Roman Catholic Diocese of San Diego hoped to find shelter from potentially embarrassing and costly lawsuits from people, claiming they were sexually abused by priests, when filing for bankruptcy six months ago.
Instead, the church opened itself up to an unprecedented public examination of its financial affairs and to withering criticism from a judge.
U.S. Bankruptcy Judge Louise DeCarl Adler has used her authority to interrogate church staff, order audits and, in the most recent blow, return individual cases to state court control for immediate trials.
Now, Adler is considering throwing out the whole case - a move that would leave the diocese where it was in February, with little choice but to settle or risk going to trial.
Mediation proceedings continue Thursday before a federal magistrate judge, and Adler delayed a hearing until Tuesday on the dismissal to allow for more negotiations.
"It's like sitting holding a candle on a pile of dynamite," said Richard Sipe, a former Benedictine monk who has written extensively on church abuse. "The question is how to blow the candle out."
San Diego was the fifth U.S. diocese to seek bankruptcy protection, and with nearly 1 million Catholics, it was by far the largest and wealthiest. The decision automatically suspended civil trials and at least temporarily shielded the church from testimony about what officials knew about the abuse.
At the time, Bishop Robert Brom told parishioners he believed bankruptcy court would be a neutral venue to reach a settlement that would fairly compensate about 150 alleged victims but leave church assets intact.
It has proven to be a noisy forum. Attorneys for people claiming abuse have repeatedly accused the church of lying, forum shopping and abusing the bankruptcy process. In return, church attorneys have claimed they are being victimized by greedy lawyers.
Adler, an experienced bankruptcy judge, has been a stern taskmaster. She has chastised the church for maintaining "Byzantine" records and commented that the diocese had more accounts than billion-dollar corporations that have come before her.
Last month, she rebuked the church for undervaluing real-estate holdings and failing to disclose facts to the court. She said federal statutes would allow the case to be dismissed on grounds of "gross mismanagement" and the diocese's "unexcused failure" in financial reporting.
"This case has been unusual in that she's gotten madder than she usually gets," said Shaun Martin, a San Diego University law professor. "By reputation, she's not always mean but she's definitely no shrinking violet."
Adler has now pushed the diocese into a corner. Church officials have proposed settling for US$95 million (EUR69.91 million) and setting aside an additional US$3 million (EUR2.21 million) to resolve future claims.
Plaintiffs' attorneys, using other settlements in California as a benchmark, are seeking closer to US$200 million (EUR147.2 million).
The Los Angeles Archdiocese settled 508 cases for US$660 million in July, two days before jury selection was scheduled to begin involving 172 abuse claimants. At the time, Los Angeles Cardinal Roger Mahony said he was hoping for a settlement in San Diego.
"I told Bishop Brom recently, I said, 'It's my hope that both us and you will have this over with by Labor Day,"' Mahony said.
The Orange County diocese settled 90 claims for US$100 million in 2004 after a judge promised to move toward trial if settlement talks collapsed. Bishop Tod D. Brown later said he could not risk a trial in a state where a jury once awarded US$30 million to two clergy abuse victims.
Bankruptcy proceedings led to fights in Portland, Oregon, Spokane, Washington; and Tucson, Arizona. But all emerged from Chapter 11 with settlements ranging from US$20 million in Tucson to US$75 million in Portland.
In those dioceses, experts say, the plaintiffs and church lawyers managed to work together in a way that has been absent so far in San Diego.
"I think this is the worst," said David Skeel, a law professor at the University of Pennsylvania who has followed the church bankruptcies. "If it remains as ugly as it obviously is, it could be a really nasty process."
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