The Roman Catholic Diocese of San Diego filed for Chapter 11 bankruptcy protection hours before it was scheduled to go to trial in the first of more than 140 lawsuits accusing priests of sexual abuse.
The filing automatically halted court proceedings scheduled for Wednesday.
In a letter posted on the diocese's Web site, Bishop Robert H. Brom said the diocese made its decision because any damage awards in the earlier trials could deplete "diocesan and insurance resources" and leave nothing for other victims.
The diocese claimed in the filing late Tuesday $95.7 million in property holdings and another $60.4 million in liquid assets, including stocks, bonds and operating accounts.
San Diego is the fifth diocese in the nation to file for bankruptcy protection.
Diocese officials and lawyers for the plaintiffs failed to reach a settlement during two days of negotiations that ended Monday in Los Angeles Superior Court.
The diocese called plaintiffs' lawyers on Tuesday morning to make a "final and best" settlement offer, Micheal Webb, a lawyer for the diocese said. He declined to specify how much the church had offered, but said it was higher than total settlements reached in other dioceses in the Unites States.
"When they rejected it, we were left with no choice," Webb said.
Lawyers for the plaintiffs said the amount the church offered was insufficient because the diocese had more plaintiffs than other jurisdictions.
They also accused the church of using the bankruptcy filing as a way to keep potentially embarrassing information under wraps.
"For three years they've told people they want to settle, they want to be transparent," said John Manly, a lawyer for a plaintiff whose lawsuit is scheduled to go to trial in April, "but the moment it became clear the truth will come out through a jury trial, they sought to shut down victims' ability to get compensated and get out the truth."
In its filing, the diocese did not list the names of litigants who have filed sex-abuse claims, indicating that it has petitioned to enter those details under seal.
A trial prompted by a woman's accusations that a priest forced her to have sex in his parish office in 1972, when she was 17, was scheduled to begin Wednesday. Three other trials were scheduled to follow, involving multiple victims and allegations that the diocese protected abusive priests by moving them from parish to parish.
Plaintiffs with cases already released for trial may appeal for permission to let those trials move ahead.
The diocese which covers San Diego and Imperial counties, has 98 churches, runs 50 schools.
The other dioceses that have filed for bankruptcy protection are Davenport, Iowa; Portland, Ore.; Spokane, Wash.; and Tucson. Tucson has emerged from bankruptcy protection, while proposed settlements are awaiting final approval in Portland and Spokane.
