A federal judge in Wisconsin handed down an opinion yesterday granting the Catholic Church — and indeed, potentially all religious institutions — such sweeping immunity from federal bankruptcy law that it is not clear that it would permit any plaintiff to successfully sue any church in any court. While the ostensible issue in this case is whether over $50 million in church funds are shielded from a bankruptcy proceeding triggered largely by a flood of clerical sex abuse claims against the Archdiocese of Milwaukee, Judge Rudolph Randa reads the church’s constitutional and legal right to religious liberty so broadly as to render religious institutions immune from much of the law.
The case involves approximately $57 million that former Milwaukee Archbishop Timothy Dolan transferred from the archdiocese’s general accounts to into a separate trust set up to maintain the church’s cemeteries. Although Dolan, who is now a cardinal, the Archbishop of New York and the President of the United States Conference of Catholic Bishops, has denied that the purpose of this transfer was to shield the funds from lawsuits, Dolan penned a letter to the Vatican in 2007 where he explained that transferring the funds into the trust would lead to “an improved protection of these funds from any legal claim and liability.”
The issue facing the court is, essentially, whether the funds that Dolan split off into a separate trust can now be reabsorbed into the archdiocese’s assets in order to enable sex abuse victims and other creditors to be paid out of these assets. In holding that these funds cannot be so absorbed, Randa relies on a law that limits the federal government’s ability to “substantially burden a person’s exercise of religion,” Randa cites to the current Archbishop of Milwaukee’s statement that “the care and maintenance of Catholic cemeteries, cemetery property, and the remains of those interred is a fundamental exercise of the Catholic faith,” and concludes that this statement alone is enough to shield the church’s funds. As Randa explains, “if the Trust’s funds are converted into the bankruptcy estate, there will be no funds or, at best, insufficient funds for the perpetual care of the Milwaukee Catholic Cemeteries.”
And Randa does not stop there. He goes on to argue that senior church officials get to unilaterally decide what constitutes a “substantial burden” on their faith for purposes of federal law — “Archbishop Listecki’s declaration stands unopposed, and on the issue of religious doctrine, it is unassailable. Moreover, the issue of substantial burden is essentially coterminous with religious doctrine.” In this case, an archbishop declared cemetery funds to be untouchable in a bankruptcy proceeding, but Randa’s reasoning could extend much farther. Nothing in his opinion would prevent a church’s officials from declaring that every single line in every single ledger kept by the church is mandated by the sacred word of God — and therefore every single dollar owned by the church is untouchable so long as the church engages in the kind of accounting gymnastics Dolan allegedly performed.
The same federal law that protects religious liberty also permits substantial burdens on religion when such a burden is “in furtherance of a compelling governmental interest and is the least restrictive means of furthering that interest.” Randa largely glosses over this exception, however, holding that the “interests advanced by the bankruptcy system are not compelling.” That very well be true, but there is another, overriding interest in this case — whether an employer whose employees stand accused of widespread sexual abuse can evade accountability by engaging in accounting tricks. At least 45 Milwaukee priests face sex abuse accusations. One priest in particular was accused of personally molesting close to 200 deaf boys. Yet Randa does not even consider whether America has a compelling interest in deterring the church from allowing future such incidents to occur.
If Randa had stopped there, his opinion would still award the church — and, indeed, potentially all religious institutions — a breathtaking degree of legal immunity. Taken to its logical conclusion, Randa’s framework would allow a church to run up whatever debts it chooses, then effectively protect the entirety of its assets from its creditors through a combination of creative accounting and a bankruptcy filing. Yet Randa does not even stop there. After reaching this sweeping interpretation of federal religious liberty law, he then turns to the First Amendment of the Constitution. With little analysis, and in an almost certain conflict with a binding Supreme Court precedent, Randa concludes that the church has a constitutional right to shield its funds. By raising his opinion to constitutional status, Randa effectively strips Congress of its ability to correct his sweeping interpretation of the law.
Judge Randa, a George H.W. Bush appointee, has a history of being reversed by higher courts in cases involving hot button social issues, so there is a good chance that his opinion will ultimately be reversed on appeal. In the meantime, however, Randa effectively places the church above the law — and leaves what could be hundreds of sexual abuse victims in the cold.