Diocese of Sacramento: AB 218 Claims and Real Estate Sales

The Roman Catholic Bishop of Sacramento filed for chapter 11 protection on April 1, 2024 in the Eastern District of California, facing approximately 300 civil actions alleging childhood sexual abuse by clergy and other employees. The filing followed California's AB 218, which reopened time-barred abuse claims from 2020 through 2022 and generated litigation exposure that the diocese concluded could exceed available assets. Law360 reported the diocese's potential abuse liability at up to $500 million, with the petition itself listing estimated assets and liabilities each in the $100 million to $500 million range. Nearly two years into the case, pending matters include appellate litigation over California's Proposition 51, a committee motion for derivative standing to pursue avoidance claims, ongoing real estate sales, and mediation efforts targeting a session in May 2026.

Bishop Jaime Soto described the filing as the only remaining path to compensate victim-survivors equitably, after a three-day global mediation in November 2023 involving more than 250 claims failed to produce a consensual resolution. The diocese had already paid more than $51 million in settlements since 2000, including a $35 million aggregate settlement after an earlier 2003 revival window. Sacramento joins a growing list of California dioceses — including Oakland and San Francisco — that have filed for bankruptcy in response to revived abuse claims. On February 23, 2026, the U.S. District Court affirmed the bankruptcy court's order modifying the automatic stay to allow representative state-court tort actions to proceed, a ruling that shapes the case's continuing litigation posture.

Debtor	The Roman Catholic Bishop of Sacramento
Court	U.S. Bankruptcy Court, Eastern District of California (Sacramento Division)
Case Number	24-21326
Petition Date	April 1, 2024
Judge	Hon. Christopher M. Klein

AB 218 and the Path to chapter 11

California's AB 218, signed in 2019, lifted the statute of limitations on childhood sexual abuse claims and opened a three-year window from January 1, 2020 through December 31, 2022 for filing previously time-barred actions. By the close of that window, more than 250 lawsuits had been filed against the diocese alleging abuse by clergy and other employees dating back to the 1950s. The total claim count eventually rose to approximately 300 civil actions by the petition date.

The First Day Declaration filed by Stephen J. Greene Jr. stated that most claims concerned historical conduct from approximately 1950 through 2020. More than 90% of the over 100 priests named as perpetrators were deceased, and only 11 claims alleged abuse after 2000. The declaration tied the filing directly to the AB 218 revival window and the resulting volume of litigation. The diocese had defended childhood sexual abuse claims for more than two decades before the petition date, with the First Day Declaration framing the bankruptcy around the cost and administration of that litigation rather than a conventional operating-company capital structure problem.

Prepetition settlement history. Since 2000, the diocese and its insurers had paid more than $51 million in settlements, including a $35 million aggregate resolution following California's earlier 2003 revival window — an earlier statutory reopening that had allowed a previous round of time-barred claims. The diocese disclosed that it had limited insurance coverage remaining from the decades when the alleged abuse occurred, and that a significant number of claims fell in periods with no available insurance. The Daily Journal reported in March 2023 that the diocese was already facing bankruptcy pressure from the surge in abuse claims before the petition was filed.

Failed global mediation. A three-day mediation session in November 2023 involving more than 250 claims did not produce a consensual resolution. The First Day Declaration described the failure as a key inflection point: the debtor concluded that aggregate exposure could exceed available assets, with claim demands reportedly exceeding $2 million per claim and potential punitive or cover-up damages adding further risk. Bishop Soto announced the plan to file in a December 2023 letter, stating that bankruptcy was the "only respectful, transparent, and fair way to address the substantial number of claims."

Parish and school separation. The diocese emphasized that its parishes are separately incorporated entities. The diocesan Catholic high schools, St. Francis High School in Sacramento and St. Patrick/St. Vincent in Vallejo, are similarly structured. The diocese stated its expectation that these separate corporations would be largely unaffected by the filing, though it acknowledged that creditors had challenged the status of separate parish corporations in other diocesan bankruptcies.

Survivor advocacy response. The Survivors Network of those Abused by Priests (SNAP) criticized the bankruptcy decision, arguing that alternative options existed and expressing concern that the process would reduce compensation to survivors. SNAP's Sacramento Area Volunteer Leader, Dorothy Small — herself an abuse survivor who had previously won a $200,000 settlement from the diocese — noted that the economic, mental, and physical consequences of clergy abuse are compounded when they occur within a religious institution. The Official Committee of Unsecured Creditors later launched a dedicated website to provide resources and updates to abuse survivors, stating that the committee's role is to advocate for survivors and navigate the complexities of the bankruptcy case.

Bar date and early case management. The court established October 1, 2024 as the general claims bar date, setting the deadline for abuse claimants and other creditors. Donlin, Recano & Company, Inc. serves as the claims and noticing agent. In the first days after filing, Judge Klein indicated that the diocese should pursue mediation as soon as possible to resolve the case, signaling early judicial interest in a consensual resolution path.

