In a significant decision that could accelerate settlement talks, a federal bankruptcy judge has ruled that two sexual abuse lawsuits against the Roman Catholic Archbishop of San Francisco can proceed to trial despite the archdiocese's ongoing Chapter 11 bankruptcy protection.
U.S. Bankruptcy Judge Dennis Montali granted relief from the automatic stay that had halted litigation against the archdiocese since it filed for bankruptcy nearly two years ago, though he delayed the effectiveness of his ruling until June 30 to allow more time for mediation efforts. The decision, filed on April 10, represents a victory for abuse survivors who have been seeking their day in court and could provide critical leverage in settlement negotiations.
"Though the court understands that the parties use the term 'data point' to describe the outcome of a jury trial, the court emphasizes that the two plaintiffs themselves (along with other Survivor Claimants) are not data points," Judge Montali wrote in his 10-page memorandum. "They are aging survivors of clergy abuse, with stories that are both unique to themselves and similar to other survivors."
The Roman Catholic Archbishop of San Francisco filed for Chapter 11 protection on August 21, 2023, just days before two abuse cases were scheduled to go to trial. According to court documents, these "Trial Cases" were part of a broader coordinated proceeding involving multiple California dioceses and Catholic entities in Alameda County Superior Court. The cases involve allegations against a now-deceased perpetrator whose conduct had previously resulted in substantial judgments against the archdiocese in previous decades.
The Official Committee of Unsecured Creditors (OCC), representing abuse survivors, filed the motion to lift the automatic stay that typically prevents litigation from proceeding during bankruptcy. Both the archdiocese and certain insurers opposed the motion, arguing that allowing the trials would interfere with mediation and reorganization efforts.
Judge Montali systematically addressed the twelve factors courts consider in such decisions, known as the "Curtis factors" after a 1984 bankruptcy case. He determined that most factors weighed in favor of allowing the abuse cases to proceed, including judicial economy, the trial-ready status of the cases, and the potential benefit of jury verdicts in facilitating a global resolution of the hundreds of similar cases pending against the archdiocese.
"Letting two cases go to trial involving wrongful conduct committed decades ago by a long-deceased perpetrator...will not result in a complete resolution of issues in this bankruptcy," the judge acknowledged. "But the insights provided from trying these cases, even if the outcome is a partial resolution for the two plaintiffs, will move the entire case toward, and not away from, a global resolution of these abuse cases."
The court rejected arguments that the trials would distract from reorganization efforts, noting that the archdiocese has ample resources to manage both litigation and bankruptcy proceedings simultaneously. "The Debtor is not a small, understaffed business," Judge Montali wrote. "It has its own panoply of active components engaged in a variety of schools, churches, charitable activities, administrative tasks, and religious functions, and more."
The judge also considered the ongoing mediation process, which he characterized as progressing somewhere between the parties' conflicting descriptions. While the OCC contended that allowing trials would encourage more meaningful mediation, the debtor and insurers insisted the process was on track. Judge Montali acknowledged this factor weighed against granting immediate relief, which contributed to his decision to delay implementation until the end of June.
The ruling could have significant implications for other diocesan bankruptcies across the country, where similar tensions exist between survivors seeking their day in court and church entities pursuing global settlements through bankruptcy processes. Several previous church bankruptcies have seen courts grant similar relief from stay, which the committee cited as having moved those cases toward resolution.
Case No. 23-30564-DM is pending in the United States Bankruptcy Court for the Northern District of California.
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