On Wednesday, U.S. Bankruptcy Judge Susan V. Kelley ruled that the Milwaukee archdiocese must pay legal and professional fees they have accrued over the last 17 months. The diocese must use $1.35 million in surplus cash, according to the National Catholic Reporter.
Lawyers who have represented the creditors in the case must be paid by the archdiocese. Most of the creditors in the case are survivors of sexual abuse. The archdiocese was also ordered to pay its own legal experts in the case.
The archdiocese has accrued more than $14 million in legal fees since filing for Chapter 11 bankruptcy in January of 2011.
The lead lawyer for the creditors, James Stang, said that the payout will probably amount to about 20 cents on the dollar for the plaintiffs. Lawyers for the archdiocese continue to claim that everyone will be paid in full when a reorganization plan is approved.
The approval process for the proposed reorganization plan from the archdiocese has been put on hold by Kelley until the 7th Circuit Court of Appeals makes decisions on other issues. One of those issues includes a decision about $57 million in a trust fund for perpetual care of cemeteries and if that money can be used for claims. The decision here will not come until October.
More than 570 people filed claims against the archdiocese and under the proposed plan, most of them will be dismissed. Some 120 people will share $4 million.
Parishes would be absolved of legal responsibility in sexual abuse by priest cases under the current plan. Kelley did say that some of the sexual abuse survivors are not prepared to sign off on this idea.
At the start, 80 percent of legal bills were being paid monthly by the archdiocese and the other 20 percent were paid quarterly after disputes about billing were fixed. All of this ended when Kelley was told by the archdiocese that there might not be enough money to make payroll and other operational finances. When Kelley was told this, the archdiocese said that it would need $1.5 to $2 million to pay those expenses.
Frank LoCoco is a lawyer for the archdiocese. LoCoco said, “I would never do something that is criminal or unethical. I resent even a sniff of that.”
A lawyer for a creditor, Kenneth Brown, said, “It’s not right and it’s not fair that the committee professionals are financing this case,” adding that the pressure is on them to get the claimants to sign off on a plan.
“We are at risk here,” Brown said. “If there is a dismissal [of the bankruptcy], we don’t get paid.”