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Insurance the bad guys! : Diocese wants case in fast lane


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Insurance the bad guys! : Diocese wants case in fast lane

Description: As legal fees mount, mediation requested

Keywords: US

Category: 8

Body text:

Diocese wants case in fast lane

As legal fees mount, mediation requested

With legal bills spiraling above $1 million in the past six months, the Catholic Diocese of Wilmington said Monday it wants to move to mediation to speed up its bankruptcy reorganization and preserve assets for creditors.

"The litigation burn rate is very high," Robert Brady, an attorney for the diocese, told U.S. Bankruptcy Judge Christopher Sontchi. "The money is coming out of the debtor's pockets."

The diocese, which filed for bankruptcy in Wilmington in October under the weight of clergy sexual-abuse lawsuits, wants to avoid the run-up in professional fees experienced by other Catholic dioceses that filed for bankruptcy, said Tony Flynn, a lawyer for the diocese.

In the case of the Archdiocese of Portland, which filed for bankruptcy in July 2004, professional fees were running more than $300,000 a month in the first seven months. By November 2006, they had risen to nearly $6 million.

To avoid such a scenario, the Wilmington diocese asked Sontchi to order the case to go to mediation. Sontchi would continue to preside over the case, but settlement discussions between the parties would take place outside the courtroom. The judge would have final say on any agreements reached in mediation.

"I'm all in favor of alternative dispute resolution," Sontchi said. "I don't know a judge who isn't."

But Sontchi was reluctant to compel mediation over objections by the insurance carriers and others because "willingness" is a key to a successful outcome. Instead, he ordered all the parties involved in the case, from clergy abuse survivors to lay employees to insurance companies, to meet and confer on the matter at the offices of Young, Conaway, Stargatt & Taylor, the diocese's lawyer.

Survivors of clergy abuse, through the official creditors' committee, have been ready to move to mediation. Last month, both the survivors and diocese had reached an agreement on mediator Thomas Rutter, a Philadelphia lawyer who has experience in dispute resolution in sexual-abuse and personal-injury cases.

But lawyers for the insurance companies raised various objections, ranging from an unwillingness to be ordered to participate to the selection of Rutter. One hesitation is related to the fact that Rutter had served as a mediator in diocesan sexual-abuse cases and was not successful on some cases.

Jim Stang, the lawyer for the official creditors' committee, said he questions whether all of the insurance carriers are "acting in good faith." Previous efforts to bring the "recalcitrant insurers" into the discussions about mediating the case have not been productive, Stang said.

"We've all been waiting too long to get to this point," Stang said.

Sontchi asked that, after discussions, the parties involved in the case submit three or four names of mediators to him by the end of the month. He scheduled a hearing for May 4.

"If we can't agree with someone, I assume he'll appoint someone," Stang said.
 
 
 
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