## Facts

- The Diocese of Rochester filed a Chapter 11 petition in the U.S. Bankruptcy Court for the Western District of New York (Case No. 19-20905-PRW).
- Abuse survivors brought (or sought to prosecute) New York state-court claims under the Child Victims Act (CVA) arising from alleged childhood sexual abuse connected to Catholic institutions in the Diocese’s territory.
- Many state-court cases named not only the Diocese but also separately incorporated Catholic entities—such as parishes, schools, and similar institutions—described in the decision as “Independent Catholic Corporations,” none of which were debtors in the Chapter 11 case.
- For more than two years during the bankruptcy case, survivors refrained from prosecuting CVA actions against the Independent Catholic Corporations, with that forbearance extended multiple times.
- In 2022, the Diocese commenced an adversary proceeding (Adv. Pro. No. 22-02075-PRW), captioned *The Diocese of Rochester v. AB 100 Doe, et al.*, seeking to stop the continuation of CVA litigation against the Independent Catholic Corporations during the pendency of the Diocese’s bankruptcy.
- The Diocese sought (a) stay-like relief based on § 362(a) and (b) a preliminary injunction under § 105(a), arguing that litigation against non-debtor Catholic corporations could impair the Diocese’s reorganization, including through effects on insurance and the burdens of litigation.
- The abuse survivors opposed the requested relief, and the Committee of Unsecured Creditors supported allowing claims against the Independent Catholic Corporations to proceed.

## Issues

1. Whether the Bankruptcy Code’s automatic stay under 11 U.S.C. § 362(a) barred prosecution of CVA state-court actions against separate, non-debtor Independent Catholic Corporations.
2. Whether the court should issue a preliminary injunction under 11 U.S.C. § 105(a) to enjoin CVA state-court actions against those non-debtors during the Diocese’s Chapter 11 case.

## Decision

- The court denied the Diocese’s motion seeking to enjoin prosecution of state-court CVA actions against the Independent Catholic Corporations.
- The court ruled that the automatic stay generally applies to actions against the debtor and estate property, and the Diocese did not establish a basis to treat the non-debtor litigation as stayed under § 362(a).
- Applying the traditional preliminary-injunction framework, the court held the Diocese did not carry its burden to justify extraordinary injunctive relief under § 105(a).
- The court found the Diocese’s asserted harms—such as potential effects on insurance and reorganization—too speculative on the record presented to warrant halting survivors’ state-law actions against non-debtors.
- The court weighed the harms and public interest and found that further delaying survivors’ CVA actions against non-debtor entities, after years of forbearance, was not justified.
- The court dismissed the Diocese’s adversary complaint.

## Legal Principles

- The automatic stay under 11 U.S.C. § 362(a) is limited by its terms to actions against the debtor and actions to obtain possession or control of property of the estate; it does not automatically protect non-debtor co-defendants.
- Stay-like protection for non-debtors requires an independent basis (typically § 105(a)) and a showing sufficient to justify injunctive relief; bankruptcy courts do not grant such relief as a matter of convenience to consolidate litigation.
- A preliminary injunction under § 105(a) requires satisfaction of the traditional factors (including a sufficient merits showing, irreparable harm, balance of hardships, and public interest); speculative effects on reorganization or insurance are not enough.
- Section 105(a) authorizes orders necessary or appropriate to carry out the Bankruptcy Code, but it does not create substantive rights and cannot be used to confer broad non-debtor protections beyond what the Code provides.
- Shared or overlapping insurance interests, without a concrete showing that the state-court actions are effectively actions against the debtor or estate property, are insufficient to justify enjoining suits against non-debtors.
- In evaluating hardship and public interest, the court may consider the remedial purpose of the CVA and the prejudice caused by extended delay to survivors pursuing claims against entities that have not sought bankruptcy relief.

## Conclusion

In *In re Diocese of Rochester*, the bankruptcy court refused to extend bankruptcy protections to separately incorporated, non-debtor Catholic entities, holding that § 362(a) did not bar the CVA suits and that the Diocese failed to satisfy the demanding requirements for a § 105(a) preliminary injunction; the court therefore denied the requested relief and dismissed the adversary complaint.


In re Diocese of Rochester, 640 B.R. 28 (Bankr. W.D.N.Y. 2022)