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Bankruptcy Court Rules Large Investment Pool Is Property of Wilmington Diocese Chapter 11 Estate

June 2010

The firm has won a first-of-its-kind trial judgment in the Catholic Diocese of Wilimington chapter 11 case on behalf of the official committee of unsecured creditors, which is comprised of the survivors of sexual abuse, in the amount of approximately $120,000,000.  The Delaware bankruptcy court determined that the Diocese, along with various parishes and entities related to it, including Catholic Cemeteries, Catholic Foundation and Catholic Charities, transferred more than $120,000,000 of funds to the Diocese to be invested in a pooled investment account. While the court held that the funds transferred by the nondebtor investors were held in a resulting trust for the benefit of the contributors, the funds nevertheless were commingled with the Diocese's funds. The court found in the committee's favor that those funds were not traced or identified. Accordingly, the court ruled that the entire pooled investment account, valued at about $120,000,000, is property of the Diocese's bankruptcy estate. These funds are now potentially available to pay the claims of survivors of sexual abuse. Official Committee v. Catholic Diocese of Wilmington, Inc. (In re Catholic Diocese of Wilmington, Inc.), 432 B.R. 135 (Bankr. D. Del.  2010). (Opinion available below with permission of  Thomson Reuters.)

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