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Spokane, Washington  Est. May 19, 1883
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Spokane Diocese claims lawyers mishandled bankruptcy

The Catholic Diocese of Spokane has accused its own lawyers of mishandling its historic bankruptcy, which exposed decades of clergy sex abuse and cost parishioners and insurers $50 million.

A malpractice lawsuit filed this week by the diocese seeks more than $12 million from the venerable Spokane law firm Paine Hamblen Coffin Brooke and Miller.

The claim is the latest bombshell in a bankruptcy that staggered along from December 2004 until May. The diocese settled with 180 people who claimed they were sexually abused by priests and other Catholic clergy.

The diocese, now under the leadership of Bishop Blase Cupich, says in court documents that bankruptcy lawyers Shaun Cross and Greg Arpin failed to explore other means of ending the abuse scandal.

Cupich also blames the lawyers for writing a bankruptcy plan that failed to assess and adequately fund the risk of new claims, which nearly forced the foreclosure of churches.

The lawsuit also accuses the attorneys of a conflict of interest, in shielding former Bishop William Skylstad from testifying in the first civil trial alleging sex abuse by filing for bankruptcy on the eve of that suit. The accusation echoes concerns voiced during the bankruptcy by some lawyers and wealthy Catholics who opposed that strategy. At one point, several prominent Catholics urged Skylstad to resign.

The lawsuit stunned Paine Hamblen.

“We believe we worked very hard and very diligently for them and did extraordinary work,” Jane Brown, managing partner of the firm, said Tuesday. “We stand by our work.”

Cross, who has since left Paine Hamblen, did not return messages seeking comment. Brown spoke on behalf of Arpin.

Paine Hamblen – one of Spokane’s oldest law firms, with 50 attorneys and a storied, 119-year history – defended the legal advice it provided the diocese in the years leading up to bankruptcy.

“We kind of feel like the new bishop is not fully informed and doesn’t really understand under what circumstances any judgment calls were made,” Brown said. “They were facing hundreds of millions of dollars in claims that dwarfed the church’s financial resources, and the diocese and parishes have been able to continue.”

A decade ago, as the child sex abuse scandal deepened and lawsuits mounted, questions arose surrounding Skylstad’s ties to notorious pedophile priest Patrick O’Donnell. The two priests had both served in north Spokane’s Assumption Parish in the 1970s.

The Paine Hamblen lawyers undertook the role of representing Skylstad as an individual named in the lawsuits against the diocese, at the same time representing the diocese.

Cross contended that the bishop and the diocese were legally inseparable. It was a tactic designed to define the diocese as a one-man “corporation sole” that did not own parish property – thus shielding the assets of parishes and checkbooks of parishioners.

Cupich, appointed bishop of the Spokane Diocese two years ago, said such dual representation posed a conflict of interest.

O’Donnell – one of 27 Catholic clergy in Eastern Washington who the diocese acknowledges molested children – admitted to abusing boys in the Assumption Parish rectory.

Victims alleged that Skylstad knew O’Donnell had hosted boys at his room in the rectory and, according to multiple lawsuits, “announced his presence before entering; the implication being that he was at least suspicious of unwarranted behavior and didn’t want to witness it.”

At least one parishioner testified that she alerted Skylstad that O’Donnell was molesting boys.

Skylstad left Assumption in 1976, and shortly thereafter his replacement at Assumption learned of O’Donnell’s actions. Within months diocese officials sent O’Donnell to Seattle for treatment rather than report his activities to police.

O’Donnell later returned to Spokane and began molesting more boys. He was removed from ministry in 1986.

The first lawsuits against the diocese were filed more than a decade later.

Skylstad became bishop of the Spokane diocese in 1990 and stepped down in 2010.

In the two years since Cupich took over, the diocese has settled its remaining bankruptcy issues.

In a statement Tuesday, Cupich said he attempted to resolve the dispute with Paine Hamblen in private meetings.

“Unfortunately, overtures to resolve this on a confidential, mediation-based approach were rejected,” he said.

The lawsuit seeks repayment of millions in legal fees paid by the diocese to Paine Hamblen, along with millions more for negligence and malpractice.

Sandpoint attorney Ford Elsaesser, who represented parishes during the bankruptcy, is now advising Cupich.

Seattle attorney Robert Gould is handling the malpractice suit for the diocese.

Paine Hamblen no longer has an active bankruptcy practice. Cross and at least two other attorneys associated with the diocese bankruptcy, but not named in the suit, have left the firm.

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