Portland church deal clears hurdle.

Byline: Bill Bishop The Register-Guard

PORTLAND - A federal bankruptcy judge on Thursday approved the first step of a proposed reorganization of the Roman Catholic Archdiocese of Portland, a deal among insurance carriers and the church that generates more than $51 million for the church to pay to victims of sexual abuse by priests.

The 34-minute hearing carried an air of celebration among two dozen lawyers representing the archdiocese and eight insurance companies who had been fighting over liability and coverage issues for more than two years.

The deal essentially allows the archdiocese to sell its insurance coverage back to its insurers for $51.75 million in cash. In exchange, the insurers walk away with no further liability for any claims by victims of abuse by priests of the archdiocese.

The $51.75 million comprises a major portion of funding for the bankruptcy reorganization plan, which allows the archdiocese to pay victims while continuing operations without encumbering any assets of its 124 parishes, 42 elementary schools, 10 high schools, two colleges and numerous charitable funds.

Without the reorganization, those assets may have been tapped to pay victims who went to trial and won large punitive damage awards against the church. Advocates for abuse victims have criticized the reorganization plan for the severe limits it appears to place on potential damage awards for victims who choose to go to trial instead of settling their cases out of court.

The Portland archdiocese was the first in the nation to file bankruptcy in the face of sex abuse lawsuits when it sought protection in 2004. By then it had already paid $53 million to settle claims of sexual misconduct and was on the eve of two trials in which alleged victims sought more than $155 million in damages. About 170 claims have been filed against the Portland archdiocese.

None of the victims of abuse attended Thursday's hearing. Little is known of their assessment of the proposed settlement because a gag order, imposed by two judges who mediated the bankruptcy reorganization, forbids them from talking about the case to the media - or even among themselves, unless the mediating judges are present.

Portland lawyer Erin Olson, who represents several of the victims, attempted unsuccessfully to have the gag order lifted. Both the Ninth U.S. Circuit Court of Appeals and U.S. Bankruptcy Judge Elizabeth Perris refused to consider the request until Olson had made the request to the judges who imposed the gag order, U.S. District Judge Michael Hogan and Lane County Circuit Judge Lyle Velure.

It's not clear whether the gag order may bar Olson from even discussing the gag order. She did not return a reporter's phone call on Thursday.

In her request, Olson argued the gag order is an unconstitutional restraint on free speech and lacks the procedural safeguards normally required before a gag order is imposed.

Hearings on the reorganization plan are scheduled in Portland on April 10, 11 and 12, according to court records.