On July 3, attorneys for the Official Committee of Unsecured Creditors and the archdiocese notified Judge Susan V. Kelley, who is presiding over the case in U.S. Bankruptcy Court for the Eastern District of Wisconsin, that they have agreed to have the case mediated by retired U.S. Bankruptcy Court Judge Randall Newsome. He was a bankruptcy court judge for 18 years, most recently the chief judge for the U.S. Bankruptcy Court, Northern District of California. He retired in 2010.
In approving the attorneys’ choice of Newsome, Kelley stayed the Chapter 11 proceedings, effective Friday, July 20, for a period of 60 days. Details of how and where the mediation attempt will be executed were still being developed, but the court noted, in a summary of disposition issued July 3: “If mediation results in settlement of any or all of the issues in this case, the parties shall commit the settlement to writing, signed by all parties to the settlement. The court recognizes that settlement could take the form of a consensual plan or stipulated dismissal of the case.”
Jerry Topczewski, chief of staff for Archbishop Jerome E. Listecki, noted the archdiocese’s history with mediation.
“Mediation works. It was a successful way. Our approach to mediation has always been holistic: financial, spiritual/pastoral, therapeutic. It’s not new territory for us in that regard,” he told your Catholic Herald Monday, July 9.
Between Oct. 18 and Nov. 11, 2010, the archdiocese attempted to mediate with 24 victim/survivors, offering a settlement of $4.6 million. Attorneys for the victim/survivors rejected the offer. On Jan. 4, 2011, the archdiocese filed for Chapter 11 reorganization.
Topczewski said eligibility to make a claim and criteria for eligibility will need to be determined if resolution is to be reached in the upcoming attempt at mediation.
“Clearly, Judge Kelley wants to see the case moved toward a resolution, as does everybody; the main question (remains): How many claims are eligible? What is the best way to organize compensation for them? That will be the goal going into mediation,” he said.
Mediation is not binding, but Topczewski said the archdiocese is “hopeful” the process will work.
“We go in with a sincere, open effort, as we have in the past. If we can settle these, and come to agreements on issues that are involved, great if it would bring resolution to the case,” he said. “That’s how we go into a mediation – with the intention of reaching an agreement.”
The planned mediation was part of the discussion, Monday, July 9, as Kelley heard and responded to an objection regarding compensation, reimbursement of expenses and fees paid to the firm of Pachulski, Stang, Ziehl & Jones (PSZJ) – attorneys for the Committee of Unsecured Creditors. The objection was filed by the firm of Leverson & Metz, special counsel to the archdiocese.
During the 27-minute hearing in which attorneys for the creditors and the archdiocese were present via telephone, Kelley regularly referred to the mediation.
“Going forward, we do not need to be objecting to anyone’s fees until after the mediation,” she said, adding that objections could be filed after conclusion of the mediation.
“Stop focusing on fees and start focusing on mediation and settling this,” Kelley said. “Go into mediation without worrying about fees.”
The objection to compensation, reimbursement of expenses and fees were raised after Mark Metz of Leverson & Metz, having examined what PSZJ had submitted for Dec. 1, 2011-Feb. 29, 2012 and April 1-30, 2012, concluded, as stated in the memorandum accompanying the objection, that the creditors’ firm had “at different times and in varying degrees, engaged in many … forms of improper billing …” The result, he said, were “excessive and unnecessary fees in the range of $250,000 to $400,000.”
The archdiocese is responsible for expenses of the creditors’ committee counsel and its own legal representation.
An exhibit entered as part of the objection showed that fees requested by PSZJ for May 1-31, 2012, totaled $291,469. Expenses were $24,965. The average hourly rate billed by seven of the firm’s attorneys involved in the case is $612.85.
Included in the May expenses was the cost for two PSZJ attorneys to travel from California to Milwaukee to meet with archdiocesan counsel. Travel and meeting time amounted to 24 hours, or a billed cost of $15,600.
When Kelley said, “I see the point to concern being raised,” Kenneth H. Brown of PSZJ, replied, “Yes, perhaps some of this could have been avoided had Frank LoCoco picked up the phone.”
Brown was criticizing LoCoco, of Whyte Hirshboeck Dudek, the archdiocese’s counsel, for not raising the issue sooner.
He contended that presenting the objections days after both sides had agreed to mediation was “toxic.” Brown said, “We believe the focus on fees to be a distraction.”
Kelley asked why the archdiocese’s counsel hadn’t tried to resolve the billing matter with PSZJ “before bringing it into court.”
Daryl Diesing, of Whyte Hirshboeck Dudek, the archdiocese’s counsel, said they had “wanted to object for a long time.”
“We tried to warn them (PSZJ) about these things,” he said, listing dates on which they had communicated their concerns. “We’d be happy to discuss this with counsel; we haven’t gotten anywhere.”
Returning the focus to the Newsome mediation, Kelley said that the objection would be heard on Friday, Oct. 12 – after the 60-day mediation period ends.
“I want you to work as hard as you can on mediation,” she said.