The Diocese of Rochester v. AB 100 Doe (In re the Diocese of Rochester)

The Diocese of Rochester (the diocese) (debtor) filed for a bankruptcy reorganization under Chapter 11. In the bankruptcy proceeding, the diocese negotiated an agreement with a large group of survivors of child sexual abuse (the abuse survivors) (creditors). Under this agreement, the abuse survivors voluntarily agreed to temporarily delay filing state-court civil actions against parishes, schools, and other Catholic institutions that were affiliated with the diocese (the Catholic corporations). The Catholic corporations were legally separate entities that were beyond the fiscal and operating control of the diocese. After three years of waiting and 11 extensions of the initial deadline, three abuse survivors had died, and the remaining abuse survivors refused to voluntarily delay any longer. The diocese filed a motion asking the bankruptcy court to either (1) apply the automatic stay under 11 U.S.C. § 362(a) to stay the proposed state-court lawsuits against the nondebtor Catholic corporations or (2) use the court’s equitable powers under 11 U.S.C. § 105(a) to issue a preliminary injunction preventing those lawsuits until the diocese’s bankruptcy action was complete. The diocese argued that the state-court actions would harm its reorganization efforts because the actions could deplete insurance policies that also covered the diocese and could divert personnel from the reorganization efforts. The bankruptcy court considered the motion.