A Federal Bankruptcy Judge Issues an Important Ruling in the Portland Archdiocese Bankruptcy:
Why the Judge Was Right, and Why the Ruling Matters So Much For Clergy Abuse Victims

At the end of 2005, federal bankruptcy Judge Elizabeth Perris ruled in Portland, Oregon, that the Catholic Archdiocese there owns its parishes.

This is a very important ruling, although it might appear at first blush to be self-evident: Catholic parishes are hardly independent entities. In this column, I will explain why the Archdiocese is in bankruptcy in the first place; why the judge's ruling was correct; and what the ruling will likely mean for clergy abuse victims.

(Full disclosure: In the Portland proceedings, I represented clergy abuse victims on the First Amendment and constitutional issues, as I do in many other jurisdictions. But the views expressed in this column are not advocacy; they are what I personally believe as an attorney and law professor.)

Why the Archdiocese Filed for Bankruptcy

Why, readers may wonder, did the Archdiocese file for bankruptcy in the first place?

Most people believe that filing for bankruptcy means that an organization is close to being indigent. But in this case - and many others -- that would be false. The Catholic Church in the United States has enormous resources, including much in commercial property. It would take millions of clergy abuse victims before it would have to shut down parishes or programs to any significant degree.

That hasn't stopped Archdioceses - not only in Portland, but in Philadelphia and elsewhere, too -- from pleading poverty to the press, and to their congregations, however. (In Philadelphia, the claims come in the face of laudable suggestions that victims be given the legal means of suing for the terrible harms documented in the District Attorney's Grand Jury Report, which I discussed in a prior column, and for which I served as a consultant.)

Plainly, the Archdioceses want the people (and judges) to believe that the crush of claims will force them to shut down parishes and programs. But in fact, in the wake of the clergy abuse trials and settlements across the country, very few programs and few, if any, parishes have actually been closed.

So why opt for bankruptcy, if not due to indigence? The answer is simple: To protect assets - in this case, from the victims of clergy abuse in which the Archdiocese was complicit. Religious organizations are no different in their drive to protect accumulated wealth than any other organization.

Why the Judge's Ruling Was Correct

One wealth-protection strategy the Portland Archdiocese employed was to claim that its parishes were independent - and it did not own them. The goal was to make its "estate" as small as possible in the face of the numerous clergy abuse claims.

If the judge had accepted this argument, the value of the Archdiocese would be dramatically lower. As a result, victims of predator priests who'd been shuffled parish to parish, as they continued their abuses, would probably have had to accept very low settlements for their claims, despite the grievous, long-lasting harms they've suffered.

Fortunately, though, the judge ruled the other way. And rightly so. The Roman Catholic Church, after all, is the longest surviving monarchy in history -- its top-down structure is hardly a secret. Indeed, a prime reason priests were ordered to be celibate centuries ago was to ensure property ownership stayed within the larger church and did not devolve to their offspring. (In the early centuries of the church, priests could be female, and, whether male or female, could be married.)

Except for Vatican II, the 1960s ecumenical council that would have given the laity more power within the Church and which made services more informal, there has been little reason to think the hierarchy ever would have approved having church property land in the hands of parishioners. And Vatican II has not fared well in recent years or under recent Popes.

The Archdiocese Could Have Made Parishes Independent, Had It Wanted To

The Church argued, though, that property issues ought to be determined under church law - which is called canon law. But that contention was wrong, as the judge rightly held: Property ownership in the state of Oregon and in the United States is determined by neutral, secular principles of law. And under those principles, the parishes' assets plainly belonged to the Archdiocese.

That conclusion isn't unfair. It's a result of choices the Archdiocese made - and that others have made differently. Archdioceses make decisions with consultation from their lawyers all the time; presumably, those lawyers are perfectly capable of doing what needs to be done to make parishes independent - or not - under civil law.

The Portland Archdiocese could have made secular arrangements that would have ensured the parishes would not be brought into the Archdiocese's bankruptcy. That would have meant separately incorporating the parishes, having separately incorporatedparishesholdrecordtitle, and acting in ways that illustrate parish control.

Parishes, under secular law, can be independently owned. Indeed, in two recent Episcopal Church cases, one in New York and one in California, courts have held - applying secular legal principles -- that the parish did, in fact, own its own property.

Baleful Consequences Would Have Followed a Ruling that Canon Law Controlled Property Ownership

The bankruptcy judge's ruling is laudable not only because it reflects the reality that the parishes are not independent, but also because it reasserts a principle crucial to our constitutional system: Even the Catholic Church is part of the United States legal system and is bound by neutral, generally applicable laws.

The Church claimed the First Amendment's Religion Clauses -- and the Religious Freedom Restoration Act, of which I have written most recently in this column -- required the Court to defer to canon law to determine the ownership of the parishes, even if it was at odds with civil law. But in fact, the Religion Clauses require the very ruling the judge reached. There is no First Amendment right to avoid the application of neutral, generally applicable laws, and no impermissible interference with religion in applying such laws to religious entities. In the United States, they are property owners like everyone else.

Imagine if the bankruptcy judge had ruled the other way - ruled, that is, that canon law, not civil law, determined ownership of property within the Church. Every deal involving Church property would have to include canon lawyers, and disputes would have to be settled by choosing between the canons that canon lawyers presented. Yet, civil courts, which may not determine religious belief, could not choose between those canons. The end result: Ownership of church property would have to be determined by canon law courts, and no buyer of such property could rely on the neutral rule of law to govern and predict property ownership.

Ironically, the application of canon law here would have hurt the Church -- which owns billions on property just in the United States -- financially in the long run. There is no arena where predictability and stability are more necessary, and, therefore, secular property rules are longstanding and quite constant. This certainty is needed to permit property markets to operate efficiently and to keep the chain of title clear.

In contrast, if canon law were suddenly held to apply, that would put a cloud on the title of all Church property, and reduce its value accordingly. Would you buy a piece of land from the Church if you knew that, in the event of any dispute, your only option would be to turn to Church-controlled canon courts? You might - but at fire-sale prices.

It's rather amazing that was a risk the Archdiocese was willing to take just to reduce its financial and legal obligations to the victims of clergy abuse.

The Big Picture: Implications for Other Archdiocese Bankruptcies

The Portland dispute isn't over. Bishop Vlazny announced this weekend that, despite the ruling, he would continue to act as though the parishes were independently owned. Obviously, it has not yet sunk in that neither he nor the Archdiocese has the right to reside in a universe wholly divorced from civil law, civil courts, or public accountability - especially when he has voluntarily filed for federal bankruptcy to obtain its civil benefits!

The Portland ruling is good news for past clergy abuse victims, certainly. Portland's is not the only Catholic Church bankruptcy - Tucson's bankruptcy has been settled, and the Spokane diocese is in litigation. But it is the biggest. Other Archdioceses will have to take note of the Portland bankruptcy's judge's ruling - and make the determination whether to make parishes independent, and then to follow the civil law's requirements to reach that end. If they choose independence to avoid compensating victims, they will have to live with the corresponding reduction in control. They simply cannot have it both ways.

Make no mistake - the diocesan filings in federal bankruptcy are just one part of the larger effort by the Church in the United States to "manage" the crisis it created. This recent Portland bankruptcy decision makes this much clear: if the goal is to reduce victims' compensation, bankruptcy is no panacea.