14 - Compromises & Offers 408 Flashcards
408 Intro
- 408 excludes evidence of compromises and offers to compromise when offered to prove or disprove the validity or amount of a disputed claim, or to impeach by a prior inconsistent statement or a contradiction.
- If the evidence is offered for some other purpose, however, the rule does not apply.
- 408 also extends to statements made during settlement negotiations. A different provision, Rule 410, governs the admissibility of offers to plead guilty or “no contest” in criminal cases.
The trial court decides 408 admissibility questions pursuant to Rule 104(a).2
Rationale
- Offers to settle lawsuits would quickly disappear if the other party could reject the offer but then use it as evidence. In the absence of a provision such as Rule 408, the offer would be admissible as a statement (“admission”) of a party-opponent. As the drafters commented, it is the “promotion of the public policy favoring the compromise and settlement of disputes” that underlies Rule 408.4
- Relevancy - “The evidence is irrelevant, since the offer may be motivated by a desire for peace rather than from any concession of weakness of position. The validity of this position will vary as the amount of the offer varies in relation to the size of the claim and may also be influenced by other circumstances.”5 As this last sentence suggests, the relevancy argument would not justify a blanket rule such as Rule 408. In a million-dollar lawsuit, a settlement offer of $12,000 may be an attempt to “buy peace” because it would cost far more to hire attorneys. However, an $800,000 offer suggests a real concern that the suit has merit
Scope of Rule 408
Rule 408(a) applies to completed compromises as well as to offers of compromise, covering disputes over the AMOUNT of a claim as well as its validity. Some, but not all, courts have extended the rule to cover the mitigation of damages. The rule applies even when the evidence is tendered by the person making the offer; the rule explicitly states “on behalf of any party.” The rule’s “protection extends to legal conclusions, factual statements, internal memoranda, and the work of non-lawyers and lawyers alike so long as the communications were ‘intended to be part of . . . negotiations toward compromise.’”8 Courts have disagreed about the term “claim.”
Inconsistent statements or conduct - Rule 408 was amended in 2006 to explicitly exclude impeachment by prior inconsistent statement or conduct. “Such broad impeachment would tend to swallow the exclusionary rule and would impair the public policy of promoting settlements.”10
Criminal cases - It is not uncommon for parallel civil and criminal suits to result from the same conduct. Since a different provision, Rule 410, governs the admissibility of offers to plead guilty or no contest in criminal cases, one could argue that Rule 408 does not apply to criminal litigation.11 Rule 408 was amended in 2006 to clarify its application in criminal cases, a topic discussed in the next section.12
Statements
- 408(a) excludes evidence of conduct or statements made during compromise negotiations.
- The rule changes the common law, under which “independent statements of fact” made during settlement negotiations were admissible. The drafters rejected the common law position because admitting statements made during negotiations has the effect of either inhibiting the negotiations or trapping the unwary negotiator (e.g., forcing negotiators to preface offers with words such as “hypothetically,” “without prejudice,” or “assuming”).
- In short, settlement negotiations involve communications, and the common law rule needlessly dampened or interrupted communications.14 In addition, such a rule raised controversies as to whether the proffered evidence constituted an independent statement of fact, or was rather part of the offer.
- Criminal cases - Statements or conduct indicating fault made during settlement negotiations regarding a civil dispute with a government regulatory, investigative, or enforcement agency may be admissible in subsequent criminal cases. Nevertheless, Rule 403 applies in this context.15 Moreover, an “individual can seek to protect against subsequent disclosure through negotiation and agreement with the civil regulator or an attorney for the government.”16 In contrast to statements, an offer or acceptance of a settlement with a government agency remains inadmissible.1
- 408(a) draws a “distinction between civil disputes involving the government and civil disputes involving private parties.”18 Statements made in negotiations between private parties are inadmissible in criminal cases. According to the drafters: “When private parties enter into compromise negotiations they cannot protect against the subsequent use of statements in criminal cases by way of private ordering. The inability to guarantee protection against subsequent use could lead to parties refusing to admit fault, even if by doing so they could favorably settle the private matter. Such a chill on settlement negotiations would be contrary to the policy of Rule 408.”19 Some states reject this position: “When weighed directly against the public interest in the settlement of civil suits, the public interest in the disclosure and prosecution of crimes is certainly greater. Encouraging settlement of a civil matter surely ‘does not justify excluding probative and otherwise admissible evidence in criminal prosecutions.’”20 One such case involved a murder prosecution.21
“Dispute” Requirement
408 applies only if the claim or its amount is disputed. If there is no dispute, Rule 408 does not apply because the policy justification for the rule is absent.
