Judge appoints mediator to diocese bankruptcy case

By Elizabeth Hardin-Burrola
Gallup Independent
October 11, 2014

http://gallupindependent.com/

ALBUQUERQUE — U.S. Bankruptcy Judge David T. Thuma appointed a mediator in the Diocese of Gallup’s Chapter 11 case Wednesday.

Thuma appointed retired judge Randall J. Newsome of San Francisco to conduct mediation proceedings to assist the Gallup Diocese, its creditors and other interested parties develop a plan of reorganization. Newsome is the former chief judge of the U.S. Bankruptcy Court, Northern District of California.

Attorneys for the Diocese of Gallup and the Official Committee of Unsecured Creditors, which represents the interests of clergy sex abuse claimants, agreed upon Newsome’s selection and recommended him to Thuma in a status conference Sept. 23.

“Judge Newsome, although he is now retired and a private mediator, has agreed to do the mediation pro bono with only travel expenses being paid…,” Susan G. Boswell, the diocese’s lead bankruptcy attorney, told Thuma at the hearing.

Boswell said the first mediation meeting should take place in late October or early November and will most likely be held in either Albuquerque or Phoenix. Prior to that first meeting, she said, Newsome plans to take a “road trip” to visit the geographic area covered by the diocese.

The Diocese of Gallup covers much of western New Mexico and northern Arizona. Prior to 1970, the diocese extended west to the California border and south to central Arizona.

Third party participation

In 2012, Newsome mediated unsuccessfully in the Archdiocese of Milwaukee’s case, a contentious church bankruptcy that continues to drag on and rack up millions in litigation fees.

Thuma has been critical of the length and cost of the Milwaukee bankruptcy case. In a Feb. 14 hearing, Thuma said he would be unhappy if the Diocese of Gallup bankruptcy followed Milwaukee’s path “where the debtor says all the money that could have been paid to creditors has been spent on litigation.”

In the recent status conference, Thuma asked who would be expected to participate in the mediation, other than attorneys representing the Gallup Diocese and those representing creditors, particularly sex abuse claimants.

Boswell, along with James I. Stang, the legal counsel for the Unsecured Creditors Committee, said a number of third parties, such as insurance companies, charitable organizations that operate in the Gallup Diocese, and other Catholic entities with possible liability may be asked to participate.

“There are people who we think could benefit from the mediation but are concerned that entering into it would somehow expose them to your jurisdiction which they otherwise think would not be applicable to them,” Stang told Thuma, citing the Diocese of Corpus Christi as an example.

Rehearing denied

Stang, who also represents the Unsecured Creditors Committee in the Archdiocese of Milwaukee bankruptcy case, said Thuma may be asked to encourage, but not order, such participation.

“Judge Kelley, in the Milwaukee case, when she ordered mediation, used her bully pulpit in order to urge people to go,” Stang said. “She didn’t order people to go, but she urged them. And we may collectively try to submit something to you that asks you to kind of use your bully pulpit to do the same.”

In his order Wednesday, Thuma included a provision for insurers and any other third parties, encouraging their participation in mediation. The provision also addresses concerns about the court’s jurisdiction by such third parties.

In a related development, the U.S. Bankruptcy Appellate Panel of the Tenth Circuit, which had dismissed an appeal by the Diocese of Corpus Christi in September regarding an order by Thuma, denied Corpus Christi’s motion for a re-hearing on the dismissal.

Because the Diocese of Corpus Christi had allowed one of its sexually abusive priests to serve in the Diocese of Gallup, where he molested Catholic school children and altar boys for more than 30 years, Stang had filed a discovery motion to obtain certain financial and insurance records from Corpus Christi. In his order, Thuma had granted part of Stang’s motion, which Corpus Christi continued to oppose.

The Appellate Panel said Corpus Christi’s motion for re-hearing was “devoid of any substance that would support a determination that this Court has overlooked, misapprehended, or misconstrued any point of law or fact.”