land and buildings that make up the physical presence of the church.
Howard Levine, an attorney for the archdiocese, says canon law of the Catholic church should apply when deciding ownership. ''Parish property is parish property," Levine said.
But an attorney for the alleged victims, Albert Kennedy, dismisses that argument.
''Does the rule of law apply to the Catholic church? I think the answer is yes, of course," Kennedy said.
David Skeel, a bankruptcy law expert at the University of Pennsylvania, says the case seems destined for the US Supreme Court.
Skeel said the church has taken inconsistent positions on ownership in the past, with the Archdiocese of Boston acting like a property owner in deciding whether to close Catholic schools in the Boston area.
Two other Catholic dioceses filed for bankruptcy after the Portland archdiocese. The Diocese of Tucson emerged from bankruptcy in September after settling with victims for just over $22 million.
The Diocese of Spokane in Washington state has offered to sell its headquarters and the home of its bishop under a reorganization plan filed in October, after a judge ruled that parish and school property could be liquidated. But the ruling has been appealed, leaving it unresolved.