The Archdiocese of St. Paul and Minneapolis filed for Chapter 11 bankruptcy on Jan. 16, a step that allows the church to operate as usual while reorganizing its operations and paying its creditors.
Federal bankruptcy Judge Robert Kressel, who is overseeing the process, has ordered the archdiocese and its creditors into mediation, where the parties will attempt to negotiate a settlement to reorganize the archdiocese and compensate victims of clergy sexual abuses.
Compromise is critical to mediation, as parties try to work toward a settlement that most — or many — can live with.
If mediation is successful, the archdiocese and its creditors can avoid moving the process to a federal bankruptcy courtroom — where the process can be more contentious than negotiation.
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"Litigation is war," said Roger Haydock, professor at the William Mitchell School of Law in St. Paul. "It's civil war, but it's war. To that extent, you try to get a peace treaty."
Mediation provides the opportunity for that peace treaty. Haydock says no party gets everything it wants in mediation, but it provides an opportunity to gain some control over the outcome.
How common is it?
Mediation has played a role in most, if not all, church Chapter 11 bankruptcy filings, with varying degrees of success. It didn't resolve the Archdiocese of Milwaukee's bankruptcy, which is entering its fifth year.
But mediation was key to making the Diocese of Helena, Mont.'s bankruptcy move forward smoothly.
Ford Elsaesser, the Helena diocese's bankruptcy attorney, said the church and its creditors were basically under mediation even before the diocese filed for Chapter 11 reorganization protection.
"The financial condition of the Helena diocese was not good," Elseasser said. "Everyone worked together to maximize what could be brought to the table, including settlements with the insurance carriers."
How do insurers fit into the picture?
Insurance coverage is always a major factor in church bankruptcies. Carriers claim church officials voided their dioceses' policies when they turned a blind eye toward clergy sexual abuse.
In mediation, though, the Twin Cities archdiocese and its insurers might determine that it's better to compromise than fight it out in court, Elsaesser said.
An insurer could determine it has no legal obligation to provide coverage, but might decide to contribute money to a settlement, rather than spend money fighting a claim.
The archdiocese, for its part, could decide to settle for less insurance money than it figures it is owed, rather than risk getting little or nothing in court.
"It's hopefully more productive to grind that out through the mediation process and come to an agreed number rather than rolling the dice in the courtroom," Elsaesser said.
Who's in charge?
Former federal Judge Arthur Boylan is serving as mediator in the Archdiocese of St. Paul and Minneapolis' bankruptcy case.
Boylan has settled thousands of cases through mediation, including the 2011 labor dispute between the National Football League and its players' union.
The NFL's mediation required 26 sessions over the course of more than 100 days. Boylan's successful mediation of the dispute ended that season's lockout.
In this case, Boylan will work with the parties involved toward some sort of consensus. That requires a lot of listening, so Boylan can best understand the groups involved — and ensure they feel fairly treated.
Boylan's role is to guide the process, as a neutral player, to an equitable solution.
What might get in the way?
"Egos are on the line, people's reputations," said Guy Burgess, co-director of the University of Colorado's Conflict Information Consortium.
That makes Boylan's job as a neutral party especially difficult.
"Some folks go into this to get all they possibly can get. Other folks might be more inclined to be conciliatory," Burgess said. "So, there's a lot of very difficult interpersonal issues that the mediator and the parties are likely to have to struggle with."
Will the old alliances remain intact?
A bankruptcy filing tests the relationships of the parties involved and their ability to work together.
"Some relationships improve, where the parties find common ground. Others can deteriorate if the parties are or appear to be intransigent on critical issues or if ... they're perceived to to be hindering the resolution of the case," said Howard Levine, who represented the Archdiocese of Portland, Ore., in its bankruptcy.
Bankruptcies can change relationships. For instance, groups that were pitted against each other before a bankruptcy — such as clergy abuse victims and the archdiocese — might find themselves allied against insurance companies on some issues in a mediation.
Even within the different groups involved in the bankruptcy, there could be internal divisions and squabbles.
"Among the 20 or so insurance companies, there's probably 20 different opinions about what to do," said Christopher Soper, a bankruptcy attorney and University of Minnesota law professor.
What's the benefit of attempting mediation?
The mediation process is private and confidential, unlike a case that goes before a judge.
That promise of privacy invites candor — and encourages the parties involved to consider making concessions they might not otherwise make in open court.
"In mediation, the parties themselves get to say how much they're willing to give up — how much they're willing take, if you would, on either side of the table — and come to some resolution," said Christine Kubes, a construction attorney and mediator.
What about compensating victims?
Generally in a bankruptcy, there's not much dispute about individual abuse claims.
After it's determined how much money is available to compensate victims, a court-appointed adjudicator will decide how that money should be allocated to individual victims, based on the severity of abuse suffered. Settlements also typically include an apology to victims.
Insurers and parishes where sex abuse occurred will likely try to make sure that any settlement with victims doesn't leave the door open to abuse lawsuits against individual parishes.
Insurers and parishes may be on the same page in seeking, through the bankruptcy court, some sort of legal protection against future abuse claims.