Court Opinion

ID: 3004574
Source: CourtListenerOpinion
Date Created: 2015-09-24 23:45:45.367726+00
Date Added: 2024-06-11T11:39:15.394924
License: Public Domain

In the

     United States Court of Appeals
                  For the Seventh Circuit
                      ____________________
No. 13-3783

JOHN DOE, Claimant A-282,
                                                             Appellant,

                                  v.

ARCHDIOCESE OF MILWAUKEE,

                                                      Debtor-Appellee.
                      ____________________

          Appeal from the United States District Court for the
                    Eastern District of Wisconsin.
            No. 13-CV-00419 — Rudolph T. Randa, Judge.
                      ____________________

      ARGUED JUNE 2, 2014 — DECIDED NOVEMBER 5, 2014
                  ____________________

   Before FLAUM and WILLIAMS, Circuit Judges, and DOW,
District Judge. *

   *Of     the United States District Court for the Northern District of
Illinois, sitting by designation.
2                                                  No. 13-3783

    WILLIAMS, Circuit Judge. “John Doe” settled his sexual
abuse claims against the Archdiocese of Milwaukee for
$80,000 after participating in a voluntary mediation pro-
gram. He later filed a claim against the Archdiocese in its
bankruptcy proceedings for the same sexual abuse. Doe re-
sponded to the Archdiocese’s motion for summary judgment
by contending that his settlement was fraudulently induced.
This argument depends upon statements made during the
mediation, but Wisconsin law prohibits the admission in ju-
dicial proceedings of nearly all communications made dur-
ing mediation. Doe maintains an exception applies here,
namely that the later action is “distinct from the dispute
whose settlement is attempted through mediation.” Wis.
Stat. § 904.085(4)(e). We, however, conclude that Doe’s bank-
ruptcy action is not distinct from the dispute settled in me-
diation. The issue in both proceedings, which involved the
same parties, is the Archdiocese’s responsibility for the sexu-
al abuse Doe suffered. Doe seeks damages in both the medi-
ation and bankruptcy for the same sexual abuse; he does not
seek separate or additional damages for the alleged fraudu-
lent inducement. We conclude the exception in Wisconsin
Statute § 904.085(4)(e) does not apply, and so we affirm the
judgment of the district court.
                     I. BACKGROUND
   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 Archdio-
cese 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
No. 13-3783                                                 3

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 be-
tween them.” These included “all claims of any nature that
[Doe] has against the Archdiocese … arising from any sexual
abuse of [Doe] by Murphy …”
   The Archdiocese filed for relief under Chapter 11 of the
United States Bankruptcy Code four years later. Doe filed a
proof of claim (he is Claimant A-282) 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 Arch-
diocese 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 fraudu-
lently induced into settlement with the Archdiocese. Doe
stated in an affidavit that the Archdiocese told him during
mediation that $80,000 was the maximum amount of money
it had available to pay him, that all the other sexual abuse
survivors who signed settlement agreements were receiving
$80,000, and that it would not be fair to pay him more than
others. Doe also stated that the Archdiocese did not inform
him that it was paying priests $10,000 to $20,000 to leave the
Church and that he did not realize the extent of the Archdio-
cese’s knowledge about Murphy’s past history of abusing
children. Doe asserts in the affidavit that had he known all
4                                                   No. 13-3783

this information, he would not have agreed to settle his
claims for $80,000. Doe’s brief on appeal states that the
Archdiocese settled claims with some other survivors of
sexual abuse for amounts from $100,000 to $200,000.
    The bankruptcy court initially ruled that the bankruptcy
action and 2007 mediation were distinct disputes and that
admission of communications made during the mediation
was necessary to prevent manifest injustice. As a result, it
concluded that statements made in the mediation were ad-
missible under Wisconsin Statute § 904.085(4)(e). The Arch-
diocese then subpoenaed the mediator who presided over
Doe’s mediation session. The mediator filed a motion to
quash the subpoena, and the bankruptcy court allowed fur-
ther briefing by the parties and held a hearing. The bank-
ruptcy court reconsidered its earlier ruling and held that the
bankruptcy proceeding and mediation were not distinct dis-
putes, and, therefore that communications in the mediation
were not admissible. It granted summary judgment in favor
of the Archdiocese on Doe’s fraudulent inducement claim,
and the district court affirmed that decision. Doe appeals.
                        II. ANALYSIS
    Federal Rule of Procedure 56(a) provides that summary
judgment is appropriate if there is no genuine issue of mate-
rial fact and the moving party is entitled to judgment as a
matter of law. Fed. R. Civ. P. 56(a); Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986). That same standard applies in
bankruptcy proceedings as well. Fed. R. Bankr. P. 7056. We
review the grant of summary judgment to the Archdiocese
de novo. See In re Solis, 610 F.3d 969, 971 (7th Cir. 2010).
No. 13-3783                                                   5

