Worried that lawyer fees will run into the millions of dollars, the Catholic Diocese of Spokane wants the federal judge overseeing its bankruptcy case to dissolve a committee representing victims and cap legal costs.
Now two and a half months into the bankruptcy, the diocese and competing victims’ groups are still fighting over one of the most basic steps in Chapter 11 cases – establishing creditors’ committees that represent the interests of investors and lenders, or in this case, the victims.
So far, there are two creditors’ committees: one to represent alleged victims who have filed lawsuits against the diocese and the other representing those who have not hired lawyers.
On Friday, the diocese asked U.S. Bankruptcy Court Judge Patricia Williams to disband the committee of litigants and reconstitute the other committee to the satisfaction of all parties.
Diocese attorney Shaun Cross said he feared lawyer bills could reach $400,000 a month, as they have in the bankruptcy case of the Archdiocese of Portland.
“We can’t let that happen,” Cross said, adding that the motion was not a move to control the committees, but rather a move to save cash.
As the debtor in the bankruptcy case, the diocese is responsible for paying the legal bills of its attorneys as well as the bills of attorneys working for the creditors’ committees.
In particular, the diocese is concerned about the billing rate of the lawyers representing the committees. Some have asked to be paid $325 an hour, and another charges $400 an hour.
James Stang, an attorney representing the committee of victims who sued the diocese for alleged sexual abuse by priests, said he expected to talk to his committee members as well as other attorneys in the case to attempt resolution of the motion to combine the committees.
Though the diocese has asked Judge Williams to rule, committees are appointed by the U.S. Trustee’s Office.
In this case, the U.S. Trustee initially appointed one committee made up of five members. Two had filed lawsuits against the diocese and three had not.
The result was a bitterly divided panel that failed to reach consensus. Its members publicly aired their concerns.
In response, the trustee’s office formed a second committee to separate the divided victims’ camps.