Judge Backs Bankruptcy Court's Lifting Stay for Six Priest Abuse Cases

The ruling stems from the Oakland diocese's 2023 Chapter 11 filing, which automatically stayed approximately 332 sexual abuse lawsuits filed under California's Assembly Bill 218 that revived the statute of limitations for child sexual abuse claims. The Official Committee of Unsecured Creditors sought to lift the stay for six cases 'solely for purposes of liquidation and not collection against the Debtor,' arguing the trials would help clarify claim values and unlock insurance assets.

Judge Corley found the bankruptcy court operated within its 'wide latitude' under Section 362(a) when it allowed the state court to select which six cases would proceed. 'Rather than impose a non-delegation principle,' the court wrote, the precedent cited by insurers 'merely reinforced bankruptcy courts' final authority to determine the scope and applicability of any stay.' The bankruptcy court had found 'good cause reasons to lift the stay,' determining that even without quick trials, pretrial motions and expert depositions could provide valuable information about claim strengths.

The insurers—including Westport Insurance Corporation, London Market Insurers, and Continental Casualty Company—had successfully opposed an initial motion in January 2025 when the bankruptcy court denied relief without prejudice due to uncertainty about timing. However, after creditors overwhelmingly rejected the diocese's Third Amended Plan of Reorganization, the Committee renewed its motion in July 2025, and Bankruptcy Judge [name not specified in opinion] granted the request after finding it could help achieve consensual resolution.

The decision allows six state court cases to proceed for trial purposes while maintaining the automatic stay for all other matters, including judgment enforcement against the debtor. Judge Corley also rejected the insurers' arguments that the creditors' committee lacked standing to bring the motion and that the order violated reorganization plan requirements under Section 1123(a)(4), noting the Committee was 'not a plan proponent' when seeking stay relief.