Listecki v. Official Committee of Unsecured Creditors

Dist. Ct erred in finding in instant Chapter 11 bankruptcy proceeding filed by plaintiff-Archdiocese that $55 million that Archbishop transferred to cemetery fund as means to insulate said funds from any claims by Archdiocese’s creditors was not subject to Bankruptcy Code’s set aside/avoidance provisions by virtue of either First Amendment’s Free Exercise Clause or Religious Freedom Restoration Act (RFRA). RFRA did not apply since defendant-creditors’ committee was not governmental actor and “government” was otherwise not party to instant action. Moreover, while Free Exercise Clause was potentially applicable to civil lawsuits, said Clause did not prevent potential application of Bankruptcy Code provisions to instant transferred funds, where: (1) instant transfer was not religious matter and did not pertain to interchurch dispute; (2) avoidance provisions of Code were general in nature and neutral in applicability; and (3) govt. had compelling interest in protecting creditors from fraudulent/preferential transfers. As such, Ct. rejected notion that alleged fraudulent or improper transfers can be excused in name of religion.