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	Diocese Lawyers Will Get Paid First Abuse Plaintiffs Are at End of Line in Bankruptcy Plan By Stephanie Innes Arizona Daily Star [Tucson AZ] January 1, 2005 The first people to be paid under the Roman Catholic Diocese of Tucson's Chapter 11 reorganization plan are the diocese's lawyers, while plaintiffs with valid claims of sexual abuse by priests will be grouped together with "unsecured creditors" - the last to be paid. Priority payment to lawyers from the bankrupt entity - in this case the diocese - is not unique to the diocese's bankruptcy case, though it's one of the issues that could be raised in 2005 as the diocese seeks approval of creditors for its 71-page bankruptcy reorganization plan. The lead bankruptcy attorney for the diocese last week said she is hopeful the case will be resolved sometime this year and that plaintiffs with valid claims against the diocese will be paid as quickly as possible, though she could not put a time frame on when. According to financial records submitted to the Bankruptcy Court, the diocese so far has spent at least $255,000 in legal and other fees associated with the case, and lawyers representing the diocese's 75 parishes appear to have cost $213,000, though the diocese will not explain a payment that was made to the parish attorneys in the weeks leading up to the bankruptcy filing. The expenditures of nearly a $500,000 for lawyers and other business fees associated with the bankruptcy less than four months into the case does not include the taxpayer costs of keeping the case in federal Bankruptcy Court. A deadline for filing claims of sexual abuse of children by clergy for incidents alleged to have occurred before the bankruptcy filing is April 15. So far, 14 claims have been filed and there are also 22 pending legal actions alleging sexual abuse involving 34 plaintiffs. Ideally, the lawyers involved say, they would like to reach an agreement on the bankruptcy plan around the April 15 deadline. Diocese of Tucson Bishop Gerald F. Kicanas filed for Chapter 11 bankruptcy protection on Sept. 20 in the face of potentially embarrassing and expensive lawsuits alleging sexual abuse of children by priests. The first three months of hearings in front of a federal bankruptcy judge, James M. Marlar, have been brief and, for the most part, free of acrimony. Upcoming hearings could change the tone of the case, since the nitty-gritty of the plan - including the fact that the sexual-abuse plaintiffs will be among the last to get paid - has not yet been reviewed in detail. "The hope would be that it wouldn't take years - that was the whole purpose of going through this expedited process," said Susan Boswell, the diocese's lead bankruptcy attorney. "So far people have been working very cooperatively, and it's our goal and the creditors' goal to come up with a consensual plan that we could confirm within a reasonable time. The goal is an amicable, fair and just solution." Bankruptcy Court documents show at least 29 attorneys from entities ranging from insurance companies to alleged abuse victims are involved in the diocese case. The lead attorneys for the diocese are Boswell and Kasey C. Nye of the local law firm Quarles & Brady Streich Lang. The attorneys involved charge hourly rates ranging from $150 to $500, meaning an hour in court is racking up costs ranging from several hundred to thousands of dollars, depending on how many of the lawyers - who are paid by the various entities involved - are present. "The trouble is, it's like working on the space shuttle - there is no way to do it on the cheap," said Clifford B. Altfeld, a Tucson bankruptcy attorney who is working for plaintiff attorneys Lynne M. Cadigan and Kim E. Williamson on the diocese case. "Short of settling before bankruptcy, there is no way to do it without specialized lawyers." Cadigan and Williamson represent 24 of the 34 plaintiffs with pending claims, and their clients are included among the "unsecured creditors" who will be the last to get paid under the current reorganization plan. That means Cadigan, Williamson and attorneys working with them like Altfeld do not get paid until the plaintiffs get their money. The fact that attorneys for the diocese will be the first to get paid is not a ranking order the diocese established - it's federal law. "The federal bankruptcy code sets out basic priorities for payments, and the first are costs of administration," said Boswell. "They are not just attorneys' fees but include any post-petition operating costs, for example any costs including salaries, insurance, operating costs." Secured creditors, who are owed a previously agreed-upon debt, will be the next to get paid. The final group, including any plaintiffs who receive settlements under the bankruptcy plan, is called the "unsecured creditors." As the bankruptcy case