Outside trustee formally sought for New Orleans church bankruptcy as costs soar

A group of attorneys representing clergy abuse claimants involved in the Roman Catholic archdiocese of New Orleans’ bankruptcy case – which has cost the church about $40m but remains unresolved – has formally requested the removal of the volunteer tasked by the organization to manage the four-and-a-half-year-old case’s expenses after he testified to a stunning lack of qualifications for the role.

The abuse survivors’ lawyers also requested the appointment of an outside trustee to substitute the volunteer in question, Lee Eagan, in a motion filed late on Thursday.

Their court filing came a day after the Guardian and New Orleans CBS affiliate WWL Louisiana were the first to report on a series of sworn depositions by Eagan in which he acknowledged having never previously policed a bankrupt organization’s costs, failing to familiarize himself with the rules for that kind of proceeding and grappling with notable cognitive decline after a significant car crash in October 2022, among other things.

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During his testimony, Eagan also described essentially negotiating in bad faith amid talks meant to help the archdiocese reach a legal settlement with hundreds of clergy abuse survivors – who were mostly molested as children – as well as other creditors ensnared in the bankruptcy.

He swore to reflexively contradicting survivors’ attorneys even when he couldn’t think of a reason as costs soared for a bankruptcy which the archdiocese initially estimated would cost about $7m to resolve. And, though the archdiocese had once promised the opposite, he admitted under oath that the archdiocese knew approximately six months after filing for bankruptcy in 2020 that individual churches, schools and other ministries would have to share some of the costs of resolving outstanding clergy abuse claims. The archdiocese then waited until the fall of 2023 to announce that reality before closing or consolidating a number of its churches.

“Eagan has been the primary person responsible for authorizing payment of almost $40m in fees and expenses” to various legal and financial professionals, the motion alleged, noting that the church hasn’t even provided a draft of a fiscal reorganization plan needed to resolve the 2020 bankruptcy protection filing. “This amount increases by the day.”

Eagan does not have ultimate authority over whether fees should be paid by the church. The US trustee – a neutral bankruptcy court official from the federal justice department – and the bankruptcy judge are supposed to review the legal and professional bills that Eagan submits to the court. The court has approved all of the church’s legal fees to the penny, according to court records.

The judge in charge of the bankruptcy, Meredith Grabill, did not immediately rule on the motion from the clergy abuse claimants’ attorneys, which was signed by the lawyer who took Eagan’s deposition, Richard Trahant, along with two of his associates and members of four other law firms.

But they are not alone in questioning the cost of the lengthy church bankruptcy proceedings. Recently, the US trustee recommended holding back 20% of all legal and professional fees paid out by the archdiocese, a measure proposed to potentially expedite a resolution to the case.

Among those to support the US trustee’s proposal was a company that granted the archdiocese a $7.5m bond to cover bankruptcy-related debt at the beginning of the case. That company on Thursday filed a motion accusing the archdiocese of failing to pay any of the principal on the bond it took out while contending that holding back certain professionals’ fees was the least Grabill could do to push for a reorganization plan.

Grabill has also not ruled on the suggested fee holdback.

Related: ‘Maybe I lived a naive life’: New Orleans archbishop denies knowledge of widespread child sex abuse in 1970s

Statements issued by the archdiocese in response to media coverage about Eagan’s testimony declined to address the contents of the sworn depositions. The organization instead alleged a “direct character assassination” of Eagan, a local businessman and chief executive officer of an industrial supply company who was appointed to his role in the bankruptcy proceedings by the New Orleans archbishop, Gregory Aymond .

Furthermore, a statement attributed to the archbishop professed “complete faith in [Eagan’s] abilities and his desire to help move the local church forward”. Aymond chose Eagan rather than hire from a market of qualified professionals with expertise in managing bankrupt organizations’ bills.

The church, meanwhile, also said it wanted a prompt resolution for the bankruptcy. And the archdiocese blamed the attorneys upset with Eagan’s performance in the bankruptcy “for the unacceptable time and costs” spent on the proceeding.

But $13m of the fees approved by Eagan – a member of the archdiocese’s financial advisory council – have gone to the church’s own bankruptcy lawyers, among them the husband of the organization’s in-house lawyer.

For their part, Trahant, his colleagues and those aligned with them generally work on a contingency fee basis. And, like their clients, they have not been paid a cent with the bankruptcy yet unresolved.

The Jones Walker law firm, which is representing the archdiocese, defended the fees for which it has billed, saying their attorneys had “decades of experience and hold themselves to the highest degree of professionalism”.

New Orleans’ archdiocese filed for bankruptcy protection in large part to dispense of a wave of lawsuits seeking damages in connection to the worldwide Catholic church’s decades-old clerical molestation scandal.

That scandal prompted Louisiana state police to open an investigation into whether the New Orleans archdiocese, which ministers to a region of about half-million Catholics, enabled the “widespread sexual abuse of minors dating back decades”, according to a search warrant that the law enforcement agency served on the church in April.

The warrant also cited evidence that the archdiocese had covered up child molestation rather than report it to law enforcement.