Sexual abuse victim who settled cannot resurrect claims in Archdiocese’s bankruptcy

Charlotte Bankruptcy Lawyer Bryan W. Stone of Arnold & Smith, PLLC answers the question “How do I file for bankruptcy?”


A claimant who said he was misled by the Archdiocese of Milwaukee into accepting an $80,000 settlement in 2007 cannot assert a claim against the organization in the latter’s bankruptcy, a court has ruled. A state law barring evidence from mediations torpedoed the claimant’s attempt to wrest more money out of the Archdiocese for instances of sexual abuse that occurred in the 1970s.

Church Charlotte Chapter 11 Lawyer Mecklenburg North Carolina Debt AttorneyThe claimant, John Doe, attended St. John’s School for the Deaf in Milwaukee. In 1974, when Doe was 17, he was sexually abused by Father Lawrence Murphy.

In 2007, Doe participated in a voluntary mediation program with the Archdiocese, which runs and is responsible for St. John’s School. Through the mediation, Doe settled claims of fraud, negligence and sexual battery for $80,000.

As a part of the settlement, Doe signed a settlement agreement that contained a confidentiality clause. The agreement also contained a clause barring Doe from introducing as evidence in later proceedings any “views expressed or admissions made during the mediation proceedings.” In exchange for the $80,000, Doe released the Archdiocese from “all claims of any nature that [Doe had] against the Archdiocese… arising from any sexual abuse of [Doe]” by Father Murphy.

Four years after the settlement, the Archdiocese filed for bankruptcy pursuant to Chapter 11 of the United States Bankruptcy Code. Doe filed a proof of claim in the bankruptcy, recounting that he had been sexually abused by Father Murphy in 1974. The Archdiocese opposed Doe’s claim and moved for summary judgment, citing the 2007 settlement agreement and release.

Doe responded that he had been fraudulently induced into signing the agreement and release by the Archdiocese. He alleged that the Archdiocese had concealed how much it knew about Father Murphy’s abuse and misrepresented the nature and amount of its settlements with other victims.

The concealed information and the misrepresentations induced Doe to sign the agreement and release. Had he been aware of the Archdiocese’s knowledge regarding the extent of the abuse and of its settlements with other claimants, he never would have settled for $80,000.

The problem for Doe was that the information regarding his and other claims had arisen in the context of his 2007 mediation with the Archdiocese. Like North Carolina law, Wisconsin law prohibits statements and evidence gathered and exchanged in a mediation from being introduced in a subsequent legal proceeding. Accordingly, the bankruptcy court granted summary judgment in the Archdiocese’s favor on Doe’s fraudulent inducement claim.

Doe appealed, and the United States Court of Appeals for the Seventh Circuit ruled on November 5 that his fraudulent inducement claims against the Archdiocese were related to his 2007 claims such that the actions were not separate or distinct. The foundation for both of the actions, the Court of Appeals observed, was Father Murphy’s 1974 sexual abuse, which occurred while Doe was a student at one of the Archdiocese’s schools.

The goal of Wisconsin’s mediation statute is to encourage parties to lawsuits to “quickly, fairly, and voluntarily” resolve disputes. This goal would be perverted or undermined if parties feared that admissions or statements made in the course of mediation could later be used against them.

The Court of Appeals upheld the dismissal of Doe’s claims, suggesting that the only way in which the evidence could be admitted was if Doe’s bankruptcy claims had been “distinct” from those that underlay his 2007 action.

If you find yourself needing the services of a Charlotte, North Carolina bankruptcy attorney, please call the skilled lawyers at Arnold & Smith, PLLC find additional resources here. As professionals who are experienced at handling all kinds of bankruptcy matters, our attorneys will provide you with the best advice for your particular situation.



About the Author

Bryan 1Bryan Stone is a Partner with Arnold & Smith, PLLC, where he focuses his practice on all aspects of bankruptcy, including: Chapter 7, Chapter 11, Chapter 13, home loan modifications and landlord-tenant issues.

A native of Macon, Georgia, Mr. Stone attended the University of Georgia, where he earned a BBA in Banking and Finance, and Wake Forest University School of Law, where he obtained his law degree.

Following law school, Mr. Stone relocated to Charlotte, where he currently serves as Chair of “Bravo!” – a young professionals organization associated with Opera Carolina – and founded the University of Georgia Alumni Association of Charlotte.

In his spare time, Mr. Stone enjoys perfecting his barbeque skills for the annual “Q-City BBQ Championship” and playing softball in the Mecklenburg County Bar softball league.






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