unfolds and possibly reaches a conclusion in 2005, some of the points from the reorganization plan that will have to be approved include: The only money that's guaranteed for plaintiffs with valid sexual-abuse claims so far is $3.2 million - not nearly enough, Cadigan says. The question of how much insurance, property sales and donations will provide to a settlement fund remains. "We are in a continuing discussion with the insurance companies," Boswell said last week. The "Steering Committee of Parish Pastors," which includes Monsignor Thomas Cahalane of Our Mother of Sorrows Catholic Church, 1800 S. Kolb Road; Monsignor Robert C. Fuller of St. Frances Cabrini Catholic Church, 3201 E. Presidio Road; and the Rev. Dominic Pinti of St. George Catholic Church in Apache Junction, has not made any formal, public requests that parishioners donate money for a settlement fund. Fuller and Pinti would not share with the Arizona Daily Star the amount parishes are spending to represent themselves in the Chapter 11 process. Cahalane did not return phone calls. The diocese listed $16.6 million in assets and $20.7 million in liabilities when it filed for bankruptcy protection. But that doesn't include parishes. If the bankruptcy plan is unsatisfactory to the plaintiff lawyers, they could challenge the ownership of the parishes, but that would undoubtedly result in expensive litigation that all the parties are trying to avoid. The five-member Tort Claimants Committee assigned to the case is allowed to request a settlement trust and a litigation trust if some of the alleged victims still want jury trials. If some of the claimants want a litigation trust, that could cost money that would otherwise be given out in settlements. Also, court documents show the diocese is requesting that jury trials for nonsettling claimants be held in federal court rather than in county courts - a long process. A disclosure statement accompanying the diocese's Chapter 11 reorganization plan called for a "special master" to be assigned by the Bankruptcy Court who would determine the validity of claims against the diocese, and also place the valid claims in a tiered grid that would determine their payments. Plaintiff attorneys could object to having one person determine the validity of the claims. In any case, the selection of a special master will be closely scrutinized by all the creditors. The federal bankruptcy code says any plan must provide that creditors receive as much or more than they would receive in a federal Chapter 7 bankruptcy liquidation. The diocese is asking for an exception to that test because it is a nonprofit entity. Rather than using a hypothetical liquidation as the standard for paying creditors, the diocese is asking that the standard be "a reasonable effort" that is a better alternative to the creditors than dismissal of the case. Altfeld, who is working with Cadigan and Williamson, said the diocese's request for an exception to the standard test could be questioned in upcoming hearings. Unlike the Chapter 11 case involving the Roman Catholic Diocese of Portland, Ore., Tucson's case has been running smoothly. But the national leader of SNAP - Survivors Network of Those Abused by Priests - says he will be closely watching the progression of events in all three U.S. dioceses that filed for bankruptcy last year - Tucson, Portland and Spokane, Wash. "Our view is that, in essence, the three bishops have chosen bankruptcy because it is convenient for them," said David Clohessy. "That may sound counterintuitive to the average person but you know, in essence the bishop is the lord of his kingdom and, as such, bankruptcy entails few disadvantages and numerous advantages. For one thing at least so far, the bankruptcies have postponed indefinitely very damaging information from surfacing." Clohessy pointed out that for each diocese that filed for Chapter 11 reorganization, a common denominator was a potentially embarrassing civil trial. In the Tucson case that trial involved three brothers in Yuma who say they were sodomized for years by the Rev. Juan Guillen, the former associate pastor of Immaculate Conception Catholic Church in Yuma who is now serving 10 years in state prison for attempted child molestation. "Certainly one of the many reasons we've strongly argued against bankruptcy is that ultimately it will cost the diocese more money," Clohessy added. Lowell Rothschild and Michael McGrath, who are representing the diocese's 75 parishes, will not disclose the amount the parishes are paying them, citing attorney-client privilege, and the parish leaders are also unwilling to publicize their payment. A line item in a financial statement the diocese filed with the Bankruptcy Court showed a $213,000 payment to Rothschild and McGrath's law firm in the weeks leading up to the diocese's filing on Sept. 20, though the diocese now says