- Ex A owes B $5,000, and A does not dispute this debt. However, A tells B that it will cost her $2,000 in litigation expenses to collect the $5,000 in a lawsuit. Therefore, A offers B $3,000. This offer smacks more of a holdup than a good faith settlement, and the policies underlying 408 “do not come into play when the effort is to induce a creditor to settle an admittedly due amount for a lesser sum.”22
Because statements made prior to the existence of a dispute are not covered by the rule, it is critical to identify the TIME at which a dispute arose.
- Ex. Suppose A drives his automobile into B’s car. If A immediately approached B and said, “It was my fault. I will pay for everything,” there is no dispute; the statements are admissible. On the other hand, if A yells, “It’s your fault! Where did you ever get a license?” and B responds, “I beg to differ.” Now there is a dispute, and if they agree to split the costs, that agreement and any related statements are inadmissible. Note that litigation or the threat of litigation is not required, only an “actual dispute.”24
Offer to Compromise
- Rule 408 covers only statements made in an attempt to compromise. But, as the Second Circuit has noted, “It is often difficult to determine whether an offer is made ‘in compromising or attempting to compromise a claim.’”
- The timing of both the offer and the existence of a disputed claim are relevant to the determination.
- Courts have drawn distinctions “between letters containing clear settlement offers and letters containing near-term demands for immediate compliance alongside promises of a possible lawsuit.”26 Similarly, an offer of severance pay conditioned on waiver of an age-discrimination claim made contemporaneous with discharge was not protected by Rule 408.27 In contrast, where a party is represented by counsel, threatens litigation, and has initiated the first administrative steps in that litigation, an offer made between attorneys will be presumed to be an offer within the scope of Rule 408.28
Third-Party Compromises
- Settlements between a litigant and a third party are excluded if offered to prove liability for or invalidity of a claim or its amount.
Ex. assume A’s automobile hits B’s car, in which C is a passenger. A settles with C but decides to defend against B. B wants to introduce the settlement with C. Not permitted. The policy of promoting settlements (here with C, the passenger) is operative.
Plaintiff, as well as defendant, third-party settlements are covered by the rule,29 as are settlements that favor a party. The Fifth Circuit stated: While a principal purpose of Rule 408 is to encourage settlements by preventing evidence of a settlement (or its amount) from being used against a litigant who was involved in a settlement, the rule is not limited by its terms to such a situation. Even where the evidence offered favors the settling party and is objected to by a party not involved in the settlement, Rule 408 bars the admission of such evidence unless it is admissible for a purpose other than “to prove liability for or invalidity of the claim or its amount.”
Admissibility for Other Purposes
- Rule 408 applies only if evidence of compromise is offered to prove or disprove the validity or amount of a claim, or to impeach by a prior inconsistent statement or a contradiction. If the evidence is offered for some other purpose, the rule does not apply.
- The list of other purposes in Rule 408(b) — proving bias, negating a contention of undue delay,31 or proving an effort to obstruct justice — is not exhaustive; such evidence may be offered for any other purpose.
- Admissibility is NOT automatic; the trial court must still apply Rules 401 to 403.32 If evidence of settlement is introduced for another purpose, a limiting instruction is required upon request of a party.33
Admissibility for Other Purposes -
A. Bias
B. Obstruction of Justice
- Evidence of a compromise, or an offer to compromise, is also admissible if proffered to prove obstruction of a criminal investigation or prosecution. An attorney unfamiliar with criminal litigation may fall into this trap. Sometimes the same conduct may result in parallel litigation, i.e., both criminal and civil suits — for example, a drunk-driving accident that has caused property damage. Although there is nothing improper in attempting to settle the civil suit, care must be exercised in this context. If the damage amounts to $5,000 and you offer $6,000, hoping that the criminal case “disappears” with the civil case, there may be a problem. “An effort to ‘buy off’ the prosecution or a prosecuting witness in a criminal case is not within the policy of the rule of exclusion.”37
- Plea negotiations in criminal cases involve the prosecutor as the representative of the state; the civil plaintiff is not a party to the criminal prosecution (perhaps only a witness) and cannot settle a criminal matter. The prudent practice is to inform the prosecutor of attempts to settle a related civil suit.
Discovery
As originally enacted, Rule 408 provided that evidence otherwise discoverable need not be excluded merely because it was presented during compromise negotiations. The Senate added this provision so attorneys would not attempt to “immunize” documents from discovery by disclosing them in settlement negotiations.38 A 2006 amendment deleted this provision because it was superfluous.39
Settlement Privilege
The Sixth Circuit recognized a privilege that would shield negotiations from third-party discovery.40 Other courts, however, have rejected such a privilege: “Adopting a settlement privilege would require us to go further than Congress thought necessary to promote the public good of settlement, or in other words, to strike the balance differently from the one Congress has already adopted.”41
