Judge rejects Catholic dioceses' suit to access coronavirus relief

shutterstock 1485335360 1 Cathedral of St. Joseph, Buffalo, New York. | Shutterstock

A federal judge on Wednesday denied attempts by the Catholic dioceses of Buffalo and Rochester to obtain emergency small business loans.

In April, the dioceses had sued the Small Business Administration (SBA) after they were blocked from emergency small business loans under the Paycheck Protection Program (PPP) because of their bankruptcy debtor status.

Congress had initially allocated $349 billion in short-term relief for small businesses and eligible non-profits in March, to help them keep employees on payroll during the pandemic.

As part of the conditions for loan applications, entities could not be undergoing the bankruptcy process. The Diocese of Rochester filed for bankruptcy in September of 2019 and the Buffalo diocese followed suit in February. Each diocese had been named in hundreds of clergy sex abuse lawsuits following the openning of a window in the statute of limitations in the state in cases of sexual abuse.

In their lawsuit, the dioceses claimed they were unlawfully denied access to the PPP loans because of their bankruptcy status.

They asked the court to block the SBA from denying them a PPP loan, and from denying them more than $2.8 million total that they requested in their applications.

On Wednesday, however, Judge Elizabeth Wolford of the Western District Court of New York said that the SBA did not act outside the bounds of the law with the bankruptcy exclusion.

While the dioceses of Buffalo and Rochester sued the government to get access to the PPP loans, other bankrupt Catholic dioceses took different approaches.

The Diocese of St. Cloud, Minnesota, had not started the bankruptcy process before applying for a PPP loan. The Diocese of Winona-Rochester did not apply because of their bankruptcy status. The Diocese of Harrisburg did not itself apply for a loan, but parishes, schools, and charities applied for and received PPP loans as separate entities from the diocese.

Both the Buffalo and Rochester dioceses faced hundreds of lawsuits after a one-year window began in August, 2019, for old clergy abuse lawsuits to be filed. The one-year window applies to abuse cases where the state's statute of limitations had expired.

In their initial complaint in court, the dioceses said they "will be forced to lay off or furlough essential employees" without a PPP loan, which could also affect their bankruptcy estates.

In April, as part of its bankruptcy proceedings the Diocese of Buffalo announced it would cut off its financial support and health benefits for almost two dozen priests who had been removed from ministry because of "substantiated allegations of sexual abuse." The diocese told CNA that it was aware of "certain canonical obligations to ensure that these individuals are not left destitute and is addressing this."

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