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Editor: Colin Miller
Univ. of South Carolina School of Law

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Tuesday, January 22, 2008

Hotel Colorado: Court Finds That Proving Unclean Hands Is A Permissible Use Under Rule 408

In Kimpton Hotel & Restaurant Group, LLC v. Monaco, Inc., 2008 WL 140488 (D. Colo. 2008), the plaintiff sued the defendant for trademark infringement, unfair competition, and unjust enrichment based upon the defendant's use of the name "Monaco Inn," which the plaintiff allegedly had trademarked.  Meanwhile, the defendant filed petitions for trademark cancellation for all of the plaintiff's registered trademarks with the United States Patent and Trademark Office. Id.  All of this led to the plaintiff bringing a declaratory judgment against the defendant, during which the plaintiff submitted certain statements made by the defendant during pre-suit settlement negotiations. Id.  The defendant moved to strike these statements pursuant to Federal Rule of Evidence 408(a), which states that evidence of compromises, offers to compromise, and related statements are inadmissible to prove liability for, invalidity of, or amount of a claim that was disputed as to liability or amount, or to impeach through a prior inconsistent statement or contradiction.  Rule 408, however, goes on to state that evidence is admissible if offered for purposes not prohibited by 408(a).  The Rule then lists as three illustrative examples:  proving bias, negating a contention of undue delay, and proving an effort to obstruct a criminal investigation or prosecution.   

As I've noted before, however, these three illsutrative examples are non-exhaustive, and courts typically find that such settlement/compromise evidence is admissible for any purpose not specifically listed in Federal Rule of Evidence 408(a).  Thus, in the recent case, Rhoades v. Avon Products, Inc., 2007 WL 2983757 (9th Cir. 2007), the Ninth Circuit found that a settlement letter was admissible to prove the reasonable apprehension necessary to bring a declaratory judgment action.  In Kimpton, the District Court of the District of Colorado relied upon this same reasoning in finding the defendant's statements made during pre-suit settlement negotiations to be admissible. 

The district court, however, also relied upon an alternate explanation I haven't seen used before in Rule 408 jurisprudence.  Specially, the court found that the defendant's statements made during pre-suit settlement negotiations were admissible to prove unclean hands.  A quick Westlaw search reveals that the District Court for the Central District of California actually used this same rationale in its opinion last November in Cyr v. Reliance Standard Life Ins. Co., 2007 WL 4246049 (C.D. Cal. 2007), but it does not appear that any courts had previously found proving unclean hands to be a permitted purpose under Rule 408.

-CM 

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