Catholic Diocese of Spokane, Washington

From the

Official News Magazine of the Diocese of Spokane

Deacon Eric Meisfjord, Editor
P.O. Box 48, Spokane WA 99210
(509) 358-7340; FAX: (509) 358-7302

Diocese seeks relief from financial burden resulting from two Chapter 11 Creditors Committees

the Inland Register

(From the Feb. 24, 2005 edition of the Inland Register)

Calling the appointment of the second committee “an extraordinary remedy” that could potentially add millions of dollars of additional legal expenses to the case, the Catholic Diocese of Spokane contended in several pleadings filed today in U.S. Bankruptcy Court that one creditors’ committee can adequately represent the interests of all the Tort Claimants in the case.

The Diocese’s pleadings contest the formation two weeks ago of a second creditors’ committee to represent the interests of individuals claiming sexual abuse by priests of the diocese.

On December 23, 2004, less than three weeks after the Diocese filed for Chapter 11 Reorganization, the Office of the U. S. Trustee appointed a five-member committee of Tort Claimants. Of that committee’s five members, two had filed lawsuits against the Diocese; three had not. On February 2, 2005, the U. S. Trustee appointed a second creditors’ committee, comprised of five claimants, all of whom had filed lawsuits against the Diocese.

The two committees have retained separate law firms, one from Seattle, one from Los Angeles. For their services, those firms charge as much as $400 per hour.

As the debtor, the Diocese legally is responsible for the payment of not only its own legal fees, but the fees incurred by any official creditors’ committees.

The Catholic Archdiocese of Portland, Ore., and the Catholic Diocese of Tucson, Ariz., both filed Chapter 11 petitions in 2004. According to Shaun Cross, one of the attorneys representing the Spokane Diocese, “The administrative expenses in Portland totaled $400,000 in the month of January alone. And that is with just one creditors committee.”

The same U. S. Trustee who appointed two committees in Spokane appointed only one creditor committee for each of the Portland and Tucson cases.

Father Steve Dublinski, Vicar General of the Spokane Diocese, said that “The Spokane Diocese simply cannot afford to pay $400,000 each month in administrative expenses. We believe that the appointment of a second committee was well intentioned. But this development, with its profound financial ramifications, threatens the very ability of the Diocese to reach a fair resolution of the claims and to make it through the Reorganization process.”

In its pleadings filed today with the Bankruptcy Court, the Spokane Diocese argues that appointing a second committee is an extraordinary remedy. Fairness, justice, and equity will be better served for everyone by simply changing the composition of the first committee.

Said Shaun Cross, “This is not about adequate representation for those who are claiming they were abused. This is a question of whether this Debtor will be given the opportunity to even reorganize.” The significantly higher legal costs, said Cross, make the Diocese’s financial survival extremely difficult – in direct opposition to the goal of the Chapter 11 Reorganization process.

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