NEW ORLEANS (LA)
Nola.com [New Orleans, LA]
October 25, 2024
By STEPHANIE RIEGEL
A consultants’ report on the Archdiocese of New Orleans bankruptcy blames both the local church and attorneys for abuse survivors for the case’s massive costs and slow progress, recommending that the federal judge overseeing the process immediately freeze legal fees and bring in an independent “examiner” to propose a settlement if the two sides can’t agree soon.
The 35-page report from New York-based M3 Advisory Partners said that Archbishop Gregory Aymond and his advisors are “cognitively capable” of guiding the local Roman Catholic Church through the bankruptcy process, but said they have not “exercised the leadership” needed to do it, have failed to share crucial financial information, have lacked transparency and haven’t provided oversight of mounting fees.
At the same time, it faults a group of attorneys who, together, represent more than 100 of the abuse survivors for “aggressive litigation tactics that have been disruptive to the forward progress of negotiations … and led to increased administrative costs.”
The report suggests that successfully settling the case will be difficult unless the two sides can put aside the bitterness and “animosity” that have gotten in the way of negotiations.
“This case is still pending because the parties, and primarily their attorneys, have allowed toxicity and interpersonal animus to cloud the negotiation process in a way that has been extremely detrimental to progress,” M3 Managing Partner Moshin Meghji wrote in the report, which was filed Wednesday.
“One thing is certain — the survivors deserve better,” he wrote.
The report, which comes after U.S. Bankruptcy Judge Meredith Grabill hired Meghji to advise her on a number of central issues in the bankruptcy, puts the decision on how to move the case forward back in the judge’s hands.
Meghji included a proposed order that would freeze all legal fees for 90 days or until a compromise reorganization plan is filed and would appoint an independent “examiner” if that deadline isn’t reached.
It’s not clear when Grabill could make a decision on that order. The next scheduled hearing in the case is in November.
In a prepared statement, the archdiocese said it is focused on bringing the case “to an equitable resolution.”
“We are grateful for the experts’ recommendations and look forward to incorporating them as we continue our work with all parties to reach a consensual agreement,” said the statement from spokesperson Sarah MacDonald.
Attorney Soren Gisleson, whose firm Herman, Katz, Gisleson and Cain represents large group of abuse survivors, took issue with the blame the report placed on his firm and other plaintiff attorneys.
“To the extent the report makes unsubstantiated statements against lawyers representing sexual abuse survivors, those lawyers and their clients look forward to deposing Mr. Meghji and his team soon,” Gisleson said in a prepared statement.
Plenty of blame
The sweeping report comes four-and-a-half years after Aymond placed the nation’s second-oldest diocese under bankruptcy court protection to try to settle mounting claims of decades-old sex abuse by local priests, deacons and other clergy.
At the time, about three dozen survivors had sued the local church and Aymond’s advisors estimated the case would cost about $7 million.
Today, more than 550 survivors have filed claims alleging abuse and the legal bills alone top $40 million.
Meghji, his firm and its lawyers, Latham & Watkins, added more than $350,000 to the growing legal bills over the past two months, interviewing dozens of key players in the case.
Grabill tapped Meghji and his firm in August to provide her with an independent assessment of the case, citing her frustrations at the time with the lack of progress and mounting legal bills.
She also tasked the firm with advising her on several contested matters, including one seeking to remove Aymond and his chief advisor, retired businessman Lee Eagan, from their roles overseeing the case.
Attorneys for abuse survivors alleged in a court filing earlier this year that church leaders are mishandling the case, and they sought to have Aymond replaced with an independent trustee.
Meghji’s report found Aymond and Eagan to be “cognitively capable of making the decisions necessary to lead and progress the case to conclusion,” though it says Eagan has not “exercised the leadership necessary” to bring the case to a conclusion and is not getting guidance from the church’s own attorneys and advisors.
It also faulted attorneys for the archdiocese and the separate law firm representing the 150 parishes and charitable organizations, which are not in bankruptcy themselves, for failing to share “relevant information” about the value of church real estate and other assets with the committee of attorneys representing abuse survivors.
The archdiocese itself, the report said, wasn’t transparent and failed to exercise oversight over legal fees.
As for the survivors’ attorneys, the report called them out for “aggressive litigation tactics,” including “personal attacks” against Eagan and Aymond in the motion seeking to remove Aymond from the case.
It also cited a legal dispute over an alleged breach of the court’s protective order by attorney Richard Trahant, who was sanctioned by Grabill and fined $400,000, as well as a year-long effort to get the case dismissed as examples of adversarial dealings that have dragged the case out, led to mistrust and added to the escalating administrative costs.
“Every dollar spent on administrative costs in this case is a dollar not available to fund a trust to pay abuse claims for the benefit of survivors,” the report said.
Closing the gap?
In recent weeks, two competing — and vastly different — settlement plans have been filed in the case.
The archdiocese plan proposes paying survivors $62.5 million, or about $114,000 each. The survivors plan seeks nearly $1 billion, about $1.8 million each, though the $777 million balance would come from church insurers, which have not agreed to any such settlement.
While Meghji’s report says the plans represent a step forward, it casts doubt that either plan will get confirmed and recommends the two sides work harder to come up with a single plan on which they can agree.
“Parties are far apart on key issues … substantial work remains to be done to close the gap,” the report notes.
The report concludes by urging the parties to spend the next 90 days working towards a settlement, including a recommendation that all ancillary legal disputes related to the case be put on hold.
If no consensual plan is announced after 90 days, the report suggests the court appoint an independent examiner with broad powers, including the ability to propose and file a single plan on behalf of the debtor.
“The appointment of an examiner is, in the expert’s opinion, preferable to the dismissal of the case,” the report said.
Email Stephanie Riegel at stephanie.riegel@theadvocate.com.