A bankruptcy judge has ordered the Roman Catholic Diocese of Gallup, N.M., its insurance carriers and lawyers representing 58 alleged sexual-abuse victims to begin mediation no later than July 15.
Judge David Thuma, who oversees the diocese’s bankruptcy proceedings, signed off on mediation at the request of both alleged victims and the diocese, which stretches across broad swaths of northern Arizona and New Mexico.
Mediation is likely the best opportunity to resolve the diocese’s bankruptcy case through a settlement that provides compensation to alleged victims and protects the church from future litigation, according to lawyers involved in the case. Other diocesan bankruptcies prompted by sexual-abuse claims have stretched out over years, racking up huge legal bills.
In advance of mediation, lawyers representing the diocese, insurers and alleged victims have spent nearly a year and a half seeking out victims, assessing the value of the diocese’s assets and collecting evidence on the allegations of abuse and alleged cover-up by diocesan officials, much of which is said to have taken place decades ago.
Susan Boswell, a lawyer for the Diocese of Gallup, said she hopes to arrive at a court-approved settlement with alleged victims and others well in advance of the second anniversary of the case in November.
“We need to get this case done,” she said at a hearing last week.
James Stang, a lawyer with Pachulski Stang Ziehl & Jones LLP who has represented thousands of victims in nearly a dozen diocesan bankruptcies, told the judge he doesn’t want to receive news of another victim’s death before the case is resolved.
“I know that may seem a little melodramatic,” he said at the hearing. “But it happens to me on a regular basis.”
But not everyone involved in the case is eager to begin mediation.
Catholic Mutual Group, the Diocese of Gallup’s insurance carrier, said it wanted more time to collect and evaluate information on abuse claims and accused the diocese of failing to hand over files on abusive priests.
In court papers, Catholic Mutual said the diocese has placed “every conceivable roadblock in the path of Catholic Mutual’s request for information.”
David Spector, a lawyer for Catholic Mutual, said that the dispute with the Diocese of Gallup was highly unusual and that Catholic Mutual had never before had an adversarial relationship with a diocese. Catholic Mutual is the primary provider of insurance coverage to many Catholic dioceses in the U.S. and Canada, and its board of trustees consists of 25 Catholic bishops, archbishops and cardinals.
“We don’t want to go to war with the diocese,” Mr. Spector said. “All we want is some basic information to enable us to be able resolve these claims.”
Ms. Boswell disputed Catholic Mutual’s assertions, calling them an “incomplete story.”
“Unfortunately, Catholic Mutual responds to each group of documents it receives, with a request for more information and documents, failing to realize the limited resources of the diocese,” she said.
A Franciscan order of priests, several parishes and a Catholic school will also participate in the upcoming mediation along with the diocese, victims and insurance carriers. Several other Catholic institutions, which could eventually be pulled into the diocese’s bankruptcy case, were not ordered to attend.
Lawyers for alleged victims say they are continuing to investigate other dioceses and religious orders that may have played a role in protecting abusive priests at the Diocese of Gallup.
One such diocese, the Diocese of Corpus Christi, Texas, failed to adequately warn the Diocese of Gallup about an abusive priest who was ordained in Corpus Christi but later moved to Gallup, victims’ lawyers say.
“Any accusation of inappropriate conduct, made against a church worker or employee of the Diocese is always taken seriously and fully investigated regardless of the age of the victim or the amount of time that has passed,” a spokesman for the Diocese of Corpus Christi said in an email.
The Diocese of Gallup, home to 58,000 parishioners, filed for chapter 11 bankruptcy protection on Nov. 12, 2013, as several lawsuits related to sexual-abuse claims were preparing to go to trial.
Judge Randall Newsome, who formerly served as the chief judge of the U.S. Bankruptcy Court for the Northern District of California, will serve as the bankruptcy court-appointed mediator and will work pro bono.
Judge Newsome led a similar round of mediation in 2012 between several hundred abuse alleged victims and the Archdiocese of Milwaukee, which failed to produce a settlement.
In total, 14 Catholic dioceses and religious orders have turned to chapter 11 in the past decade to address waves of litigation related to alleged sexual abuse of children.
Write to Tom Corrigan at tom.corrigan@wsj.com. Follow him on Twitter at @TheTomCorrigan
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