Keeping the Faith: The Rights of Parishioners in Church Reorganizations

Faced with significant potential liability to victims of sexual abuse at the hands of church personnel, four archdioceses and dioceses of the Roman Catholic Church have filed for Chapter 11 bankruptcy protection. The bankruptcy proceedings present a multitude of novel issues, including valuation of tort claims against the church and determination of the property available to pay those claims. While each issue has the potential to affect parishioners of the church, the issue of property ownership may have a particularly strong effect. Under both canon law and state incorporation statutes, an archdiocese or diocese owns all assets of its churches. Unless the diocese holds this property in trust for the benefit of its parishes, a claim against the diocese or archdiocese may be satisfied with any property located within any of its parishes, even if that property has no other connection to the claim. Such property may be the only means for tort claimants to receive a substantial recovery for their claims, but is also the only means for parishioners to fully practice their faith. This Article considers whether parishioners have a procedural right to represent their interests in a bankruptcy and concludes that parishioners have an interest in bankruptcy proceedings, but that their interest is not sufficient to allow them automatic participation in the bankruptcy proceedings. Rather, the courts will need to determine on a case-by-case basis whether the diocese or archdiocese adequately represents the interests of parishioners within the bankruptcy proceedings in order to determine the ability of parishioners to intervene