Judge allows clergy abuse claimants to sue for parish assets in Vermont Catholic bankruptcy case

A U.S. Bankruptcy Court will allow clergy abuse claimants to sue for an estimated half-billion dollars in parish assets to fund settlements under the Vermont Roman Catholic Diocese’s current financial reorganization case.

In a written order, Burlington-based Judge Heather Cooper said creditors can pursue not only the highest-level bank and building holdings of the state’s largest religious denomination, but also the trust-sheltered local property and possessions of nearly 70 parishes — from St. Edward the Confessor in northernmost Derby Line, population 687, to St. Joachim in southernmost Readsboro, population 702.

The order doesn’t promise any parish assets, but simply permits abuse claimants to file a lawsuit — what the bankruptcy court labels an “adversary proceeding” — to determine whether they’re entitled to local holdings.

“Unless settled,” Cooper wrote of the question in her July 28 ruling, “there may be years of litigation ahead and millions of dollars spent in attorneys’ fees and costs that could have been paid valid abuse claims.”

The diocese’s leaders and lawyers declined VTDigger’s request for comment, although they filed an 18-page objection to the pursuit of parish assets as recently as July 21. They now have two choices available in court: try to negotiate an agreement with abuse claimants in closed-door mediation talks set for this week, or continue to fight the creditors, having already spent $2 million in legal bills over the last two years.

Attorneys for a federally appointed committee representing more than 100 clergy abuse claimants submitted its lawsuit Friday asking the judge to declare that all church assets are available to pay creditors.

“Absent a declaration,” the abuse claimants’ attorneys wrote in a filing, “the diocese will continue to evade its moral, financial and legal responsibility to the survivors.”

The court has yet to announce a next step or schedule on the issue.

The diocese filed for Chapter 11 protection in the fall of 2024, arguing that a past series of priest misconduct settlements had reduced its highest-level financial holdings by half, to about $35 million. But abuse claimants argue the collective wealth of 66 parishes — assessed at up to $500 million — also should be on the table, even after the diocese aimed to protect the local properties in 2006 by placing them in trusts.

“What the parties need at this stage in the case is guidance from the court regarding the actual legal status of the assets at question in order for us to reach a resolution,” Brittany Michael, lawyer for the claimants’ committee, told the judge July 28 of why she wanted to file a lawsuit.

In response, attorneys for the diocese voiced fear that continued hearings would cost everyone more money.

“The diocese is very concerned that if this proceeds, it will not have sufficient funds to pay for the litigation and, ultimately and most importantly, compensate the survivors,” said Steven Kinsella of the Minnesota firm of Fredrikson & Byron.

Under federal law, both the court and creditors must approve any Chapter 11 reorganization plan.

The diocese — one of 44 U.S. Catholic entities to seek Chapter 11 protection — is trying to reorganize its depleting finances after paying $34.5 million to settle 67 clergy misconduct lawsuits in the past two decades, according to records, only to still face 119 more claims dating as far back as 1950.

To raise money, the diocese has sold its South Burlington headquarters for $3.13 million and Rutland’s former Loretto Home senior living facility for $1 million. It’s now seeking court permission to transfer its parochial Rice Memorial High School campus in South Burlington for $4.3 million to a new nonprofit group of supporters.

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This story was originally published by VTDigger and distributed through a partnership with The Associated Press.