A federal judge has rejected an attempt by the bankrupt Archdiocese of Santa Fe to block three lawsuits accusing it of transferring millions of dollars in property to individual parishes to shield the assets from settlements in sexual abuse cases.
Last week’s ruling allows lawsuits for hundreds of victims to proceed, while the archdiocese says it will file another appeal.
“The gist of the proposed actions was that [the archdiocese] allegedly transferred to its 93 parishes most of [its] property, without consideration, and with the intent to hinder, delay, or defraud its creditors (almost entirely sex abuse claimants),” U.S. Bankruptcy Judge David T. Thuma wrote in his ruling.
The real estate assets the Church is accused of attempting to shield could be worth more than $150 million, according to the ruling. The assets include churches, schools and money raised from parishioners.
If the lawsuits brought against the archdiocese are successful, the assets could be sold to pay settlements to survivors of clergy sex abuse.
Attorneys said the overwhelming majority of 340 claims filed against the archdiocese by a June 2019 deadline alleged sexual molestation and assault, but the actual number of survivors is closer to 2,000. The archdiocese said at the time at least 78 clergy members had been credibly accused of sexually abusing children.
The archdiocese filed for bankruptcy in 2018.
A committee of lawyers filed complaints arguing the archdiocese created trusts for real estate and assets, and made individual parishes the beneficiaries before transferring millions of dollars in land and other assets to the trusts in 2013 to protect them from creditors.
The plaintiffs also argued that prior to 2013, the parishes did not exist as separate legal entities and could not hold legal or beneficial interests in the property.
The archdiocese argued that the shifting of assets was part of a reorganization effort and not fraudulent.
According to the ruling, the archdiocese intends to appeal the decision in a process that could last several years.
“One of the things [the archdiocese] said is that the First Amendment — religious freedom — a federal law called the Religious Freedom Restoration Act and the Church’s canon law says that Judge Thuma cannot do anything about these transfers,” said James Stang, a Los Angeles attorney representing the claimants.
“Our position is the First Amendment does not protect you from defrauding your creditors, that the Religious Freedom Restoration Act does not protect you from defrauding your creditors and that canon law has nothing to do with this dispute because this is not a dispute between the parishes and the diocese, which would be controlled by religious law,” he continued.
“This is a dispute between people who were sexually abused as children and the parishes and the diocese. And their rights are not controlled by the law of the Catholic Church. Their rights are controlled by the laws of New Mexico,”
Ford Elsaesser, an attorney who represents the archdiocese, could not be reached for comment.