Diocese may contest fees rung up in bankruptcy

The Roman Catholic Diocese of Rochester may challenge fees charged by lawyers, consultants, and other professionals working on the diocese’s long and hard-fought bankruptcy.

Expenses paid to such professionals by the diocese totaled $14.8 million as of Aug. 31.  

In a Nov. 18 filing in the Western District of New York Bankruptcy Court’s Rochester division, the diocese states that expenses it has not yet reported to the court bring the current total to more than $18 million.

In stating its intention to challenge fees, the diocese singles out amounts charged by the bankruptcy’s official creditors committee. It also notes expenses incurred due to a protracted dispute between the diocese and the Continental Insurance Co., also known as CNA.

Appointed by the U.S. Trustee to look out for the interests of individuals with claims in the case, the creditors committee is a body made up of abuse victims. CNA is one of several liability carriers the diocese hopes to see pay the bulk of claims that could top $200 million. If a settlement is reached, it would be liable to pay claims due to more than half of the 485 claimants in the case.

Figures cited in the Nov. 18 filing show $3.1 million in not-yet reported expenses. The total includes more than $1 million sought by lawyers and other professionals representing the diocese and more than $1.9 million sought by the creditors committee’s lawyers and expert witnesses.

In the dispute between CNA and the diocese, the insurance company contended that the diocese owed damages potentially totaling millions of dollars for backing out of a settlement deal.

After a two-day trial, Bankruptcy Court Judge Paul Warren found against CNA. The diocese estimates that the creditors committee incurred more than $500,000 in expenses in the Bankruptcy Court proceeding. It estimates that trial-related administrative claims not yet booked by CNA could top $2 million.

Now entering its sixth year, the Chapter 11 case was first filed in September 2019, a month after the New York Child Victims Act took effect. The act opened a two-year window for survivors of long-past sexual abuse to pursue abusers who otherwise would have been protected by a statute of limitations. Hundreds of survivors filed CVA cases against the Rochester diocese, its parishes and other church affiliates. Four hundred and eighty-five have filed claims in the bankruptcy.

After five years of court-ordered mediation between the creditors committee, the diocese and the diocese’s liability carriers, the case seemed to heading toward a settlement earlier this year, when it was upended by a June 27 U.S. Supreme Court ruling.

To seek a way around the Supreme Court ruling, Warren last month ordered parties in the bankruptcy to begin a second round of talks under a new set of mediators.

The mediation is also supposed to hammer out a compromise between the creditors committee and CNA.

While other insurers, the diocese, and the committee agreed to a plan in which the diocese, its parishes, and several of its liability carriers would fund a $127.3 million trust to pay survivors’ claims, CNA and the committee have so far failed to come to terms.

Successive offers by CNA to contribute $63.5 million and $75 million were rejected by the committee as paltry when compared to what other insurers have agreed to pay on a per-survivor basis.

CNA meanwhile has floated the idea of proposing a rival settlement plan to one the diocese and the committee might propose.

In a vote, survivors overwhelmingly approved the now-scrapped $127.3 million jointly submitted by the diocese and the committee. In the same vote, they also overwhelmingly rejected an earlier rival CNA plan that included the insurance company’s $75 million offer.

How much longer the second-round mediation might stretch or how much expenses might climb while it proceeds is unknown.

“The Diocese … is concerned about the significantly mounting financial costs associated

with a protracted resolution of this Chapter 11 Case in what is, at this point, essentially a two-party dispute between the Committee and CNA,” the diocese asserts in the Nov. 18 filing.

Warren made a similar point in a recent filing, putting CNA and the committee on notice that if they would not retreat from “the lines in the sand” they have drawn, he would impose a compromise on them that neither party might like.

“The Diocese respectfully reserves the right to object to any and all professional fees charged to its estate in this Chapter 11 Case in connection with final fee applications filed by all professionals,” the Nov. 18 filing states.

Whether that blanket statement might include challenges to fees charged by its own attorneys, accountants and other professionals fees is not clear.

Will Astor is Rochester Beacon senior writer. The Beacon welcomes comments and letters from readers who adhere to our comment policy including use of their full, real name. See “Leave a Reply” below to discuss on this post. Comments of a general nature may be submitted to the Letters page by emailing  [email protected]. 

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