Listecki v. Official Comm. of Unsecured Creditors (In re Milwaukee)

• Decision Date: 29 July 2013
• Docket Number: Adversary No. 11–2459–SVK.,Bankruptcy No. 11–20059–SVK.,No. 13–C–179.,13–C–179.
• Citation: 496 B.R. 905
• Parties: In re ARCHDIOCESE OF MILWAUKEE, Debtor. Archbishop Jerome E. Listecki, as Trustee of the Archdiocese of Milwaukee Catholic Cemetery Perpetual Care Trust, Appellant, v. Official Committee of Unsecured Creditors, Appellee.
• Court: U.S. District Court — Eastern District of Wisconsin

496 B.R. 905

In re ARCHDIOCESE OF MILWAUKEE, Debtor.Archbishop Jerome E. Listecki, as Trustee of the Archdiocese of Milwaukee Catholic Cemetery Perpetual Care Trust, Appellant,

v.Official Committee of Unsecured Creditors, Appellee.

Bankruptcy No. 11–20059–SVK.

Adversary No. 11–2459–SVK.

No. 13–C–179.

United States District Court, E.D. Wisconsin.

July 29, 2013.

Recognized as Unconstitutional

42 U.S.C.A. § 2000bbBrady C. Williamson, Jennifer L. Vandermeuse, Linda S. Schmidt, Godfrey & Kahn SC, Madison, WI, Matthew M. Wuest, William E. Duffin, Godfrey & Kahn SC, Milwaukee, WI, Timothy F. Nixon, Godfrey & Kahn SC, Green Bay, WI, for Appellant.

Bruce G. Arnold, Daryl L. Diesing, Francis H. Lococo, Lindsey M. Johnson, Whyte Hirschboeck Dudek SC, Milwaukee, WI, for Debtor.

Albert Solochek, Jason R. Pilmaier, Howard Solochek & Weber, Milwaukee, WI, Kenneth H. Brown, Pachulski Stang Ziehl & Jones, San Francisco, CA, Marci A. Hamilton, Washington Crossing, PA, Gillian N. Brown, James I. Stang, Pachulski Stang Ziehl & Jones, Los Angeles, CA, for Appellant.

DECISION AND ORDER

RUDOLPH T. RANDA, District Judge.

The Archdiocese of Milwaukee is in bankruptcy. One of the issues in this bankruptcy is whether the Archdiocese's creditors, primarily clerical abuse victims who are represented by the Official Committee of Unsecured Creditors (the “Committee”), appointed by the United States Bankruptcy Trustee, can access funds contained in the Archdiocesan Cemetery Trust. The Cemetery Trust, referred to as the Archdiocese of Milwaukee Catholic Cemetery Perpetual Care Trust, stands apart from the Archdiocese and holds more than $50 million in trust for the perpetual care of more than 500,000 deceased, interred under the tenets of the Catholic faith.

The Cemetery Trust filed an adversary complaint seeking declaratory relief, arguing that the Committee cannot access the funds therein without violating the Religious Freedom Restoration Act, 42 U.S.C. § 2000bb et seq. (“RFRA”) and the Free Exercise Clause of the First Amendment. The bankruptcy court granted the Committee's motion for partial summary judgment, finding that neither RFRA nor the First Amendment barred the Committee's claims or defenses in the adversary proceeding. In re Archdiocese of Milwaukee, 485 B.R. 385 (Bankr.E.D.Wis.2013). Archbishop Jerome E. Listecki, as Trustee for the Cemetery Trust, appealed.

The bankruptcy court's decision is reversed. The Committee, in pursuing the claims of the unsecured creditors under the authority granted to it by the bankruptcy court, acts “under color of law” and is subject to RFRA. § 2000bb–2(1). Therefore, RFRA and the First Amendment prevent the Committee from appropriating the funds in the Trust because doing so would substantially burden the Trustee's free exercise of religion.

I. Background

The Archdiocese of Milwaukee was established on November 28, 1843 and created an archbishopric almost 32 years later. The Archdiocese is both a Wisconsin non-stock corporation and a public juridic person under Codex Iuris Canonici or the Code of Canon Law of the Catholic Church. The Archdiocese's mission is to serve Catholic parishes, schools and institutions so that they, too, may effectively serve people in Southeastern Wisconsin and the broader community. The Archbishop is Jerome E. Listecki, successor to the former Archbishop, now Cardinal, Timothy M. Dolan.

The Archdiocese has operated and maintained Catholic cemeteries and mausoleums in Milwaukee since as early as 1857 (collectively, the “Milwaukee Catholic Cemeteries”). Those cemeteries consist of Catholic burial facilities within the geographical boundaries of the Archdiocese, including individual burial plots, crypts, niches, and property dedicated to future use as burial facilities. The Milwaukee Catholic Cemeteries encompass approximately 1,000 acres of land in which more than 500,000 individuals are interred. An estimated 3,000 burials take place each year.

