Dual creditor committees still in place

The Catholic Diocese of Spokane lost a bankruptcy court fight to disband a committee representing victims of clergy sex abuse.

Fearful that the Chapter 11 case will cost millions in lawyer fees, the diocese asked U.S. Bankruptcy Court Judge Patricia Williams to consider whether she had jurisdiction to dissolve one of the two creditors’ committees appointed by the U.S. Trustee’s office.

Though the U.S. Trustee initially appointed one committee, the members were so divided that the panel became dysfunctional.

In response, the U.S. Trustee ordered two separate committees: one consisting of alleged victims who are pressing lawsuits against the diocese, and the other made up of alleged victims who have not sought legal action.

On Monday, the judge decided the appointment and makeup of committees were outside her purview, leaving the two-committee apparatus in place.

In a related matter, the diocese decided to drop its objection to the hiring of James Stang to represent the committee of creditors who filed lawsuits.

Those legal actions ultimately prompted the diocese to seek bankruptcy court protection.

The diocese did, however, retain the right to object to the fees that Stang and other lawyers in connection with the case will charge.

Some lawyers have asked to be paid more than $300 an hour.

Shaun Cross, whose firm Paine Hamblen Coffin Brooke & Miller LLP is representing the diocese, said lawyer bills could reach $400,000 a month as they have in a similar bankruptcy case involving the Archdiocese of Portland.

Such fees would be a catastrophic financial hit to the Spokane diocese, which continues to be run by Bishop William Skylstad rather than by a court-appointed trustee.