The successful completion this week of the Tucson Roman Catholic diocese’s bankruptcy case was a triumph of negotiation and compromise over contention.

It could serve as a potential model, but it’s unlikely to have much impact on two more acrimonious diocesan bankruptcies playing out in the West, according to bankruptcy experts and other specialists who have followed the sex abuse scandals plaguing the Catholic church nationwide.

The effect of the Tucson case, which gives some abuse victims at least $600,000, on ongoing bankruptcy cases involving the Archdiocese of Portland, Ore., and the Diocese of Spokane, Wash., is not obvious, said Samuel Gerdano, executive director of the American Bankruptcy Institute in Alexandria, Va.

“The cases are different, even though they start with a seemingly common thread,” Mr. Gerdano said. “They’re proceeding very differently.”

Diocese Was Proactive

In Tucson, he said, the diocese proactively put some money on the table and “indicated a willingness to get to a plan” as part of a negotiating process typical in Chapter 11 reorganization cases, he said.

The plan, in the end, skirted questions about whether parishes and other properties tied to the church could be used to settle diocesan debts — a controversy that has plagued other cases.

In Tucson, a compromise was reached with parishes agreeing to contribute $2 million toward the diocese’s $22.2 million settlement, in exchange for not being subject to claimants suing them individually. Meanwhile, the diocese’s insurers, which had initially balked at contributing to the settlement pool, agreed to pony up $14.8 million.

But the ownership of parishes and other assets, such as cemeteries and charities, is at the core of the Portland and Spokane Chapter 11 cases. The bankruptcy judge in the Spokane proceeding is the first to have taken up the issue and has said she’ll rule this summer — with subsequent appeals certain.

“I’m frankly amazed that this issue didn’t come up” in Tucson’s case, said Chuck Zech, an economics professor at Villanova University who specializes in Catholic church finances. “It’s still hanging out there for Portland and Spokane. It’s going to have to be resolved eventually.”

Mr. Zech noted that the Catholic diocese in Newfoundland, Canada, put all its churches, parish houses and missions up for sale to pay $13 million to a pedophile priest’s victims.

“I’m gratified by the Tucson settlement,” he said. “This is a very positive development,” but he added that it’s unlikely the parties in Portland or in Spokane “could learn very much about their particular case” from it.

Phoenix lawyer Thomas Salerno, a bankruptcy specialist, said that if the Tucson case had not worked out cooperatively, it would have had more ramifications for the Spokane and Portland cases. “There would have been rulings on issues, judicial decisions, precedents set,” he said. “The parish properties, who owned them, those are critical issues.”

The Tucson outcome, Mr. Salerno said, “was a good example of a difficult situation being resolved through negotiation. That’s always the preferred way for these things to go.”

Another bankruptcy specialist, Boston attorney Dan Glosband, who represented that city’s archdiocese when it considered seeking bankruptcy protection, said the message to take from the Tucson case is “if plaintiffs want to see any money any time soon they should consider some sort of settlement structure. It might also be a good lesson for the debtors in the various dioceses.”

The Tucson plan protected parishes and insurance companies. “That in itself is a great model,” he said.

Fred Naffziger, a business law professor at Indiana University-South Bend, said resolving a major bankruptcy case in less than a year is highly unusual. “It reflects obviously a willingness on both sides to compromise,” he said.

Mr. Gerdano of the American Bankruptcy Institute said the Tucson case also benefited from having a judge “who proactively ran a tight ship,” keeping the case from unraveling in different directions, and holding down the amount spent on lawyers and experts — the so-called “burn rate” — that reduces the amount of money for claimants.

“Everybody had an eye on the ball, which is important. The eye has not been on the ball in the other cases.”

Judge Marlar set a deadline for claims and moved the case along, “rather than turn it into a feast for lawyers,” Mr. Gerdano said, and the lawyers and parties “did not view this as a full-employment project for life. They had a very realistic approach for working this case out.” —

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