Saturday, November 21, 2009

ONGOING COVERAGE: SPOKANE DIOCESE BANKRUPTCY

Diocese legal bill surpasses $10 million

Bankruptcy judge must approve fees

Document: Explanation of Paine Hamblen LLP's fees

John Stucke
Staff writer
July 24, 2007

Bankruptcy lawyers and accounting professionals have billed the Roman Catholic Diocese of Spokane $10.1 million for 2 1/2 years of work.

The fees reflect what diocese leaders and lawyers have said for many months – that while the case is among the most expensive legal endeavors in Spokane history, it is serving the purpose of settling all claims of sexual abuse by clergy and other diocese employees while allowing the church to continue its Eastern Washington ministry.

The $10.1 million will come from the $48 million that will settle all claims and lift the diocese out of bankruptcy. The most money will be paid to the Paine Hamblen Coffin Brooke & Miller law firm of Spokane. The firm has submitted a $3.7 million bill for the work of its lawyers, led by Shaun Cross, Greg Arpin and Michael Paukert.

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The bankruptcy judge must approve fees before they're paid.

Criticized widely for his firm's handling of the case, Cross defended it, saying full payment should be awarded even for work on a scuttled settlement deal in the spring of 2006 that drew the ire of parishioners, priests and some victims left out of the agreement.

The judge ultimately rejected the settlement as unfair and unworkable.

"I'm very proud of the work that my firm did on this entire case," Cross said, insisting that the rejected settlement was worth the hundreds of thousands of dollars in time billed because it laid the groundwork for compromise.

Cross acknowledged the sometimes harsh – and what he described as uninformed – criticism from fellow attorneys, as well as many parishioners, the press, victims and others.

He said legal fees could have been kept lower if the U.S. trustee had appointed one committee to represent victims rather than two. The two law firms representing the different committees – one made up of victims who had filed lawsuits and were instrumental in exposing pedophile priests, the other consisting of victims who had not filed lawsuits – charged a combined $4.5 million.

The two firms included Riddell Williams P.S. of Seattle, which seeks $1.85 million for representing one group of sex abuse victims; and Pachulski Stang, a Los Angeles-based law group that charged $2.6 million.

It was attorney Jim Stang who first won a ruling from U.S. Bankruptcy Judge Patricia Williams that parish property was owned by Bishop William Skylstad and thus should be included as assets available to satisfy the legal demands of victims.

But U.S. District Judge Justin Quackenbush reversed the decision on appeal last summer in favor of the diocese and parishes, and urged the sides to mediate.

Six months later, $48 million deal to settle all claims was reached. The so-called "property of the estate" argument was key to the bankruptcy, and Quackenbush's ruling deflated the demands of victims who said the diocese should use parish properties to secure hefty payments.

In bankruptcy, the company, or in this case the diocese, must cover the legal fees of creditors as well as the cost of its own lawyers.

Hourly rates for the attorneys ranged from $200 for Arpin and Paukert to $250 for Cross to more than $300 for some victims' attorneys.

Cross said that of the $48 million owed to settle the bankruptcy, about $28 million has been collected from insurance settlements and the sale of diocese property including Skylstad's house in Spokane, farm acreage, and the Chancery building on West Riverside Avenue.

The approximately $20 million balance will be funded by more sales of property and, most significantly, a $10 million note owed by Eastern Washington parishes now engaged in fundraising and $6 million in notes owed by Skylstad, yet secured by a few large parishes.

The diocese didn't return a phone call for comment. Victims of sex abuse will collect an average of about $230,000 each.

That's far less than the $1.3 million average victims stand to collect in the recently announced $660 million settlement of sex abuse claims against the Archdiocese of Los Angeles.