The Roman Catholic Bishop of Oakland filed a motion to dismiss its own Chapter 11 bankruptcy case after suffering nearly $29 million in losses over 28 months, citing the breakdown of settlement negotiations with sexual abuse survivors and mounting professional fees that have left the diocese nearly insolvent.
In a 21-page filing submitted September 9, 2025, to the U.S. Bankruptcy Court for the Northern District of California in Oakland (Case No. 23-40523), the diocese argued it can no longer afford the administrative expenses of bankruptcy and has no reasonable likelihood of rehabilitation. The motion, filed by Foley & Lardner LLP, requests dismissal under 11 U.S.C. §1112(b)(4)(A), with a hearing scheduled for October 8, 2025, before Judge William J. Lafferty.
The dramatic move comes after the Official Committee of Unsecured Creditors, representing 345 sexual abuse survivors, effectively rejected the diocese's final settlement proposal of $165 million over five years—an offer that the debtors assert would provide higher per-survivor compensation than any comparable diocesan bankruptcy in recent history.
Offer Goes Unaccepted
According to court documents, the diocese's August 25, 2025 settlement proposal would provide an average of $463,768 per survivor claim, allegedly substantially exceeding recovery amounts in similar cases nationwide. The filing includes a detailed comparison showing that recent diocesan bankruptcies have yielded average per-survivor recoveries ranging from $53,834 (Helena, Montana) to $566,956 (Rockville Centre, New York), with most falling well below Oakland's proposed amount.
"This offer is not only fair and equitable, it also would pay per survivor on average an amount which substantially exceeds all average recovery amounts in similar diocesan bankruptcies," the diocese stated in its motion.
The $165 million proposal represented a $22 million increase over the diocese's previous offer in its Third Amended Plan of Reorganization. Despite the enhanced terms, the Committee urged abuse claimants to reject the plan, resulting in a 99% rejection rate during the voting process completed earlier this year.
Financial Crisis Deepens
The diocese's financial condition has deteriorated dramatically during the bankruptcy proceedings. Court filings show the entity ended July 2025 with only $1.9 million in unrestricted cash while facing an estimated $8.7 million in outstanding professional fees. The diocese projects it will have zero cash by October 2025 and negative cash flow by December.
Over the past two years, the diocese has paid nearly $37 million to retained professionals, including more than $8.8 million specifically related to mediation with the Committee and litigation with insurance carriers. An additional $1.65 million was spent addressing what the diocese characterized as the Committee's "costly litigation strategy."
"The Committee has successfully bled the Debtor dry of its ability to continue to pay the administrative expenses of this Chapter 11 Case," the diocese stated in its motion.
The July Monthly Operating Report showed a monthly loss of $1,761,375 and cumulative losses of $28,970,173 since the bankruptcy filing. To survive through August, the diocese was forced to tap into priest retirement funds and projects needing to exhaust remaining retirement funds of approximately $3 million just to make it through September.
Extensive Mediation Efforts Fail
The bankruptcy case, filed May 8, 2023, initially appeared to progress toward resolution through court-ordered mediation that began in February 2024. The process involved four appointed mediators—Judge Christopher Sontchi, Jeffrey Krivis (who passed away during the proceedings), Judge Randall Newsome, and Timothy Gallagher—and encompassed 15 mediation sessions over more than a year.
However, the diocese claims the Committee has been "stuck in a logjam for nearly one year" and has not meaningfully engaged in settlement negotiations since September 2024. The diocese made four separate proposals to the Committee since that time, receiving no substantive response until September 8, 2025—one day before filing the dismissal motion.
"The Committee's lack of engagement on negotiations with the Insurers—something that persisted until the Debtor sent the Committee the August 25 settlement letter—is perhaps the most frustrating example of the Committee's non-approach to resolution," the filing states.
Legal Grounds for Dismissal
Under Section 1112(b)(4)(A) of the Bankruptcy Code, a court may dismiss a Chapter 11 case for "substantial or continuing loss to or diminution of the estate and the absence of a reasonable likelihood of rehabilitation." The diocese argues both conditions are clearly met.
Regarding continuing losses, the diocese points to the nearly $29 million in cumulative losses and ongoing professional fee obligations that show no signs of decreasing. On rehabilitation prospects, the diocese contends that the Committee's rejection of what it characterizes as an exceptionally generous settlement offer demonstrates no reasonable likelihood of reaching a consensual resolution.
"The Committee's actions in this case to date demonstrate that its members have not made and do not intend to make reasonable settlement demands which will result in a consensual resolution," the motion states.
Broader Context of Diocesan Bankruptcies
The Oakland case is among numerous Catholic diocese bankruptcies filed across the United States in response to sexual abuse claims. The diocese's motion includes comprehensive data on settlements in similar cases, positioning Oakland's offer as extraordinarily generous by comparison.
Recent confirmed plans show significant variation in recovery amounts, from Helena, Montana's $53,834 average per claim to Rockville Centre, New York's $566,956 average. Several cases, including Camden, New Jersey and Syracuse, New York, involved insurance assignments rather than fixed dollar amounts, making direct comparisons difficult.
The diocese serves more than 500,000 Catholics in the East Bay area and argues that continued bankruptcy proceedings would further deplete assets that could otherwise be used for both survivor compensation and ongoing ministry operations.
This article was prepared using Stretto Conductor, our new AI-powered assistant that's here to help. Stretto Conductor was able to create this summary of a 21 page court filing in less than a minute. Always review the underlying docket filings for accurate information. The information and responses generated by Stretto Conductor may contain errors or inaccuracies and should not be relied upon as a substitute for professional or legal advice.