    Doe maintains that the statements in his affidavit create a
genuine issue of material fact and that summary judgment
should not have been granted on his claim. The Archdiocese,
however, contends that evidence of statements made during
the mediation proceedings on which Doe relies is inadmissi-
ble under Wisconsin’s mediation privilege statute.
    This is a federal court proceeding, so the first question is
whether Wisconsin’s privilege law applies or whether feder-
al common law controls. Federal Rule of Evidence 501 pro-
vides that “in a civil case, state law governs privilege regard-
ing a claim or defense for which state law supplies the rule
of decision.” That same rule governs actions in the bank-
ruptcy court. See Fed. R. Bankr. P. 9017. Doe argues that be-
cause his case is a federal bankruptcy case, state privilege
law does not apply. But Doe’s claim in the bankruptcy pro-
ceeding is a Wisconsin state-law claim of fraudulent in-
ducement. Indeed, the only authority Doe cites in support of
his fraudulent inducement claim is Wisconsin state law. See
Appellant Br. at 10 (citing Kailin v. Armstrong, 643 N.W.2d
132, 145-46 (Wis. Ct. App. 2002)). Wisconsin law provides the
rule of decision governing Doe’s fraudulent inducement con-
tention, and because it does, Wisconsin mediation privilege
law applies. Cf. Northwestern Mem. Hosp. v. Ashcroft, 362 F.3d
923, 925 (7th Cir. 2004) (state-law privilege does not apply in
federal question suits); Mem. Hosp. for McHenry Cnty. v. Sha-
dur, 664 F.2d 1058, 1061 (7th Cir. 1981) (applying federal
common law where claim arose out of federal Sherman Act).
    Under Wisconsin law, “no oral or written communication
relating to a dispute in mediation made or presented in me-
diation by the mediator or a party is admissible in evidence
or subject to discovery or compulsory process in any judicial
6                                                   No. 13-3783

or administrative proceeding.” Wis. Stat. § 904.085(3)(a).
There are exceptions, however, including the one at issue
here, which provides:
         In an action or proceeding distinct from the dis-
     pute whose settlement is attempted through media-
     tion, 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 out-
     weigh the importance of protecting the principle of
     confidentiality in mediation proceedings generally.
Wis. Stat. § 904.085(4)(e).
    When interpreting a state statute, we apply the same
principles of statutory construction that a state court would
apply. See Karlin v. Foust, 188 F.3d 446, 457 (7th Cir. 1999).
Wisconsin courts begin their statutory interpretation by fo-
cusing on the plain language of the statute. State ex rel. Kalal
v. Circuit Court of Dane Cnty., 681 N.W.2d 110, 124 (Wis.
2004). That is because “[j]udicial deference to the policy
choices enacted into law by the legislature requires that stat-
utory interpretation focus primarily on the language of the
statute,” which is given its “common, ordinary, and accepted
meaning.” Id.
    Doe argues that a manifest injustice would result if the
statements from his mediation are not admitted. In support
he argues there was a disparity of power during the media-
tion (Doe is deaf and did not have legal counsel with him at
the mediation, although the Archdiocese says it did not ei-
ther), maintains the Archdiocese misrepresented the amount
it paid to other sexual abuse survivors in settlements and its
No. 13-3783                                                  7

ability to pay him, and contends the Archdiocese failed to
disclose information to him regarding Murphy’s history of
abusing children. But as Doe recognizes, the text of §
904.085(4)(e) makes clear that the “manifest injustice” in-
quiry only arises if the proceeding is one that is “distinct
from the dispute” whose settlement was attempted through
mediation. Wisconsin does not allow the admission of medi-
ation communications solely on the basis that manifest injus-
tice would result were they not admitted. Rather, the dis-
putes must be distinct. The threshold question here, then, is
whether the claim Doe asserts in bankruptcy is an action or
proceeding distinct from the dispute that was settled in the
2007 mediation.
    There is little guidance addressing Wisconsin’s “distinct
from the dispute” requirement. The only Wisconsin appel-
late court to touch on the issue came in an unpublished deci-
sion, In re Paternity of Emily C.B., 2004 WL 240227 (Wis. Ct.
App. Feb. 11, 2004) (per curiam) (unpublished). There the
court allowed a tape of a civil litigation mediation session to
be admitted in a custody dispute to shed light on one parent
as being quick to anger, id. at *3, although the court did not
discuss explicitly whether the disputes were distinct. And
Wisconsin’s law is unique; no other state has a “distinct from
the dispute” threshold in its mediation privilege statute.
    We turn then to the language of the statute: “an action or
proceeding distinct from the dispute whose settlement is at-
tempted through mediation.” Wis. Stat. § 904.085(4)(e). A
typical dictionary definition defines “dispute” to mean a
“verbal controversy; a debate” or a “disagreement or quar-
rel.” See https://ahdictionary.com/wor/search.html?q=dispute
(last visited Oct. 30, 2014); In re Commitment of Curiel, 597
8                                                   No. 13-3783

