In re Archdiocese of Milwaukee

UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF WISCONSINMar 4, 2013
Case No. 11-20059-svk (Bankr. E.D. Wis. Mar. 4, 2013)

Case No. 11-20059-svk

03-04-2013

In re Archdiocese of Milwaukee, Debtor.


Chapter 11


MEMORANDUM DECISION ON RECONSIDERATION OF

MEDIATION COMMUNICATIONS ORDER

The Court has reconsidered its Order entered November 8, 2012 authorizing Claimant A-282 to introduce communications made during a confidential pre-bankruptcy mediation session. This Memorandum Decision will explain the Court's rationale.

On April 24, 2012, the Archdiocese of Milwaukee (the "Debtor") objected to Claimant A-282's proof of claim and filed a motion for summary judgment in support of the objection. The claim objection was based on the settlement agreement and complete release that the Claimant signed after participating in a mediation program established by the Debtor for victims of clergy sexual abuse. In response to the claim objection, the Claimant alleged that the Debtor fraudulently induced him into the settlement by statements made during the mediation. On July 2, 2012, the Claimant filed a motion seeing permission to introduce the allegedly fraudulent communications in response to the Debtor's motion for summary judgment. The Claimant argued that introduction of the communications was appropriate under the Wisconsin mediation confidentiality statute because manifest injustice would occur if the Claimant could not introduce the communications. The Debtor opposed the introduction of the communications.

Along with all the pending issues in the case, the briefing on the mediation communications motion was suspended while the parties in interest attempted a global resolution of the Debtor's Chapter 11 case. When that attempt failed, the Court rescheduled the mediation communications briefing, and on November 8, 2012, the Court issued an "Order on Claimant A-282's Motion to Introduce Communications from Mediation" (the "Mediation Order"). The Mediation Order granted Claimant A-282's motion and indicated that the Court would consider materials Claimant A-282 had filed under seal in ruling on the Debtor's motion for summary judgment.

Subsequently, the Debtor subpoenaed the Mediator to appear for a deposition, prompting the Mediator to file a motion to quash. The Mediator argued that strong policy reasons and the language of Wis. Stat. § 904.085 prohibit compelling mediators to give depositions. In response, the Debtor sought enforcement of the subpoena or, alternatively, reconsideration of the Mediation Order. The Mediator's reply focused on quashing the subpoena while the Claimant's response was targeted at denying the motion to reconsider.

After considering the arguments of the parties, and in order to expedite the efficient resolution of this important issue, the Court has decided to reconsider its Mediation Order. The Court is authorized to do so by Bankruptcy Rules 9014(c) and 7054 incorporating Federal Rule of Civil Procedure 54(b) which provides in pertinent part: "[A]ny order . . . that adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties does not end the action as to any of the claims or parties and may be revised at any time before the entry of a judgment adjudicating all the claims and all the parties' rights and liabilities."

The Debtor and the Claimant signed a Clergy Sexual Abuse Mediation System Agreement to Mediate (the "Agreement") containing a confidentiality clause. The clause states that the "mediation process shall be governed by Wis. Stat. § 904.085." The Agreement goes on to provide:

The parties shall maintain the confidentiality of the mediation and shall not rely on or introduce as evidence in any subsequent proceeding, whether that proceeding is judicial, administrative, or arbitral, any of the following:
A. views expressed or suggestions made by another party with respect to a possible settlement of the dispute;
B. admissions made by another party in the course of the mediation proceedings;
C. proposals made or views expressed by the mediator, or;
D. the fact that another party had or had not indicated willingness to accept a proposal for settlement made by the mediator. The mediator will destroy his or her notes and/or written materials at the conclusion of the mediation.
The confidential nature of the mediation encounter is to ensure that all participants can be as actively involved and candid as possible. The confidentiality of the sessions does not bind the victim/survivor from sharing reflections on the process or the contents of any final resolution agreement.


