February 24, 2007 in Business

Trustee asserts diocese bill high

By The Spokesman-Review
 

Bankruptcy lawyers have overbilled the Catholic Diocese of Spokane, sometimes having multiple attorneys review the same documents and attend the same meetings and court hearings, according to the U.S. Trustee’s Office.

Though the trustee hasn’t yet recommended how much money should be trimmed from the millions in unpaid legal fees that have been accruing since the diocese filed for bankruptcy protection in December 2004, the amount could be significant.

So far, the diocese has paid $2.36 million in attorney fees. About $6 million more had accrued through the end of December. An additional $260,000 has been paid to appraisers and other professionals.

The trustee’s objections to attorney fees, which ranged from about $250 to $400 an hour, were filed this week and aimed at four firms, including the diocese’s own lawyers at Paine, Hamblen, Coffin, Brooke & Miller.

The trustee’s office, which watchdogs bankruptcy cases, doesn’t comment on its court filings.

In bankruptcy court, lawyers bill their clients in six-minute increments. That covers time spent negotiating, drafting motions, research, meetings, telephone calls and court arguments.

Clients also pay all expenses, such as travel, meals and copying documents.

If fees are disallowed, the savings could be passed along to victims of priest sex abuse or deducted from the total cost of the $48 million bankruptcy settlement.

Diocese attorney Shaun Cross called the trustee’s review a built-in safeguard to ensure professional conduct, even as the trustee specifically targeted some of his fees and expenses.

He said, however, that in many instances, lawyers with expertise in different disciplines were needed to negotiate, draft and approve agreements.

“You have to be a firm large enough to handle the complexity and volume of work,” he said, “and then you get second-guessed for having too many people working on it.”

The trustee made specific reference to rates charged by Cross. In the objection, the trustee’s office said Cross raised his rates from $200 an hour – which he claimed was an inducement for Bishop William Skylstad to hire his firm – to $250 an hour without seeking permission from the judge. Cross disputes that assertion.

The trustee also objected specifically to some of the fees associated with a failed settlement attempt a year ago.

U.S. Bankruptcy Judge Patricia Williams rejected that deal – which would have paid $45.7 million to 75 victims – as unfair to other victims.

The trustee referred to the effort as “simply not beneficial to the estate nor a reasonable expenditure of time.”

The trustee also singled out the law firm representing one group of abuse victims.

In court papers, the trustee questioned many expenses filed by Los Angeles firm Pachulski, Stang, Ziehl, Young, Jones & Weintraub, including travel, overtime and meals that cost up to thousands of dollars per day.

Another objection related to one attorney with the firm who traveled to Spokane in order to review insurance coverage settlements at a cost of $50,000.

The trustee also objected to fees of bankruptcy attorneys with Riddell Williams P.S., the Seattle firm representing the other group of abuse victims, for duplicative services and hourly rates well above Spokane norms.

Attorney fees have been a thorny issue in the case from the first day.

Many parishioners, upset that the bishop chose to put the diocese into bankruptcy before fighting any abuse claims at trial, are now weighing how much to donate to the settlement.

The diocese bankruptcy plan calls on parishioners to raise $10 million beginning in April and secure that amount with their church assets.

The bishop is expected to raise at least $6 million more, collateralizing that amount with the assets of four of Spokane’s largest parishes.


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