that line item was a mistake and should not have been included in its court documents, and has since filed an amendment with the Bankruptcy Court. "The diocese acts as an administrator for certain funds," Boswell said, adding she would say only that the payment was from "another entity" to McGrath and Rothschild's firm. Boswell said she cannot estimate a final tally on the administrative costs of the Chapter 11 case, but the diocese has long said that seeking bankruptcy protection was a difficult decision, one of the last resorts and a step it took in an attempt to deal with all current and future valid claims of sexual abuse in a fair way. So far diocese officials, who are now operating the daily business of the local Catholic Church on a shoestring budget, say the process has been positive and they hope that in 2005, those on both sides of the case will be able to walk away satisfied. "The judge is very focused. Everything in the courtroom is language that indicates cooperation," diocese spokesman Fred Allison said. Sidebar column The key players Key legal and financial professionals in the Roman Catholic Diocese of Tucson's Chapter 11 bankruptcy case and, according to the diocese's proposed Chapter 11 plan, when and how much they will be paid. Those in the top-priority tier are expected to periodically bill the diocese for hours worked and submit invoices through the court: Susan Boswell Lead bankruptcy lawyer for the diocese Hourly rate is $300. Court records filed by the diocese Sept. 20 - the day it filed for Chapter 11 bankruptcy protection, the diocese had already paid Boswell's firm, Quarles & Brady Streich Lang, $180,975. When she will be paid for services after Sept. 20: top-priority tier. Kasey Nye Attorney working with Boswell Hourly rate is $195. When he will be paid: top-priority tier. Sue Utter Paralegal working with Boswell and Nye Hourly rate is $120. When she will be paid: top-priority tier. Sybil Aytch Paralegal working with Boswell and Nye Hourly rate is $125. When she will be paid: top-priority tier Thomas A. Zlaket Attorney for the diocese on "special matters" according to court documents Hourly rates range from $350 to $500, though in the past he has done work for the diocese at a reduced rate of $150 per hour. Court records say the diocese paid Zlaket $9,000 during the month before the bankruptcy filing. When he will be paid: top-priority tier. Gerard R. O'Meara Attorney for the law firm Gust Rosenfeld, business and corporate counsel for the diocese Hourly rate is $150, hourly rate for paralegals in his firm is $75. Court records filed by the diocese Sept. 20 say that in the 60 days leading up to the diocese's bankruptcy filing, the diocese paid Gust Rosenfeld $39,234. When he will be paid: top-priority tier. Keegan, Linscott & Kenon Accountants and consultants for the diocese Hourly rates are listed as $195 for the firm's director, $125 for the manager, $100 for the supervisor, $85 for the senior employee and between $50 and $75 for other staff. Court records filed Sept. 20 say that in the 20 days leading up to the diocese's bankruptcy filing, the diocese paid Keegan, Linscott & Kenon $26,000. When he will be paid: top-priority tier. Lowell Rothschild and Michael McGrath Bankruptcy attorneys representing the diocese's 75 parishes They are being paid an undisclosed amount by the diocese's 75 parishes, which maintain they are separate financial entities from the diocese. When they will be paid: There's no court mandate on when they get paid. Court records filed by the diocese Sept. 20 lists payments from the diocese to Rothschild and McGrath's law firm, Mesch, Clark & Rothschild, of $213,590 between Sept. 7 and Sept. 14 - days before the diocese filed for bankruptcy protection. The diocese later amended and removed the payment from its records with the Bankruptcy Court. Last week an attorney for the diocese said the payment to McGrath and Rothschild was made by the diocese on behalf of an entity that diocese officials would not identify. Attorneys for 34 plaintiffs in the 22 pending sexual-abuse lawsuits against the local diocese No hourly rate. Lynne M. Cadigan and Kim E. Williamson , who represent 24 of the 34 plaintiffs, are paid on contingency, which means they earn a percentage of any settlement or jury award their clients receive. The attorneys, who represented plaintiffs in a $14 million settlement with the diocese in 2002, say their contingency fee is 20 to 40 percent. No one knows the money at stake in the lawsuits pending with the Bankruptcy Court. Any award to plaintiffs will be divided among Cadigan and Williamson, who have employed other attorneys to help them, and lawyers for the other 10 plaintiffs. When they get paid: The plaintiff's attorneys are paid at the same time as their clients - in the lowest-priority tier.
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