In In re Roman Catholic Bishop of Oakland, (ND CA Bkrptcy., Oct. 2, 2926), the federal Northern District of California Bankruptcy Court, in a 109-page opinion, rejected the Oakland Diocese's proposed Plan of Reorganization, finding that the Plan does not satisfy the Bankruptcy Code's requirement that it be in the best interest of any non-consenting class of creditors.
Under to proposed Plan, a Survivor's Trust would be set up and would pay known abuse claimants $172.3 million in total, which amounts to just over $499,000 per claimant. A reserve of $7.7 million would be set aside for unknown future abuse claimants. The Abuse Claimants voted overwhelmingly (331-8) against approval of the Plan.
The court rejected the Diocese's claim that certain requirements for confirmation of the Plan violate its rights under the 1st Amendment's Free Exercise Clause or under RFRA, saying in part:
First, the Court is unaware of any Code provision, or any case law interpreting the Code, that applies any of the requirements of the Code ... differently or more leniently, because the debtor is a religious entity....
Second, the Court does not believe that the Debtor has articulated any basis on which the actual requirements for confirmation of a plan of reorganization would implicate any of the protections provided under the First Amendment or RFRA....
Third, even if there were some theoretical basis to consider the application of the First Amendment or RFRA to this case, the actual provisions and requirements of those laws would either (a) render them inapplicable to plan confirmation issues or (b) make it impossible to assess the effect of those laws on the Debtor’s requirements for confirmation....
The Debtor argues that the Court would violate the Church Autonomy Doctrine, and by analogy, the Ministerial Exception, if it were to “weigh in on a dispute between the Committee and Debtor regarding how many Churches the Debtor needs to fulfill its mission...."
Here, the court is not resolving a dispute between the Committee and the Debtor about the number of churches to sell, nor is it requiring Debtor to sell anything. It is also not second guessing the decisions Debtor has, in good faith, made. ....
... Debtor simply does not articulate a basis for the Court to conclude that the confirmation standards are imposing a substantial burden on Debtor ‘s exercise of religious rights....
However, the Court concluded that it could not find that the plan satisfied the "best interest of creditors" test, questioning the accuracy of the amount of assets the Diocese claimed would be available to creditors. The court, though, rejected claims that the Diocese had not proposed the Plan in good faith.
NBC Bay Area reports on the court's decision.
