Archdiocese Clarifies 7th Circuit Court Ruling on Cemetery Trust in Chapter 11
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Archdiocese Clarifies 7th Circuit Court Ruling on Cemetery Trust in Chapter 11

Yesterday, the 7th Circuit Court ruled that there is no protection under the federal Religious Freedom Restoration Act for the Cemetery Perpetual Care Trust. This argument, that the Trust enjoyed protection under its First Amendment and RFRA rights, was initially rejected by Judge Kelley in the bankruptcy court; overturned by Judge Randa in the District Court; and then ultimately appealed by the Creditors’ Committee to the Federal Court in the 7th Circuit.

It’s important to note that the court did not decide anything about the money set aside in trust for the perpetual care of the cemeteries that is in the Cemetery Trust. The appellate court’s focus was on the issue of religious freedom protections. So, yesterday’s decision only means that Judge Kelley can now move forward with confirming the archdiocese’s Plan of Reorganization to emerge from Chapter 11. 

Some media have incorrectly included information in its reports that the issue is the alleged fraudulent transfer of funds set aside for decades to care for the archdiocesan cemeteries into a trust in 2007. In fact, the 7th Circuit goes out of its way to say in its ruling that the issue of whether the Archdiocese actually made a fraudulent, preferential or avoidable transfer is not part of their decision.

Others have indicated that the Cemetery Trust money is now available for settlements in the bankruptcy.  That also is incorrect. This ruling only addressed issues of religious protection, so this does NOT make the money in the Trust part of the archdiocesan estate or available to abuse survivors.  

Some have tried to attack Cardinal Timothy Dolan, who formalized this long-standing Trust arrangement into a formal Trust in 2007, in line with the laws of the State of Wisconsin.  Because the money always was held in trust and always in a separate account designated for the perpetual care of the cemeteries, Cardinal Dolan followed the advice of the Archdiocesan Finance Council, who directed a formal trust be established.  It was not nefariously transferred out of other diocesan funds. In fact, the archdiocese’s practice of setting aside money to provide for perpetual care follows the same requirements under Wisconsin law as for non-religious cemeteries.

As we have communicated since the onset of the Chapter 11 proceeding, the Creditors’ Committee has targeted the Cemetery Perpetual Care Trust because the Trust holds a large amount of money.  Even without the protection of the 1st Amendment, the money remains protected because it was held in trust for a specific designated purpose, namely, that the money was always held in trust for the perpetual care of the archdiocesan cemeteries, a commitment dating back to the late 1800s. 

So what happens next? The Cemetery Trust will decide if it intends to appeal this decision to the United States Supreme Court. Meanwhile, the bankruptcy court had been waiting on this decision before it would move ahead with a hearing on the Plan of Reorganization.  In the Plan, the Cemetery Trust litigation is actually settled through a loan provided by the Trust to the archdiocese, along with a long-term commitment to provide an annual payment to the archdiocese of approximately $2 million to offset the actual cost of care of the cemeteries. The archdiocese will ask that this hearing move forward so it can finally emerge from bankruptcy and return its focus to its spiritual, charitable and educational mission.

Our hope is that with the positive developments of the multi-million dollar settlements with insurance companies; the resolution of the Cemetery Trust litigation; and the recent rulings on what claims are eligible for compensation; that the bankruptcy court will be able to swiftly move this proceeding toward conclusion.

Published:2015-03-10
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