Opinion
Case No. 11-20059-svk
02-04-2013
In re Archdiocese of Milwaukee, Debtor.
Chapter 11
MEMORANDUM DECISION ON DEBTOR'S OBJECTION TO CLAIM NO. 259
FILED BY CLAIMANT A-156
The Archdiocese of Milwaukee (the "Debtor") objected to Proof of Claim number 259 (the "Claim") filed by A-156 (the "Claimant"). The Debtor moved for summary judgment, arguing that the Claim should be disallowed as time-barred under Wisconsin's statute of limitations. The Court held hearings on December 13, 2012 and January 24, 2013. After consideration of the written submissions and argument of counsel, the Court issued an oral ruling at the January 24, 2013 hearing, which is memorialized by this decision.
Pursuant to the Order Authorizing Special Confidentiality Procedures to Protect Abuse Survivors, the Claimant is being referred to by his number rather than his name. (Order, Docket No. 327).
I. BACKGROUND AND FACTS
The Debtor filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code on January 4, 2011. On January 9, 2012, the Claimant filed the Claim, alleging that Father Richard Nichols sexually abused him in 1965 and 1966 when the Claimant was 12 to 13 years old. The Claimant was an altar boy at Saints Peter and Paul Catholic Church in Milwaukee, and the abuse occurred in the sacristy.
In support of its motion, the Debtor filed the affidavits of Attorneys Francis LoCoco and Lindsey Johnson. Attorney LoCoco's affidavit attaches a copy of the Claim, certain correspondence from the Debtor to the Claimant and records of the Claimant's contact with the Debtor. Attorney Johnson's affidavit contains voluminous copies of newspaper articles about the priest sex abuse scandal, but the newspaper articles do not expressly mention Nichols. The Debtor relies on the correspondence and the Debtor's contact records to demonstrate that the Claimant had knowledge of the Debtor's alleged fraud.
The Claimant filed an affidavit opposing the Debtor's motion for summary judgment. According to the affidavit, he called the Debtor in 1993 to report that he had been abused by Nichols. At that time, he did not know about Nichols' history of sexual abuse, and the Debtor did not inform him of Nichols' history during a subsequent meeting. The Claimant's affidavit states that he did not know about the priest sex abuse scandal, and the Debtor did not inform him that Nichols was not the only perpetrator. Contrary to the Debtor's records, the Claimant disputes that he told the Debtor's representative, Diane Knight, that he was "angry that the Church has allowed these kinds of things to go on for so long and handled them so poorly, that is, by simply transferring people around to where they could continue to abuse." The Claimant did not know in 1993, and does not know today, why the Debtor transferred Nichols from St. Peter and St. Paul or what Nichols' next assignment was. After the meeting, the Claimant received a letter from Diane Knight with a news article stating that Nichols had been stripped of his priestly duties. Based on the newspaper article, the Claimant believed that the Debtor acted appropriately with respect to Nichols and did all it could to address the problem with Nichols.
The Debtor urges disallowance of the Claim under 11 U.S.C. § 502(b)(1) because the Claim is "unenforceable against the debtor . . . under any agreement or applicable law." The applicable law is Wisconsin's six-year statute of limitations for fraud. The Claimant disputes that the statute of limitations bars the Claim.
II. JURISDICTION
Ruling on objections to proofs of claim falls within the core jurisdiction of the bankruptcy court under 28 U.S.C. §§ 1334 and 157(b)(2)(B). Unlike the entry of a final order on a State law counterclaim, allowance of claims was not deemed unconstitutional in Stern v. Marshall, 131 S. Ct. 2594, 2614 (2011). In Stern, the Supreme Court reaffirmed that bankruptcy courts have the authority to restructure the debtor-creditor relationship and determine "creditors' hierarchically ordered claims to a pro rata share of the bankruptcy res." Id.
Under 28 U.S.C. § 157(b)(5), personal injury tort claims must be tried in the district court. However, in Stern, the Supreme Court confirmed that this provision is waivable. Stern, 131 S. Ct. at 2608. Further, an objection to the legal validity of a personal injury tort claim, such as the Debtor's statute of limitations objection in this case, does not fall within the personal injury exception to the core jurisdiction of the Bankruptcy Court. In re UAL Corp., 310 B.R. 373 (Bankr. N.D. Ill. 2004). Finally, Claimant's fraud claims are not necessarily personal injury tort claims.
III. DISCUSSION
A. Summary Judgment Standard
Summary judgment is governed by Rule 7056 of the Federal Rules of Bankruptcy Procedure, incorporating Rule 56 of the Federal Rules of Civil Procedure, and should be granted if the Debtor can establish that there is no genuine issue of material fact and that the Debtor is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Material facts are those that "might affect the outcome of the suit." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). When analyzing a summary judgment motion in a similar context, the Seventh Circuit Court of Appeals explained: "[I]t follows that summary judgment is appropriate only if (1) the statute of limitations has run, thereby barring plaintiff's claim as a matter of law, and (2) there exist no genuine issues of material fact regarding the time at which plaintiff's claim has accrued and the application of the statute to plaintiff's claim which may be resolved in plaintiff's favor." Yorger v. Pittsburgh Corning Corp., 733 F.2d 1215, 1219 (7th Cir. 1984).
