Legal Fees Mount As Duluth Diocese Bankruptcy Case Hits One-year Mark

By Tom Olsen
Duluth News Tribune
December 8, 2016

http://www.duluthnewstribune.com/news/4176211-legal-fees-mount-duluth-diocese-bankruptcy-case-hits-one-year-mark

Diocese.jpg The Catholic Diocese of Duluth covers 10 counties in Northeastern Minnesota. Steve Kuchera / skuchera@duluthnews.com

A year into bankruptcy, legal bills are continuing to mount for the Diocese of Duluth.

U.S. Bankruptcy Judge Robert Kressel on Thursday approved the spending of another $750,000 in attorneys' fees and expenses — swelling the total cost of the process to $1.28 million and counting.

The biggest chunk of the money has gone to four law firms representing the diocese, but more than $183,000 also has been paid out to attorneys for a creditors' committee, which represents people who have filed child sexual abuse claims against the diocese.

While in bankruptcy protection, the diocese's expenses must be submitted to and approved by a judge. The order issued Thursday covers attorney compensation through October.

The diocese filed for Chapter 11 bankruptcy protection on Dec. 7, 2015, in wake of a $4.9 million verdict in the first case to go to trial under the Minnesota Child Victims Act, which temporarily lifted the statute of limitations for victims of decades-old abuse cases to file suit.

A diocese official testified at a February hearing that the diocese typically breaks even on an annual budget that is based on operating revenues of about $3.5 million. The diocese has reported debts of approximately $12 million, far exceeding its reported assets of about $5 million.

Sexual abuse claims were filed in the bankruptcy process by 125 people ahead of a May 25 deadline.

The diocese and the creditors' committee have held several mediation sessions with Gregg Zive, a federal bankruptcy judge in Nevada with experience mediating diocesan bankruptcy cases. Both sides have expressed a desire to reach a settlement, as has been the case in previous diocesan and religious order bankruptcies.

The diocese in June filed a federal lawsuit against five insurers — a measure supported by victims' attorneys — in an effort to force coverage of legal expenses and any judgments entered against the diocese. That action is still pending.

The diocese has a deadline of March 17 to file a reorganization plan, with an additional two months set aside to seek approval from creditors.