Opinion
Case No. 11-20059-svk
02-01-2013
In re Archdiocese of Milwaukee, Debtor.
Chapter 11
MEMORANDUM DECISION ON DEBTOR'S OBJECTION TO CLAIM NO. 456
FILED BY CLAIMANT A-341
The Archdiocese of Milwaukee (the "Debtor") objected to Proof of Claim number 456 (the "Claim") filed by A-341 (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 26, 2012, the Claimant filed the Claim, alleging that Father Franklyn Becker sexually abused him in 1971 or 1972 when the Claimant was 13 or 14 years old. Becker abused the Claimant while Becker was a parish priest at St. John de Nepomuc Church in Milwaukee.
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; Attorney Johnson's affidavit contains voluminous copies of newspaper articles about the priest sex abuse scandal in general and articles detailing some of the specific allegations concerning priests in the Milwaukee Archdiocese, including Widera, Effinger and Hanser. However, none of the articles attached to the Johnson affidavit specifically mention Becker. Becker's name is on the July 8, 2004 list of priests against whom the Debtor received one credible report of abuse.
The Claimant filed an affidavit opposing the Debtor's motion for summary judgment. According to the affidavit, the Claimant did not know that the Debtor had posted a list of priests accused of abuse until after the Debtor's bankruptcy petition was filed in 2011. He did not hear anything related to the list until 2011. Until 2010 or 2011, he did not suspect that the Debtor knew that Becker was a child abuser before Claimant was abused. Until that time, the Claimant did not have any idea that the Debtor may have defrauded him.
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, a claim that the Debtor defrauded the Claimant, as is made here, is not necessarily a personal injury tort claim.
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 1972, 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 the derivative claims 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
"[F]raud claims are not derivative claims, but rather, intentional torts where the wrongful act is the Archdiocese's fraudulent representation that it did not know of the priests' histories of sexually molesting children and that it did not know the priests were dangerous to children. Fraud claims, if proven, provide a separate cause of the plaintiff's' injuries." John Doe 1, ¶50. The statute of limitations for fraud is six years from when the claim accrues. Under the discovery rule, the claim is not deemed to accrue until the aggrieved party's discovery of the facts constituting the fraud. Wis. Stat. § 893.93(1)(b). 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." Id. ¶51, (quoting Koehler v. Haechler, 27 Wis. 2d 275, 278, 133 N.W.2d 730 (1965)).
The discovery rule 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 the 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 general publicity about the priest abuse scandal suffices to bring home the information to the Claimant, and that the Claimant is chargeable with knowledge of the Debtor's purported fraud in covering up the priest sex abuse scandal and transferring Becker to an unsuspecting parish where he could abuse the Claimant. But none of the priest sex abuse articles attached to Attorney Johnson's affidavit mention Becker. Although Becker's name was on the list published by the Debtor, the Claimant did not know about the list. And the Claimant's affidavit states that the Claimant had no idea that the Debtor knew that Becker was an abuser before Becker abused the Claimant. Since there is no evidence that any information about the Debtor's alleged fraud was brought home to the Claimant, it is not reasonable to require him to conduct an investigation.
It is possible that discovery will reveal that the Claimant indeed had more information brought home to him than appears in the record. If that is the case, the Court will revisit this issue. But in the battle of affidavits between an attorney who attached reams of publicity about the priest sex abuse scandal and an abuse victim who says he did not know about the cover-up and never saw the list of abusive priests, the Court sides with the Claimant as having raised a disputed fact about whether he should have discovered the Debtor's alleged fraud.
IV. CONCLUSION
For the foregoing reasons, the Debtor's motion for summary judgment is denied. The Court will enter a separate order.
By the Court:
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Susan V. Kelley
U.S. Bankruptcy Judge