Doe v. Archdiocese of Milwaukee

Filing 11

ORDER DISMISSING CASE signed by Judge Rudolph T. Randa on 10/22/2013. The Bankruptcy Court's order disallowing Claimant A-282's claim is AFFIRMED. (cc: all counsel)(cb)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
In re Archdiocese of Milwaukee,
Debtor.

Bankruptcy Case No. 11-20059-SVK

JOHN DOE, Claimant A-282,
Appellant,
-vs-

Case No. 13-C-419

ARCHDIOCESE OF MILWAUKEE,
Appellee.
DECISION AND ORDER

The appellant, Claimant A-282, settled his sexual abuse claims against the
Archdiocese of Milwaukee for $80,000 after participating in the Archdiocese‟s
voluntary mediation program. Notwithstanding this settlement, A-282 filed a claim
against the Archdiocese in the underlying bankruptcy proceedings, contending that his
settlement agreement was fraudulently induced.

The bankruptcy court ultimately

granted the Archdiocese‟s motion for summary judgment and enforced the release in
the settlement agreement. The Court can exercise jurisdiction over this appeal because
the bankruptcy court‟s decision was a final order with respect to A-282‟s claim. 28
U.S.C. § 158(a); Matter of Forty-Eight Insulations, Inc., 115 F.3d 1294, 1299 (7th Cir.

1997) (“Under § 158, [courts] treat as final those orders that ultimately determine a
creditor‟s position in the bankruptcy proceeding, even though the administration of the
debtor‟s estate continues”).
A-282‟s claim hinges on the admissibility of mediation communications. In
Wisconsin, “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.” Wis. Stat. § 904.085(3). One exception is for an action that is “distinct
from the dispute whose settlement is attempted through mediation . . .”

§

904.085(4)(e). In that instance, 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.” Id.
The bankruptcy court initially held that the “Debtor‟s objection to this proof of
claim in this formal federal bankruptcy case is a distinct dispute from the mediation of
a claim for abuse under a voluntary program instituted by the Debtor when there was
no state or federal court case pending.” November 8, 2012 Order on Claimant A-282‟s
Motion to Introduce Communications From Mediation, at 3, Doc. 1059.

On

reconsideration, the bankruptcy court reversed itself and held that the bankruptcy
dispute was not distinct from the dispute in mediation: “Here, the subject of the
mediation was the Debtor‟s alleged responsibility for the reprehensible conduct of
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Father Lawrence Murphy, who served at St. John‟s School for the Deaf, and abused
deaf children, including the Claimant. When the Debtor filed bankruptcy, Claimant A282 filed a proof of claim detailing the abuse he suffered at Murphy‟s hand. The
subject matter of the dispute – abuse by Murphy – is the same in the mediation and the
proof of claim.”

March 4, 2013 Memorandum Decision on Reconsideration of

Mediation Communications Order, at 4, Doc. 1559.
As an initial matter, A-282 argues that Wisconsin‟s mediation privilege is
trumped by the Federal Rules of Evidence. To the contrary, Rule 501 provides that “in
a civil case, state law governs privilege regarding a claim or defense for which state
law supplies the rule of decision.” Wisconsin law “supplies the rule of decision” for
the appellant‟s fraudulent inducement claim. Bankruptcy courts routinely apply state
law in this context. See, e.g., In re Logistics Info. Sys., Inc., 432 B.R. 1, 8-9 (D. Mass.
2010) (“Massachusetts law „supplies the rule of decision‟ as to the fraudulent
conveyance claim. Because the mediation statute is fairly understood as creating an
evidentiary privilege, the bankruptcy court did not err in excluding the settlement”).
As to the proper interpretation of the statute, A-282 argues that his claim for
fraudulent inducement is distinct from the claims that were mediated. It is true, for
example, that claims for battery and negligence have different elements of proof than a
claim for fraudulent inducement, but the statute uses the term “dispute,” not “claim.”
§ 908.085(4)(e) (“In an action or proceeding distinct from the dispute whose settlement
is attempted through mediation, the court may admit evidence otherwise barred by this
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section . . .”) (emphasis added). Here, the claims may be different, but the dispute
regarding the extent of the Archdiocese‟s liability is the same. Obviously, the entire
purpose of the mediation was to settle A-282‟s claims against the Archdiocese as they
relate to being abused by Father Murphy. Now, A-282 seeks to undo that settlement
so he can extract more money from the Archdiocese for being abused by Father
Murphy. This violates the express purpose of the statute. Professor Eva M. Soeka,
who chaired the committee that drafted § 908.085, explains as follows:

“if a

proponent‟s use of otherwise privileged evidence of the mediation communications
were to be used to invalidate a written settlement agreement made pursuant to the
mediation, it would unquestionably encompass the same underlying „dispute‟ and
therefore not qualify for the exception in subpart 4(e).” Soeka Affidavit, ¶ 13, ECF
No. 3-5 at 102. So it is here.
The order disallowing A-282‟s claim is AFFIRMED.
Dated at Milwaukee, Wisconsin, this 22nd day of October, 2013.
BY THE COURT:

__________________________
HON. RUDOLPH T. RANDA
U.S. District Judge

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