Saturday, November 21, 2009

ONGOING COVERAGE: SPOKANE DIOCESE BANKRUPTCY

Diocese case turns to fees

Settlement lawyers jostling for millions

What's next Attorneys will meet with a federal mediator Sept. 20 in an effort to determine how more than $10 million in legal fees will be divided among the law firms.

John Stucke
Staff writer
September 10, 2007

Bankruptcy lawyers who have billed the Roman Catholic Diocese of Spokane more than $10 million want to fight about the legitimacy of their fees in secret.

It's an odd step for a high-profile case, where more than $10 million of a $48 million settlement is coming from the pews.

On Sept. 20, attorneys representing Bishop William Skylstad and those representing people sexually abused by priests decades ago are scheduled to meet in Reno with a federal mediator. The law firms representing various parties in the case are fighting over how to divide money allotted for legal fees.

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If they come to an agreement on how much each firm should be paid, the deal would be presented to the bankruptcy court judge here for approval.

If mediation fails, the fight could be aired in court. So far, the disagreements have been filed in the form of vaguely worded objections.

Normally, bankruptcy lawyers file their detailed fees, including specific tasks performed such as court hearings, meetings, conference calls, drafting e-mails and research. In this case, the hourly rates for the top lawyers range from $200 to more than $300.

The lawyers, including those of Seattle-based Riddell Williams who seek $1.85 million, and those with Pachulski Stang of Los Angeles who have charged $2.6 million, bill in six-minute increments, dividing the hour by tenths for recording-keeping ease.

Lawyers also file for reimbursements for such things as airplane tickets, meals, hotel rooms and office expenses.

In an August court hearing, diocese attorney Shaun Cross, whose Paine Hamblen Coffin Brooke and Miller law firm of Spokane has billed the diocese more than $3.7 million, said he's fearful that a public fight over fees would be an unnecessary airing of dirty laundry.

"Part of our desire to try to resolve this peacefully and quietly is not to have any above-the-fold, three-inch high reports in the newspaper, which there would be," he said.

U.S. Bankruptcy Judge Patricia Williams, of Spokane, will ultimately approve how much the lawyers are paid. She said during the hearing that she favors mediation in most instances and that judges tend to defer to the work of mediators.

If mediation is successful, the row between lawyers over money would be secret.

At the hearing, in fact, Williams and lawyers discussed how to finesse mandatory objection filings that would mask specific billing disagreements.

In bankruptcy court, the company, or in this case the diocese, must not only pay its own legal bills, but also the bills of lawyers representing creditors.

To ensure billing fairness, interested parties have the opportunity to object to the fees. Such reports are public filings.

But in this case, in which Catholic parishioners have been asked to raise $10 million to fund an overall $48 million settlement, there have been few objections.

The U.S. Trustee, which acts as a government watchdog on bankruptcy cases, has objected to the fees on several matters, including time and money on issues that were not important to resolving the case, along with complaints that too many lawyers duplicated tasks.

It is uncertain if the trustee will participate in the mediation.

Timing is important. All sides want the lawyer fees resolved by November, when large payouts for victims are scheduled.

Some smaller amounts already have been paid, said Gloria Nagler, a lawyer managing the trust set up to disburse funds.