A California bankruptcy judge agreed Wednesday to postpone dismissing the Roman Catholic Diocese of Oakland's Chapter 11 case for two more weeks, after a mediator overseeing plan discussions said there was a "light at the end of the tunnel."

U.S. Bankruptcy Judge William J. Lafferty III said he will give the diocese more time to file a plan, despite complaints from the committee representing sexual abuse claimants that the claimants were not included in the talks.

"I don't need to tell any of you what a tragedy it would be if we dismissed the case this week," the judge told the parties at a hearing.

The Oakland, California, diocese filed for Chapter 11 protection in May 2023 to address mounting litigation brought under a state law that opened a temporary window during which adult survivors of childhood sexual abuse could file otherwise time-barred claims.

Earlier this year, the diocese proposed a Chapter 11 plan to establish a $165 million fund to settle hundreds of abuse claims, but the plan was overwhelmingly rejected by the survivors.

The diocese and its official committee of unsecured creditors, which includes the abuse claimants, began mediation in early 2024, but the diocese said the talks reached a deadlock, and in September this year, it moved to dismiss its own Chapter 11 case, saying the diocese could not afford the expense of a contested plan confirmation.

The committee also requested dismissal and said the case should end immediately, but at a hearing held late last month, Judge Lafferty said he would grant the motion unless the parties could report progress toward a plan by Wednesday.

During the hearing held Wednesday, diocese counsel Ann Marie Uetz told the court that mediation since last month had produced enough progress that the dismissal date should be pushed back to Nov. 26.

One of the two mediators, former U.S. Bankruptcy Judge Randall Newsome, said that the discussions had been the most difficult in his mediation career, but there was a "light at end of the tunnel" and the talks should be allowed to continue.

"Over the last 10 days, there has been progress like I've never seen before," he told the court.

Counsel for a half-dozen of the diocese's insurance carriers also rose in support of an extension, but committee counsel Jeffrey Prol said the group still wanted immediate dismissal, adding that it had not been invited to the latest talks and there had been no indications of a settlement the committee could accept.

The other mediator, former U.S. Bankruptcy Judge Christopher Sontchi, said: "There have been no communications between the debtor and the committee, period."

Judge Lafferty asked if proposing a plan without committee approval would just set up another plan rejection. Uetz said "select" state court counsel for abuse claimants had been included in the talks, and Tancred Schiavoni, who is representing diocese insurer Pacific Indemnity, noted that in the Boy Scouts of America bankruptcy, a plan negotiated without committee participation later won the committee's support.

"We're all acting in good faith. We're just asking for two weeks here," Schiavoni told the court.

Judge Lafferty said he would give the debtor two more weeks, and urged it to include the committee in the discussions.

"With the committee in the room, there is a chance of something consensual," he said.

The debtor is represented by Eileen Ridley, Shane J. Moses, Geoffrey S. Goodman, Ann Marie Uetz, Matthew D. Lee and Mark C. Moore of Foley & Lardner LLP.

The committee is represented by Jeffrey D. Prol and Brent Weisenberg of Lowenstein Sandler LLP and Tobias S. Keller, Jane Kim and Gabrielle L. Albert of Keller Benvenutti Kim LLP.

The insurers are represented by Justine Daniels, Alexandra Wolter and Tancred V. Schiavoni of O'Melveny & Myers LLP, Alexander Potente, Jason Chorley, Catalina J. Sugayan, Clinton E. Cameron and Bradley E. Puklin of Clyde & Co. LLP, Mark D. Plevin, Miranda H. Turner and Jordan A. Hess of Plevin & Turner LLP, Blaise S. Curet of Sinnott Puebla Campagne & Curet APLC, Robin D. Craig of the Law Office of Robin Craig, Harris B. Winsberg, Matthew M. Weiss, Matthew G. Roberts, Todd C. Jacobs and John E. Bucheit of Parker Hudson Rainer & Dobbs LLP, Andrew Wyatt, Joshua Haevernick, Kelly Graf and Lauren Macksoud of Dentons, Russell W. Roten, Jeff D. Kahane, Nathan Reinhardt and Betty Luu of Duane Morris LLP, and Michael David Compean and Frederick Hall of Black Compean & Hall LLP.

The case is In re: The Roman Catholic Bishop of Oakland, case number 4:23-bk-40523, in the U.S. Bankruptcy Court for the Northern District of California.