A senior federal judge in Spokane reversed a lower court order Monday and cleared the Spokane Catholic Diocese and its lawyers of contempt.
It was a rare legal win for the diocese since it reopened its bankruptcy case last year to fight a group of newly filed sex abuse claims.
U.S. District Judge Justin Quackenbush said the contempt of court findings were “erroneously ordered” in February by U.S. Bankruptcy Judge Patricia Williams.
The decision frees the diocese, along with its law firm Paine Hamblen and one of the firm’s attorneys, Gregory Arpin, from $52,000 in fees and costs.
It does not, however, resolve other pressing problems facing the diocese: a time and money crunch that risks foreclosure on parish property to pay sex abuse claims.
The contempt ordeal erupted last year after the diocese faced many more new claims of past sex abuse than it had anticipated, including many against priests and employees of the Morning Star Boys’ Ranch. The money the diocese had set aside to pay such claims has already run out.
The diocese challenged some of the findings of a court-appointed claims reviewer, saying the reviewer was too liberal in allowing some claims. Those efforts were rejected.
Disappointed, the diocese appealed and attorney Arpin wrote an e-mail to a bankruptcy trustee, Gloria Nagler. The letter warned that if Nagler paid the claims – even though they were ordered by the bankruptcy judge – the diocese reserved the right to recover that money from her personal holdings if it was successful on appeal.
Nagler complained that the letter was an intimidation tactic and sought the contempt action.
Quackenbush disagreed. He said the e-mail should not have been construed a threat, and noted that Nagler is not a lay person to be easily intimidated. Rather, she is an experienced attorney who is billing the diocese $290 an hour to serve as trustee.
Quackenbush said attorneys often exchange such letters and e-mails that outline legal theories as part of their “zealous and effective advocacy” for clients.
Attorney William Etter, representing Arpin and firm Paine Hamblen on Monday, said he was pleased with the ruling and that it underscores the kind of advocacy clients expect when they hire lawyers.
John Munding, an attorney representing the diocese, said new Bishop Blase Cupich and other church officials are attempting to resolve a web of legal and financial problems stemming from the 2004 bankruptcy filing.
The diocese has been told that it should expect to pay another $800,000 to the bankruptcy trust this fall to settle claims. That’s atop the $48 million the diocese initially paid into its 2007 bankruptcy settlement to fund payments to 180 sex abuse victims, along with attorney fees and other costs.
Raising more money will be a difficult task.
“We’re happy with today,” Munding said. “Now we need to find an overall solution.”