B. The Claimant's Negligence-Based Claims are Barred by the Statute of Limitations
The Wisconsin statute of limitations for negligence is three years from when the claim accrues. Wis. Stat. § 893.54(1) (2009-10). The Claimant's negligence-based claims relate back to the date of his abuse in 1966, and the statute of limitations has expired. See In re Archdiocese of Milwaukee, 470 B.R. 495 (Bankr. E.D. Wis. 2012) (negligence claims filed by Claimants A-12 and A-13 were barred by the statute of limitations, citing John Doe 1 v. Archdiocese of Milwaukee, 2007 WI 95, 303 Wis. 2d 34, 734 N.W.2d 827)). The Court rejects the Claimant's attempt to distinguish his negligence-based claims from those adjudicated in John Doe 1.
C. A Question of Fact Remains on Whether the Claimant's Fraud-Based Claims are Barred by the Statute of Limitations
The statute of limitations for fraud is six years from when the claim accrues. Wis. Stat. § 893.93(1)(b). "The cause of action in such case is not deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud." Id. In John Doe 1, the Wisconsin Supreme Court stated that the statute of limitations starts to run "[w]hen the information brought home to the aggrieved party is such as to indicate where the facts constituting the fraud can be effectually discovered upon diligent inquiry." John Doe 1, ¶51 (quoting Koehler v. Haechler, 27 Wis. 2d 275, 278, 133 N.W.2d 730 (1965)).
The discovery rule to start the statute of limitations has subjective and objective components. As Judge Randa noted in In re Archdiocese of Milwaukee, 482 B.R. 792, 798 (E.D. Wis. 2012), "The focus of the subjective component is on what a particular plaintiff knew, such that an objectively reasonable inquiry would then lead to the fraud being discovered. . . . In other words, the objective component does not come into play until a plaintiff has enough information to be chargeable with notice of all facts to which a diligent inquiry might have led." (internal quotes and citations omitted). And the John Doe 1 court distinguished the analysis for fraud claims against the Debtor in the priest sex abuse scandal from the analysis of commercial claims in Stroh Die Casting Co. v. Monsanto Co., 177 Wis. 2d 91, 502 N.W.2d 132 (Ct. App. 1993). The court observed: "[R]easoning about the investigation that reasonably may be required in a business context is not directly transferable to a relationship that is based on trust, particularly when the trust relationship arises in a religious context such as that of priest and parishioner." John Doe 1, ¶ 55. In Stroh, a "tremendous public outcry" about PCBs in the 1970s contributed to the court's conclusion that the statute of limitations had run.
The Debtor contends that the Claimant's contact with the Debtor demonstrates that the Claimant had sufficient information brought home to him to provide the requisite knowledge to start the statute of limitations clock. The Claimant denies the Debtor's contentions and urges the Court to apply the doctrine of equitable estoppel to prevent the Debtor from raising the statute of limitations defense.
The Wisconsin Supreme Court has recognized that "in a proper case, a defendant may be estopped from asserting the statute of limitations." Hester v. Williams, 117 Wis. 2d 634, 644, 345 N.W.2d 426 (1984). Estoppel will apply where the conduct and representations of the party asserting the statute of limitations "were so unfair and misleading as to outbalance the public's interest in setting a limitation on bringing actions." State ex rel. Susedik v. Knutson, 52 Wis. 2d 593, 598, 191 N.W.2d 23 (1971). Actual fraud is not required to invoke equitable estoppel, but the party asserting the statute of limitations must have been guilty of fraudulent or inequitable conduct -- distinct from the claimed fraud itself -- that induced the other party to delay filing the action until it was too late. Id. The Claimant bears the burden of proof of estoppel by clear and convincing evidence, and the Court cannot rely on mere inference or conjecture. Gonzalez v. Teskey, 160 Wis. 2d 1, 13, 465 N.W.2d 525 (Ct. App. 1990).
The Claimant and Diane Knight met on July 8, 1993 to discuss the Claimant's allegations against Nichols. Diane Knight's notes indicate that the Claimant said that he was angry that the Church allowed the priest sex abuse scandal to go on for so long and handled it "by simply transferring people around to where they could continue to abuse." The Claimant disputes that he expressed this sentiment to Diane Knight, setting up a disputed fact about the Claimant's knowledge. Diane Knight's notes also state: "We also reiterated that he is only aware of one other boy from his class who was involved." But the Debtor was aware of many more allegations against Nichols, and reiterating that only one other boy was involved may have been a misrepresentation. To follow up on the meeting, Diane Knight sent copies of newspaper articles about Nichols. Her letter states: "I have been able to obtain information beginning in 1981." But the Debtor's files show allegations against Nichols from well prior to that date. Apparently, in response to the Claimant's investigation, the Debtor was only willing to share information that had already been made public in the newspaper. This creates a factual issue about the propriety of the Debtor's response to the Claimant's questions.
In short, disputed facts exist as to whether the Claimant had sufficient information brought home to him to start the statute of limitations clock, and if so, whether the Debtor's response was so unfair and misleading as to estop the Debtor from raising the statute of limitations defense. The existence of the disputed facts renders summary judgment inappropriate. It is possible that discovery will reveal that the Claimant indeed had more information brought home to him than appears in the record and that the Claimant will be unable to prove his estoppel claim by clear and convincing evidence. If that is the case, the Court will revisit this issue.
IV. CONCLUSION
For the foregoing reasons, the Debtor's motion for summary judgment is denied. The Court will enter a separate order.
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Susan V. Kelley
U.S. Bankruptcy Judge