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Makeup of diocese creditor panel criticized

A five-member creditors’ committee appointed to represent alleged sexual abuse victims of Catholic clergy in the Spokane Diocese bankruptcy case has come under criticism.

Of the five, two have hired attorneys to sue the diocese for sexual abuse. The other three have not.

The makeup of the committee – appointed by the U.S. Trustee’s office – is not representative of the claimants, said attorney Michaeal Pfau, who represents a group of alleged victims.

“We’re concerned,” he said, adding that attorneys representing alleged victims planned to perhaps ask the office to reconsider committee membership to make it more favorable to those who have sued the diocese.

The creditors’ committee plays an important role in a Chapter 11 bankruptcy case. It participates in creating a plan to emerge from bankruptcy and also can wield influence over the debtor’s operations while in bankruptcy.

Upon filing for bankruptcy protection, Bishop William Skylstad said there were perhaps 125 people with potential claims of sexual abuse by clergy. Of those, about half had retained lawyers.

Skylstad said he placed the diocese under Chapter 11 bankruptcy protection to ensure that all victims were treated equally and to prevent “a race to the courthouse.”

Michael Ross, a member of the Survivors Network of those Abused by Priests, called the committee appointments chilling.

He noted that without a majority on the committee, alleged victims who hired lawyers to pursue claims against the diocese will not have a strong voice in the case.

“We are appealing to the trustee,” Ross said, “to reconsider the victims who have actually gone through the agony of psychological and emotional torture it took to file suit against the church they entrusted with their lives.”

Those on the committee include Brynne Malone, Steve Denny, Marjorie Garza, Richard Frizzell, and Michael Shea. Frizzell and Shea are the two who are suing the diocese.

Garza said she will keep an open mind about what’s best for victims.

“Just because I didn’t hire an attorney doesn’t mean I haven’t been in pain for 23 years,” she said. Abused by nuns and once warned by clergy not to hire an attorney, she said, she may or may not share views with other members of the committee.

“None of us necessarily thinks alike on anything,” she said.

Malone declined a request for an interview.

The committee will hire its own law firm to represent victims’ interests in the case. The legal bills will be paid by the diocese.

Several firms are maneuvering to represent the committee, including some with national, tough reputations.

While the case may lack the dramatic financial incentives of a big corporate bankruptcy, it nonetheless could have national implications. Lawyers involved believe some issues could ultimately be heard by higher courts — perhaps even the U.S. Supreme Court.

Shaun Cross, whose Spokane firm Paine Hamblen Coffin Brooke & Miller LLP has been hired to represent the diocese, said the appointment of a creditors’ committee will keep the case moving toward what the diocese hopes might be a quick resolution.

A core issue in the bankruptcy is whether school buildings, churches, property and other assets are the property of parishes, or if they belong to the diocese. The diocese is attempting to shield the parishes from the bankruptcy case, claiming that the assets of parishes are merely held in trust by the bishop — not owned.

Although several parishes were listed as big creditors in the bankruptcy, none is eager to join or form a separate creditors’ committee.

Sandpoint bankruptcy attorney Ford Elsaesser, who is advising the loosely organized Association of Parishes, said such a move would be premature.

“At this point, we just don’t think it would be in the best interest of the parishes,” he said.

A hearing regarding parishes with money in the diocese’s deposit and loan fund will be held next month.

Elsaesser said the parishes hope mediation can settle the claims and save the diocese from a contentious and costly bankruptcy.