Seventh Circuit Interprets Wisconsin's Mediation Privilege

08 December 2014 Wisconsin Appellate Law Blog

When Wisconsin’s legislature enacted the state’s so-called “mediation privilege” in Wis. Stat. § 904.085, it expressly sought, in subsection (1) of that provision, “to encourage the candor and cooperation of disputing parties, to the end that disputes may be quickly, fairly, and voluntarily settled.” The privilege itself provides that “no oral or written communication relating to a dispute in mediation” is admissible in evidence or discoverable in any judicial or administrative proceeding. Wis. Stat. § 904.085(3)(a).

Exceptions to the privilege exist, but they are few in number and relatively narrow—a point driven home in the Seventh Circuit’s recent decision in Doe v. Archdiocese of Milwaukee, No. 13-3783 (7th Cir. Nov. 5, 2014), authored by Judge Ann Claire Williams. 

Doe was a victim of sexual abuse in 1974 while he attended St. John’s School for the Deaf in Milwaukee, and in 2007 he participated in the Archdiocese’s voluntary mediation program, reaching a settlement with the Church for $80,000 to resolve his claims of fraud, negligence, and sexual battery.

That’s where the story begins. Four years later, the Archdiocese filed for bankruptcy under Chapter 11, and Doe returned, filing a proof of claim based on the same allegations of sexual abuse that were at issue in the 2007 mediation. Only now he alleged that his settlement had been fraudulently induced. Had he known that the Archdiocese knew more about his perpetrator’s past history, and had he known that the Church was settling claims similar to his for $100,000 to $200,000, he would not have settled for the amount that he did. Or so his story went.

All that might or might not have made out a claim for fraudulent inducement under Wisconsin law, but the deeper problem with Doe’s case was that he could not prove that his claim in bankruptcy was “‘distinct from the dispute’ whose settlement was attempted through mediation.” Slip op. 7. Doe needed to prove that distinction so that he could put into evidence what transpired during his mediation; § 904.085(4)(e), the mediation privilege’s exception for a “manifest injustice,” allows for the use of otherwise privileged information only in “an action or proceeding distinct from the dispute whose settlement is attempted through mediation.” The court turned to the dictionary and to Wisconsin’s case law to define “dispute” as a “‘verbal controversy; a debate’ or a ‘disagreement or quarrel’” and as a “‘conflict or controversy, esp. one that has given rise to a particular lawsuit.’” Slip op. 7-8.

But, both in the bankruptcy and in the mediation, the subject matter of Doe’s dispute was “the Archdiocese’s responsibility for Doe’s abuse.” Id. The Seventh Circuit declined to adopt Doe’s reading of the exception, which treated “claim” as a synonym for “dispute” and thus would have required the court to analyze the elements of fraudulent inducement vis-à-vis the elements of fraud, negligence, and sexual battery—a kinder standard for Doe, but one that was not the law. A further issue for Doe was that he did not seek independent damages in his proof of claim for fraudulent inducement. He sought damages only for the sexual abuse.

The Seventh Circuit affirmed Judge Randa’s earlier dismissal of the case in the Eastern District of Wisconsin. It noted that this result might be a harsh one, but it was one that it thought justified by the policy behind the mediation privilege.

This blog is made available by Foley & Lardner LLP (“Foley” or “the Firm”) for informational purposes only. It is not meant to convey the Firm’s legal position on behalf of any client, nor is it intended to convey specific legal advice. Any opinions expressed in this article do not necessarily reflect the views of Foley & Lardner LLP, its partners, or its clients. Accordingly, do not act upon this information without seeking counsel from a licensed attorney. This blog is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Communicating with Foley through this website by email, blog post, or otherwise, does not create an attorney-client relationship for any legal matter. Therefore, any communication or material you transmit to Foley through this blog, whether by email, blog post or any other manner, will not be treated as confidential or proprietary. The information on this blog is published “AS IS” and is not guaranteed to be complete, accurate, and or up-to-date. Foley makes no representations or warranties of any kind, express or implied, as to the operation or content of the site. Foley expressly disclaims all other guarantees, warranties, conditions and representations of any kind, either express or implied, whether arising under any statute, law, commercial use or otherwise, including implied warranties of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Foley or any of its partners, officers, employees, agents or affiliates be liable, directly or indirectly, under any theory of law (contract, tort, negligence or otherwise), to you or anyone else, for any claims, losses or damages, direct, indirect special, incidental, punitive or consequential, resulting from or occasioned by the creation, use of or reliance on this site (including information and other content) or any third party websites or the information, resources or material accessed through any such websites. In some jurisdictions, the contents of this blog may be considered Attorney Advertising. If applicable, please note that prior results do not guarantee a similar outcome. Photographs are for dramatization purposes only and may include models. Likenesses do not necessarily imply current client, partnership or employee status.

Related Services