Survivor Statement Event and Protective Order

In a procedural development unusual for diocesan bankruptcy cases, the debtor filed a non-opposition to a survivor statement event, a motion by the committee seeking to authorize a session in which abuse survivors could present statements directly to the Bishop of Sacramento. Interstate Fire & Casualty Company and other insurers objected to the session, arguing it lacked statutory authority and posed confidentiality risks. The bankruptcy court overruled those objections and granted the motion, allowing the event to proceed in a confidential, non-record setting.

The court also entered a stipulated protective order to facilitate the exchange of confidential information among the parties, prioritizing the need to advance the case and address victim allegations over insurer objections regarding confidentiality protocols.

Colliers Engagement and Real Estate Sales

By mid-2025, the debtor had shifted into an organized real-estate monetization process, part of a broader strategy to generate liquidity for an eventual plan distribution to abuse claimants. In June 2025, the debtor sought authority to employ Colliers International CA, Inc. as real estate broker for a 15-property portfolio that included vacant land, a residence, a retreat center, a former high school campus, an office building, and a camp. Two residential parcels were carved out for separate local brokers. The Colliers declaration stated that Steve Chamberlain's long experience with the diocese and the Northern California real estate market was important to maximizing value from the property sales.

Mercy High School site. One of the portfolio's most notable assets was the former Mercy High School site in Red Bluff, California. Colliers marketed the property as a historic investment opportunity, describing the sale as being conducted under the authority of the U.S. Bankruptcy Court for the Eastern District of California.

Other portfolio properties. The Colliers marketing materials also included a 13.75-acre property in Winters, California and an approximately 53-acre parcel in Vacaville, both subject to bankruptcy court approval. The breadth of the portfolio — spanning vacant land, former school campuses, a retreat center, and residential parcels — reflected the diocese's effort to monetize a significant portion of its non-essential real property.

Riverside Boulevard sale. In November 2025, the debtor moved to sell 2685 Riverside Boulevard in Sacramento to Gormley Family Property, LLC for $2.9 million, with estimated net proceeds of approximately $2.697 million after costs. The supporting declaration stated that the property had been marketed through CoStar, LoopNet, Crexi, social media, and direct outreach. Only two offers were received, and the debtor regarded the buyer's offer as the highest and best available without a value-creating auction.

W Street sale. The asset-sale program continued into 2026. In February 2026, the debtor moved to sell 1123 W Street, Sacramento, for an all-cash purchase price of $815,000, subject to overbids through the hearing. The debtor requested approval of a 4.5% broker commission and waiver of the Rule 6004(h) fourteen-day stay, seeking to close without the standard post-order waiting period. Together with the Riverside transaction, the W Street sale represented the continuation of a property-by-property disposition strategy rather than a single portfolio auction — an approach consistent with maximizing value from a geographically diverse set of assets with varying use types.

Proposition 51, Stay Relief, and Insurer Disputes

The January 16, 2026 status report identified two active appellate disputes that were shaping the pace and direction of the case.

Proposition 51 appeal. California's Proposition 51 governs the allocation of tort liability among multiple defendants, a critical issue in the abuse claims because it determines the extent to which the diocese bears joint-and-several liability versus a proportionate share. The California Supreme Court granted review on December 30, 2025 and remanded the Proposition 51 dispute to the Second Appellate District for briefing and review. The debtor then sought special appellate counsel to handle the remanded proceedings. The resolution of this issue has direct implications for the size of the total claims pool and, by extension, the plan distribution available to survivors.

Stay-relief stipulation and insurer appeals. The bankruptcy court approved a stipulation modifying the automatic stay to permit four representative state-court sexual assault tort actions to proceed to trial. The debtor was already implementing the stipulation as of January 2026, and discovery had resumed in the four released cases. Insurers including Interstate Fire & Casualty Company appealed the order, arguing that the bankruptcy court abused its discretion in its evidentiary findings and consideration of insurer interests. Senior District Judge William B. Shubb related the insurer appeals and reassigned them for consolidated oversight. On February 23, 2026, Judge Shubb issued a memorandum and order affirming the bankruptcy court's decision, rejecting the insurers' arguments and upholding the stay-relief stipulation. The affirmance cleared a significant procedural hurdle for the committee's litigation strategy.

Insurance coverage disputes. The insurer dynamics have emerged as a persistent theme in the case. The diocese disclosed in the First Day Declaration that it had limited insurance coverage remaining from the decades when the alleged abuse occurred, with a significant number of claims falling in periods with no available insurance. The committee's litigation against Interstate and other insurers over their coverage obligations, combined with the Proposition 51 allocation question, represents a substantial variable in determining the total recovery available for distribution to abuse claimants.

Committee Pursuit of Avoidance Claims

The Official Committee of Unsecured Creditors escalated the avoidance-action dispute on February 23, 2026 by filing a derivative standing motion seeking authority to pursue approximately $7.27 million in prepetition transfers to 19 transferees. The named transferees included the United States Conference of Catholic Bishops, the California Catholic Conference, the Catholic Diocese of Lansing, and Debbie Weinrich, LCSW — a mix of national and state-level Catholic organizations and individual service providers that received transfers from the diocese before the petition date.