In 2007, the Cemetery Trust was formed under Wisconsin law by then-Archbishop Dolan. The funds that comprise the Trust's principal took nearly a century to accumulate and include approximately $55 million that had been held, separately for that period, for the perpetual care of the Milwaukee Catholic Cemeteries even prior to being transferred to the Trust in or around March 2008 (collectively, with any later earned or received Trust funds, the “Perpetual Care Funds”). The Archdiocese receives quarterly distributions from the Trust to cover the costs for providing for the perpetual care of the Milwaukee Catholic Cemeteries.

Under Church law, Catholic cemeteries occupy land blessed and consecrated for the specific use of Christian burial. Church law includes canon law, issued or authorized by the Pope, recognized as the Church's supreme legislator. This Church law is universal and applicable to Catholics world-wide. Church law also includes particular law—that is, law that governs a specific territorial area for which it was promulgated.

When the Archdiocese established its first cemeteries in the mid–1800's, Church law in the United States forbade priests from providing funeral services for Catholics buried in non-Catholic cemeteries. Although this prohibition was eased in later years, allowing Catholic funerals for those buried in non-Catholic cemeteries, the Church continued to emphasize the sanctity of Catholic burial sites and the importance of Church-owned cemeteries. It also required, among other things, that Catholic cemeteries be maintained in a manner befitting their sacred purpose with money set aside to provide the necessary maintenance and care.

These expectations and requirements are reflected in the universal law of the Church, first codified in 1917 as the Code of Canon Law and in the particular law of the Archdiocese. The placement of the canons governing cemeteries in the original 1917 Code and the successor 1983 Code emphasizes the belief that Catholic cemeteries are sacred places, not mere property. As expressed in the Archdiocese's 1979 Guidelines for Christian Burial: “Not only is the Catholic cemetery a sacred place, a place of prayer, and a place reflecting our beliefs and traditions, it is also for the community a sign of the link among all the faithful, living and dead.”

For the Church and therefore Catholics, Catholic cemeteries reflect the Catholic belief in the resurrection of Jesus and the community's commitment to the corporal work of mercy of burying the dead. Resurrection of the dead, of course, has always been an essential element of the Christian faith, beginning with Jesus' own resurrection. For Catholics, moreover, the belief in resurrection is a belief in the ultimate resurrection of one's own body. According to this belief, the soul separates from the physical body at death to meet God, while awaiting reunion with its body, transformed and resurrected through the power of Jesus' resurrection, on the last day.

The sacred nature of Catholic cemeteries—and compliance with the Church's historical and religious traditions and mandates requiring their perpetual care—are understood as a fundamental exercise of this core belief. Theologically, the deceased must be treated with respect and charity in the Catholic faith with the hope of resurrection.

Although Archbishop Listecki is the administrator of both the Trust and the Archdiocese, the Trust is separate and distinct from the Archdiocese in civil and in canon law. Under the Code, the ownership of the Trust funds rests in the Trust, not the Archdiocese or the Archbishop. By administering and holding funds for the ongoing care of the Milwaukee Catholic Cemeteries, the Trust and Trustee assume canonical and moral responsibility for that perpetual care.

Similarly, the Code requires that the Trust's funds be used for the Trust's designated purposes. If funds are alienated from the Trust without the required canonical approval, the Archbishop as Trustee may well face discipline and a religious penalty from the Church. Depending on the value of the property at risk, canonical norms require consultation or consent from Church authorities. They may also require approval from the Vatican.

Archbishop Listecki, as Archbishop and Trustee, adheres to the belief in the resurrection of the body and that belief's exercise through, among other things, the perpetual care of the Milwaukee Catholic Cemeteries. If the Trust is legally compelled to cede all or part of the funds to the estate, there will be no funds or substantially less funds for that perpetual care. As a result, neither the Debtor nor the Trust and its Trustee will be able to fulfill their canonical and moral obligations to provide the appropriate care for these sacred sites—consistent with Catholic doctrine and canon law—or assure the requisite permanence, reverence and respect for those buried there.

II. Jurisdiction

An appeal to the district court from an interlocutory order issued by a bankruptcy court is appropriate when it involves a controlling question of law over which there is a substantial ground for difference of opinion, and an immediate appeal from the order may materially advance the termination of the litigation. 28 U.S.C. § 1292(b); In re Archdiocese of Milwaukee, 482 B.R. 792, 797 (E.D.Wis.2012). Previously, the Court held that it was “satisfied that this standard is met, such that it will grant leave to appeal. In the course of briefing, the parties are free to pursue further arguments on this point ...” April 1, 2013 Decision and Order at 2, ECF No. 2. Taking up the Court's invitation, the Committee argues that leave was improvidently granted.

The Committee concedes that most of the issues presented are pure questions of law. However, the Committee argues that whether the Trustee's free exercise rights would be substantially burdened if some or all of the funds in the Trust were made part of the bankruptcy estate is an issue of fact that is not appropriate for an...