N.W.2d 697, 405-07 (Wis. 1999) (turning to American Herit-
age Dictionary to help ascertain plain and ordinary meaning
of term in statute). Black’s Law Dictionary defines “dispute”
as a “conflict or controversy, esp. one that has given rise to a
particular lawsuit.” (9th ed. 2009). Of course dictionary defi-
nitions are not the end-all of statutory interpretation and
should be used with caution, United States v. Costello, 666
F.3d 1040, 1043-44 (7th Cir. 2012), but we find the definitions
provide some assistance here in ascertaining the meaning of
the statute, see Rouse v. Theda Clark Med. Ctr., Inc., 735 N.W.2d
30, 37 (Wis. 2007) (using dictionary definition to help con-
strue meaning of word in statute). Absent from the statute
and the dictionary definitions of “dispute” is any reference
to “claim,” a term Doe seems to wish to import into the stat-
ute (though even that might not help him).
    In contending that the disputes in mediation and bank-
ruptcy are distinct, Doe emphasizes that the elements of
fraudulent inducement are different from the elements of
fraud, negligence, or sexual battery. See Kailin, 643 N.W.2d at
145-46 (fraudulent inducement); Tietsworth v. Harley-
Davidson, Inc., 677 N.W.2d 233, 252 n.38 (Wis. 2004) (fraud);
Brandenburg v. Briarwood Forestry Servs., LLC, 847 N.W.2d 395,
397 (Wis. 2014) (negligence); Vandervelden v. Victoria, 502
N.W.2d 276, 278 (Wis. Ct. App. 1993) (battery). Doe also ar-
gues that the two proceedings were based on different con-
duct. In the mediation, the underlying conduct was the alle-
gation that the Archdiocese allowed Murphy to work with
children. Doe maintains that in the bankruptcy, the relevant
conduct is the Archdiocese’s alleged misrepresentations and
non-disclosures during the mediation session.
No. 13-3783                                                 9

    But 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 bank-
ruptcy 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 responsibil-
ity for Murphy’s abuse of Doe. In both proceedings, Doe
seeks to recover monetary damages from the Archdiocese for
Murphy’s sexual abuse. See Appellant Br. at 12 (“Although
the bankruptcy claim involves the sexual abuse John Doe
experienced as a child, the underlying dispute is how the
Archdiocese fraudulently induced him into settlement in
2007 …”). 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.
    Finding the disputes not to be distinct is also consistent
with the Wisconsin legislature’s express purpose in enacting
its mediation privilege statute. The statute provides that
“[t]he purpose of this section is to encourage the candor and
cooperation of disputing parties, to the end that disputes
may be quickly, fairly, and voluntarily settled.” Wis. Stat.
§ 904.085(1); see also Dyer v. Blackhawk Leather LLC, 758
N.W.2d 167, 176 (Wis. Ct. App. 2008). The purpose of the
mediation was to resolve Doe’s claims against the Archdio-
cese relating to his abuse by Murphy, and Doe signed a
complete release stating that the settlement resolved all dis-
putes with the Archdiocese. A result that would undo that
settlement and would allow Doe, years after the mediation
settlement, the possibility of receiving more money from the
10                                                  No. 13-3783

Archdiocese for the same abuse could discourage parties
from quickly resolving their disputes through mediation.
    Wisconsin’s mediation privilege statute provides a party
to a mediated agreement with contractual remedies based
upon the written agreement. See Wis. Stat. § 905.083(4)(a)
(providing that § 905.085(3) “does not apply to any written
agreement, stipulation or settlement made between 2 or
more parties during or pursuant to mediation”). The Wis-
consin legislature could have chosen to incorporate more ex-
ceptions into its statute. The Uniform Mediation Act, drafted
after Wisconsin adopted § 904.085 in 1993, for example, con-
tains an express exception allowing a party to admit evi-
dence of mediation communications for the purpose of
“prov[ing] a claim to rescind or reform or a defense to avoid
liability on a contract arising out of the mediation.” See Uni-
form Mediation Act, The National Conference of Commis-
sioners on Uniform State Laws, § 6(b)(2), available at
http://www.uniformlaws.org/Act.aspx?title=Mediation Act
(last visited Oct. 30, 2014). Although one might contend it is
unjust that a person like Doe cannot recover if he was in fact
fraudulently induced into signing a settlement agreement,
our task is to apply the Wisconsin statute as it is written. Cf.
Rojas v. Superior Court, 93 P.3d 260, 265 (Cal. 2004) (holding
California mediation privilege was not subject to “good
cause” exception because only exceptions to mediation con-
fidentiality were those expressly provided in statute); Prince-
ton Ins. Co. v. Vergano, 883 A.2d 44, 64 (Del. Ch. 2005) (declin-
ing to allow mediator testimony where plaintiff maintained
mediation settlement induced by fraud, rejecting argument
that the need to remedy a possible fraud outweighed public
policy interest served by enforcing mediation agreements
calling for confidentiality). The Wisconsin legislature bal-
No. 13-3783                                                11

anced competing interests to further the statute’s goal of
“quickly, fairly, and voluntarily” resolving disputes, Wis.
Stat. § 904.085(1), when it crafted § 904.085, and we conclude
the statute does not allow the admission of communications
made during the mediation here because the disputes in
mediation and in Doe’s bankruptcy proof of claim are not
distinct. As a result, summary judgment in the Archdiocese’s
favor was proper, as was the resulting order disallowing
Doe’s claim.
                    III. CONCLUSION
   The judgment of the district court is AFFIRMED.