Avoidance-action tolling. The debtor, the committee, and various non-debtor Catholic entities entered into a stipulated tolling agreement extending the avoidance-action deadline to January 1, 2027. The tolling agreement was designed to preserve the committee's ability to bring avoidance claims while the parties explored consensual resolution, but the committee ultimately concluded that the debtor was not going to pursue the claims on its own.

The committee argued in the derivative standing motion that the debtor had unjustifiably refused to pursue those avoidance claims, that the expected estate benefit outweighed the litigation cost, and that court intervention was urgent because the section 546(a) deadline remained close even with partial tolling coverage. As an alternative, the committee sought equitable tolling through April 1, 2027. A hearing on the motion was scheduled for March 25, 2026. The motion represents a significant escalation in the committee's posture — moving from cooperative tolling to adversarial recovery, with the committee asserting that the debtor's refusal to act left estate value on the table.

Stinson and Felderstein Fee Applications

Professional-fee activity remained heavy in early 2026, reflecting the breadth of active workstreams in the case. Stinson LLP, counsel to the committee, filed its ninth interim fee application for the December 2025 through January 2026 period seeking $177,014.50 in fees and $710.79 in expenses. The principal billing categories included appeals ($92,641.00), mediation ($17,156.50), contested matters, creditor communications, asset analysis and recovery, and fee/employment work. The dominance of appellate work in Stinson's billing reflects the committee's heavy investment in the stay-relief and Proposition 51 litigation during that period.

Debtor counsel Felderstein Fitzgerald Willoughby & Pascuzzi's ninth interim fee application for the same period referenced mediation work, the March 2, 2026 oral argument schedule, insurer negotiations over released state-court actions, and avoidance-action analysis. Committee counsel was coordinating with debtor-side professionals, insurers, and the mediator on claim valuation and insurance issues, with a mediation session targeted for May 2026. No plan of reorganization has been filed, and the case remains in the pre-plan administrative phase nearly two years after the petition date.

Key Timeline

Date	Event
November 2023	Three-day global mediation involving more than 250 claims failed to produce a settlement
April 1, 2024	Chapter 11 petition filed in the Eastern District of California
October 1, 2024	General claims bar date
March 7, 2025	Bankruptcy court authorized survivor statement event over insurer objections
June 2, 2025	Debtor sought to employ Colliers for 15-property real estate portfolio
September 2025	Colliers marketed former Mercy High School site in Red Bluff
November 20, 2025	Debtor moved to sell 2685 Riverside Boulevard for $2.9 million
December 30, 2025	California Supreme Court granted review of Proposition 51 dispute and remanded to Second Appellate District
January 16, 2026	Status report updated court on Proposition 51, stay-relief litigation, mediation, and tolling agreement
February 13, 2026	Debtor moved to sell 1123 W Street for $815,000 subject to overbids
February 18-19, 2026	Ninth interim fee applications filed by multiple debtor and committee professionals
February 23, 2026	Committee filed derivative-standing motion seeking ~$7.27 million in avoidance claims
February 23, 2026	District court affirmed stay-relief stipulation
March 25, 2026	Scheduled hearing on derivative standing and next status matters
May 2026	Mediation session targeted

Frequently Asked Questions

What caused the Diocese of Sacramento to file for bankruptcy?

The diocese filed chapter 11 in response to approximately 300 civil actions alleging childhood sexual abuse. California's AB 218, which reopened time-barred abuse claims from 2020 through 2022, drove the litigation volume. A three-day global mediation in November 2023 failed to produce a settlement, and the diocese concluded that aggregate exposure — with claim demands reportedly exceeding $2 million per claim — could exceed available assets, with Law360 reporting potential liability up to $500 million.

Who is the claims agent for the Diocese of Sacramento?

Donlin, Recano & Company, Inc. serves as the claims and noticing agent. The firm maintains the official claims register and distributes case notifications to creditors and parties in interest.

What is the bar date for the Diocese of Sacramento bankruptcy?

The court established October 1, 2024 as the general claims bar date.

Are Sacramento's Catholic parishes and schools part of the bankruptcy?

The diocese stated that its parishes are separately incorporated entities that operate independently. The diocesan high schools — St. Francis High School in Sacramento and St. Patrick/St. Vincent in Vallejo — are similarly structured. The diocese expects these separate corporations to be largely unaffected, though creditors have challenged parish separateness in other diocesan bankruptcy cases.

What is the current status of the Sacramento diocese bankruptcy?

As of early 2026, the case remains in active litigation with no plan of reorganization yet filed. Key open matters include an appellate fight over Proposition 51, a committee motion for derivative standing to pursue approximately $7.27 million in avoidance claims, ongoing real estate sales through the Colliers-brokered portfolio, insurer disputes over stay-relief and coverage obligations, and a mediation session targeted for May 2026.

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