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$15M in Legal Fees in Archdiocese Bankruptcy

May 24, 2017 | Posted in : Bankruptcy Fees / Expenses, Fee Expert / Member

A recent the Star Tribune story by Jean Hopfensperger, “Judge Laments $15M in Legal Fees in St. Paul-Minneapolis Archdiocese Bankruptcy,” reports that the judge overseeing the bankruptcy of the Archdiocese of St. Paul and Minneapolis expressed concern over the legal fees being racked up in the case — about $15 million to date.

“It bothers me so much that all these attorney fees are being run up,” U.S. Bankruptcy Judge Robert Kressel said at a hearing, adding that legal fees are consuming funds that could be directed to survivors of archdiocese clergy sex abuse.

In an attempt to curb the spending, Kressel ordered that no expert witnesses be hired for the time being.  He also ordered a tighter schedule for both parties to argue their legal objections to each other’s compensation plans.  “I’m trying to save money and time and get this decided,” Kressel said.

Kressel’s remarks came in response to the archdiocese’s proposal to “retain certain experts” to advise on the competing victim compensation plans before the court, on the value of parish contributions to the settlement, on insurance settlements and other issues, according to a motion before the court.

During the first three months of this year, the archdiocese bankruptcy rang up $1.28 million in attorney and professional fees, according to documents filed with the court.  The bills are from three law firms representing the archdiocese, one representing parishes and one representing victims, according to operating budgets filed with the court.  Average monthly legal and professional fees were $420,000 from January to March, the last month for which figures were available.

The fees are high compared to other bankruptcies nationally, and the process in the Twin Cities has been long, said Chuck Zech, a church finance expert at Villanova University in Pennsylvania.  The Milwaukee Diocese, considered the “mother of all bankruptcies,” spent $23 million in a protracted battle to settle with abuse victims, plus $7 million for the victims’ attorneys, he said.  “Milwaukee is the poster boy for a disastrous way to do a bankruptcy,” said Zech.  “It seems to me that St. Paul is approaching that status.”

The fee issue surfaced during what was supposed to be a routine hearing to schedule the next steps in the two-year-old case, including approving a compensation plan and insurance settlements.