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Archdiocese of Milwaukee v. Appeal of Doe

United States Court of Appeals, Seventh Circuit

February 25, 2014

IN RE: ARCHDIOCESE OF MILWAUKEE, Debtor-Appellee,
v.
APPEAL OF: JOHN DOE, Claimant A-49, Appellant

Argued April 17, 2013.

Appeal from the United States District Court for the Eastern District of Wisconsin. No. 12-C-292 -- Rudolph T. Randa, Judge.

For In the Matter of: ARCHDIOCESE OF MILWAUKEE, Debtor - Appellee: Francis H. LoCoco, Attorney, WHYTE HIRSCHBOECK DUDEK S.C., Milwaukee, WI.

JOHN DOE, Claimant A-49, Appellant: Jeffrey R. Anderson, Attorney, Michael G. Finnegan, Attorney, JEFF ANDERSON & ASSOCIATES PA, St. Paul, MN.

Before WOOD, Chief Judge, and EASTERBROOK and SYKES, Circuit Judges.

OPINION

Page 1102

Sykes, Circuit Judge.

This appeal challenges the disallowance of a claim in the ongoing Chapter 11 bankruptcy reorganization of the Archdiocese of Milwaukee. John Doe Claimant A-49 alleges that Father David Hanser, a former pastor at St. John Vianney Catholic Parish in Brookfield, Wisconsin, sexually abused him in the late 1970s when he was seven years old.[1] In 2007 the claimant participated in a voluntary mediation program conducted by the Archdiocese to address claims of sexual abuse by priests. The mediation produced a settlement; the Archdiocese paid the claimant $100,000, and he signed an agreement releasing the Archdiocese from all claims relating to abuse by Father Hanser.

When the Archdiocese filed its Chapter 11 petition four years later, however, Claimant A-49 submitted a claim based on the same allegations of abuse by Father Hanser. The Archdiocese moved to disallow it based on the release. In response the claimant asserted that an Archdiocesan representative had fraudulently induced him to settle by giving him misleading information about when the Archdiocese first received reports of abuse by Father Hanser. The bankruptcy judge refused to set aside the agreement because the claimant had not shown that but for the alleged misrepresentations, he would not have accepted the settlement. The judge enforced

Page 1103

the release and entered summary judgment disallowing the claim. The district court affirmed.

We likewise affirm, although on a somewhat different analysis. The courts below misstated the elements of a claim for rescission based on fraudulent inducement under Wisconsin law. To be fair, the Wisconsin Supreme Court has never addressed the precise question presented here, but its approach to the remedy of rescission has long followed the Restatement (Second) of Contracts, and under that framework the lower courts reached the right result. Claimant A-49 failed to show that the alleged misrepresentations were a substantial factor in his decision to accept the settlement. The claimant's lawyer argues that the bankruptcy judge wrongly refused his request to supplement the record with oral testimony or a second affidavit from his client. We find no abuse of discretion. Counsel never made an offer of proof explaining what the expanded record would show, nor has he told us what his client would say in these additional forms of proof.

I. Background

We recount the factual background from the record before the bankruptcy court on the summary-judgment motion, construing the facts and drawing inferences in favor of the claimant. In re United Air Lines, Inc., 438 F.3d 720, 727 (7th Cir. 2006). Claimant A-49 alleges that Father Hanser sexually abused him in 1977 or 1978, when he was seven years old. At the time, Father Hanser was the pastor of St. John Vianney Parish in the Milwaukee Archdiocese. In 2007 the Archdiocese conducted a voluntary mediation program to address claims of sexual abuse by its priests. Claimant A-49 participated in this program. Barbara Anne Cusack represented the Archdiocese in the mediation.

During the course of his mediation session, Claimant A-49 asked Cusack when the Archdiocese first received a complaint of sexual abuse by Father Hanser. She replied that the first report arose in the mid- to late-1980s. Claimant A-49 then asked her whether the Archdiocese had received reports from other victims of abuse by Father Hanser while he served at St. John Vianney. Cusack said there were none.

At the conclusion of the mediation, the parties reached an agreement to settle the claim. The Archdiocese agreed to pay the claimant $100,000 and to cover certain expenses for counseling and other services. In return the claimant released the Archdiocese from all claims relating to abuse by Father Hanser. The release provision in the settlement agreement states as follows:

In return for the payments set out above, and for the mutual promises contained herein, [Doe] releases and forever discharges the Archdiocese, and all of the Archdiocese's employees, agents, officers, directors, affiliates, insurers and assigns, including, without limitation, all members of the Roman Catholic clergy, and all parishes and schools and any person or entity affiliated with the Archdiocese of Milwaukee from, and covenants not to sue them for, all claims, causes of action, charges, and demands, whether in tort, contract, or otherwise, of any nature that he may have had at any time up to and including the date of signing of this Agreement, including, without limitation, any claim of any nature arising from the assault, injury, whether physical or mental, or any other activity by Hanser.

Claimant A-49 and Cusack signed the agreement on January 10 and 12, 2007, respectively.

Page 1104

Four years later, in January 2011, the Archdiocese filed for Chapter 11 bankruptcy due to mounting claims of clergy sexual abuse. During the reorganization proceedings, information came to light showing that the Archdiocese was in possession of allegations that Father Hanser sexually abused a child in the 1970s and sexually abused other children while he was assigned to St. John ...


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