Thus, along with confirming that admissions and views stated during the mediation would be confidential, the parties expressly agreed that the admissibility of their mediation communications would be governed by § 904.085 of the Wisconsin Statutes, which provides in relevant part:

(3) INADMISSIBILITY.
(a) 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. . . .
. . .
(4) EXCEPTIONS.
. . .
(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 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.


In the Mediation Order, the Court applied § 4(e) of the statute and rejected the Debtor's argument that the mediation session and the claim objection did not involve "distinct disputes." The Court then determined that a manifest injustice would ensue if Claimant A-282 could not introduce communications from the mediation. Upon further consideration, the Court concludes that it erred when it found that the proof of claim objection and the mediation involve distinct disputes. Once that conclusion is corrected, the statute does not permit consideration of the "manifest injustice" test.

Previously, the Court focused on the fact that the mediation occurred when no litigation was pending between the Debtor and the Claimant, thus reading into the statute a requirement for distinct cases, not distinct disputes. The Mediation Order considered that the Claimant filed his claim in response to the Debtor's notice of the claims bar date for sexual abuse claimants, again emphasizing the nature of the proceeding, not the underlying dispute. The first rule of statutory construction is to give the plain language of the statute its ordinary and common meaning. Burbank Grease Services, LLC v. Sokolowski, 2006 WI 103, ¶ 14, 294 Wis. 2d. 274, 717 N.W.2d 781. The plain language of the statute states that communications are only admissible in "an action or proceeding distinct from the dispute" that was mediated.

Here, the subject of the mediation was the Debtor's alleged responsibility for the reprehensible conduct of 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 A-282 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.

Section 904.805 is a unique Wisconsin statute, and there is precious little guidance from Wisconsin courts on the admissibility of evidence under § 904.805(4)(e). An unpublished opinion from the court of appeals in David B. v. Stephanie C.S. (In re Paternity of Emily C.B.), 2004 WI App 68, 677 N.W.2d 732, provides an example of a "distinct dispute." In a custody battle, the trial court admitted a taped mediation session into evidence. The mediation session occurred during civil litigation over a car between the father seeking custody and another daughter who was not involved in the custody dispute. Id. at ¶ 9. The tape was introduced in the custody dispute as evidence of the father's temper. Id. at ¶ 10. The father objected to admission of the tape, arguing the inadmissibility of mediation communications under Wis. Stat. § 904.085. The court of appeals upheld the admission of the tape under the manifest injustice test of § 904.085(4)(e). Id. The court noted that the litigation between the father and older daughter involved a car, an obviously distinct dispute from the custody litigation involving another child. Unlike in Emily C.B, the parties here are the same: the Debtor and Claimant A-282. Unlike in Emily C.B., the dispute here is the same: the Debtor's alleged responsibility for the heinous acts committed by Lawrence Murphy. Therefore, unlike in Emily C.B., there is no distinct dispute as contemplated by Wis. Stat. § 904.085(4)(e).

Having now determined that the proof of claim objection and the subject of the mediation do not represent distinct disputes, the statute does not permit the Court to reach the issue of whether excluding the mediation communications results in manifest injustice. Thus, the Court will grant the Debtor's motion for reconsideration of the Mediation Order, and will not allow any statements made in the mediation to be considered in deciding the claim objection.

The Court sincerely regrets that this change of direction likely will cause Claimant A-282 consternation and anguish. With the exclusion of the mediation communications, the settlement and release results in disallowance of his proof of claim. But the Order disallowing Claimant A-282's claim will be immediately appealable. If the district court reverses and allows consideration of the mediation communications, then the Claimant can move forward to defend his claim using that evidence. However, if this Court's decision is affirmed, then the Claimant will not have endured the emotional turmoil of litigating the claim objection, only to see the result overturned on appeal because the Court's Mediation Order was reversed. The Court will issue an Order vacating the prior Order and disallowing Claimant A-282's claim.

By the Court:

_______________


Susan V. Kelley


U.S. Bankruptcy Judge