The easiest work around to resolve this issue :
1) Create a sequential data set on a non-SMS volume that has the same name as the catalog being reorg'd
2) Uncatalog the sequential data set and point the JCL to the dataset using UNIT= and VOLSER= statements
3) Execute CREWSRTR with PARM=RESTART.
These actions allowed the reorg to complete successfully by making CREWSRTR think the actual catalog still exists and using the original data to build the new catalog in the correct space.