Archdiocese of New Orleans bankruptcy nears key mediation as lawyers push for higher fees

New Orleans Advocate [New Orleans LA]

February 8, 2023

By Stephanie Riegel

A federal judge this week said she wants to see the Archdiocese of New Orleans bankruptcy proceedings wrapped up later this year, signaling that clergy sexual abuse victims, church creditors and the New Orleans faithful may soon learn the final financial cost of the abuse crisis to the local Roman Catholic church.

At a hearing Tuesday that included arguments over raising the cap on the bankruptcy’s mounting legal fees, U.S. Bankruptcy Court Judge Meredith Grabill told attorneys for both sides she hopes a mediation hearing scheduled for next week will move the needle forward in the case nearly three years after it was filed.

“I hope we get to 2024 and don’t have to have this conversation again,” Grabill said. “I think that is a reasonable goal…I’m optimistic about what you’re walking into next week and that it will be productive.”

Court documents, many of which have been redacted or sealed from public view, do not make clear what, specifically, the two sides will be talking about in the mediation, and attorneys declined to comment.  

But in court Tuesday, Mark Mintz, who is representing the archdiocese, indicated that the church may be more forthcoming with documents and financial information than it has been thus far. That would potentially enable the two sides to agree on the worth of the archdiocese’s vast holdings so it can work out a settlement for the more than 450 survivors of child sex abuse who made claims against the archdiocese.

Complicated picture

Getting at the true wealth of the church has been one of the sticking points in the case and court filings, though revealing, still reflect an incomplete picture.

According to recent court documents, the archdiocese had more than $40 million a month in receipts in January, and has taken in more than $935 million in receipts since the bankruptcy case began. By its own estimates, its total assets top $555 million — significantly more than the $243 million in assets it reported in its initial bankruptcy petition — and its net worth is some $115 million.

Included in those assets is the Church’s real estate portfolio, which, according to the most recent court filing, is worth some $122 million—far higher than an earlier estimate of $70 million.

But that figure still does not include the value of 187 separate apostolates — nonprofit organizations like Catholic Charities and Catholic Cemeteries of New Orleans — that list Archbishop Gregory Aymond as their sole member.

Determining the value of those assets could help determine how much sex abuse survivors and other creditors can expect to receive from an eventual settlement.

At Tuesday’s hearing, Mintz suggested that after years of fighting over documents and data, the two sides may be working together more closely.  

“As we speak, there are additional discussions happening with professionals about real estate information,” Mintz said. “They are getting that information to move forward toward the mediation and I am hopeful we can move forward towards an end.”

Still, there’s no firm decision yet on when that end may come.

In a prepared statement, the archdiocese would say only that, “Our goal throughout these bankruptcy proceedings has been to reach a settlement that allows us to make reparations to the survivors, pay our creditors, and continue our ministry to the people. Mediation is an important step in moving towards this resolution.”

Billable hours

Meanwhile, the archdiocese and its creditors are separately disputing a fee increase requested by the two national law firms that represent the committee of child sex abuse survivors.

So far, attorneys on both sides of the case have been paid nearly $21 million, court records show. Nearly half of that has gone to the church’s firm, Jones Walker, which has been paid some $10 million to date.

The two national firms representing the committee for child sex abuse survivors — California-based Pachulski Stang Ziehl and Jones, which specializes in high-profile child sex abuse cases, and Locke Lord, one of the nation’s largest law firms with a New Orleans office — have, together, been paid more than $6 million.

Those attorneys argued Tuesday they have not had a fee increase since the case began. Pachulski Stang, which has been paid some $3.4 million so far, asked for an increase in its maximum rate from $700 to $800 an hour. Locke Lord, which has been paid some $3 million so far, is asking the court to increase its hourly max fee from $500 to $600.

Stewart Robbins, the Baton Rouge firm representing commercial creditors, or vendors, contractors and businesses who are owed money by the archdiocese unrelated to the abuse claims, has been paid some $1.5 million so far, though it joined the case late. Its hourly rate was recently increased from $500 to $550 without opposition from the archdiocese.

The archdiocese opposed raising the fee cap for Pachulski Stang and Lock Lorde, arguing that having two firms representing the same creditor’s committee was redundant.

“And any amount we pay them is an amount we can’t pay to the committee,” Mintz said.

But Lock Lorde’s attorney Rick Kuebel argued that the archdiocese could more than afford an incremental increase in its legal bills. 

“This is an enterprise that is bringing in $40 million a month — nearly $1 billion since this case began,” he said.

In bankruptcy court cases, the bankruptcy estate pays most of the legal bills of the debtor and creditor, except those of the large, secured creditors — like a bank — which is at the front of the line to get paid and covers its own legal expenses.

Grabill said she is not opposed to raising fee caps, given what high-priced firms in complex cases are paid in other cases. But she said she is concerned about the “burn rate, and are we seeing this case move forward.”

“Cases only bear what they can bear,” she said. “Good attorneys don’t want to kill the case spending time on things that are not moving the case.”

Grabill said she would rule on the fee rate increase in March.