Mediating Confidentiality: 7th Circuit Finds Mediation Privilege Applies in Priest Sexual Abuse Case

November 11, 2014

Except as provided under sub. (4), no oral or written communication relating to a dispute in mediation made or presented in mediation by the mediator or a party is admissible in evidence or subject to discovery or compulsory process in any judicial or administrative proceeding. Any communication that is not admissible in evidence or not subject to discovery or compulsory process under this paragraph is not a public record under subch. II of ch. 19.

That said, Wis. Stat. § 904.085(4)(e) provides that

In an action or proceeding distinct from the dispute whose settlement is attempted through mediation, the court may admit evidence otherwise barred by this section if, after an in camera hearing, it determines that admission is necessary to prevent a manifest injustice of sufficient magnitude to outweigh the importance of protecting the principle of confidentiality in mediation proceedings generally.

So, assume that a plaintiff and defendant settle a sexual abuse claim and that the defendant later files for bankruptcy. Is that bankruptcy action a distinct action, meaning that § 904.085(4)(e)‘s exception to Wisconsin’s mediation potentially applies? Let’s take a look at the recent opinion of the Seventh Circuit in Doe v. Archdiocese of Milwaukee, 2014 WL 5671155 (7th Cir. 2014).

In Doe,

John Doe, who is deaf, attended St. John’s School for the Deaf in Milwaukee, Wisconsin. He was sexually abused as a student there in 1974, when he was seventeen years old, by Father Lawrence Murphy. Doe participated in the Archdiocese of Milwaukee’s voluntary mediation program in 2007. He reached a settlement of $80,000 for his claims against the Archdiocese for fraud, negligence, and sexual battery. Doe signed a settlement agreement containing a confidentiality clause, another clause providing that the parties could not introduce as evidence in later proceedings matters including views expressed or admissions made during the mediation proceedings, and a provision stating that the settlement was entered into “to otherwise resolve and settle all disputes between them.” These included “all claims of any nature that [Doe] has against the Archdiocese…arising from any sexual abuse of [Doe] by Murphy…”

Thereafter,

The Archdiocese filed for relief under Chapter 11 of the United States Bankruptcy Code four years later. Doe filed a proof of claim…in the Archdiocese’s bankruptcy proceeding for sexual abuse inflicted on him by Murphy. The proof of claim states that Doe was sexually abused by Murphy in 1974 and details the abuse. The Archdiocese objected to Doe’s proof of claim on the basis that he participated in a mediation and executed a settlement agreement with a complete release in 2007 and moved for summary judgment.

Doe opposed the motion on the basis that he was fraudulently induced into settlement with the Archdiocese.

The bankruptcy court initially deemed the bankruptcy action a “distinct action” under § 904.085(4)(e) but then changed course and found that the exception did not apply, prompting Doe to appeal. The Seventh Circuit agreed with the bankruptcy court, concluding that

in both the bankruptcy and the mediation, the subject matter of the dispute is the Archdiocese’s responsibility for Doe’s abuse by Murphy. Doe’s proof of claim in the bankruptcy proceeding was for the sexual abuse inflicted by Murphy and detailed the abuse he suffered from Murphy. It does not mention fraudulent inducement. The mediation, which involved the same parties as the bankruptcy claim, also concerned the question of the Archdiocese’s responsibility for Murphy’s abuse of Doe. In both proceedings, Doe seeks to recover monetary damages from the Archdiocese for Murphy’s sexual abuse….Doe’s counsel also made clear at oral argument that Doe is not seeking independent damages for the alleged fraudulent inducement; the damages he seeks are only for the sexual abuse by Murphy.

-CM