Saturday, March 1, 2008
Back in 1987, Jonathan E. Smith, an animal trainer at Sea World, was attacked by two killer whales at a Sea World in San Diego. One of the members of the audience at the Sea World whale show had a camcorder and recorded a five minute video of the attack. The man later visited Smith in the hospital, gave him a copy of the video, and assigned him the copyright. See Smith v. NBC Universal, 2008 WL 483604 (S.D.N.Y. 2008). Smith subsequently registered the video with the U.S. Copyright Office. See id. Smith thereafter licensed the video for broadcast on two occasions: (1) in 1987, for $300, he licensed the video to Channel 39, a local ABC affiliate in San Diego, which broadcast the attack on-air; and (2) in 1988, for $500, he licensed the video to the Fox Broadcasting Company program A Current Affair and granted an interview in connection with the program.
Thereafter, in 1994, MG Perin distributed a segment of the television series "The Extraordinary" containing several portions of the Fox interview and 37 seconds of the video. Consequently, Smith filed a copyright lawsuit, and the case was settled in September 1996 for $40,000, with Fox and MG Perin agreeing never to duplicate or distribute the video again without a license from Smith. MG Perrin, however, just couldn't resist the temptation to keep airing the video, leading to re-airings in 1997 and 1999 and settlements in the amounts of $100,000 and $20,000. See id.
In August 2003, MG Perin strayed from its agreement again, by accepting $200,000 from Universal Television Networks to license 10 segments of "The Extraordinary" including one containing portions of Smith's video. Smith thus sued NBC Universal, MG Perrin, and several other defendants for copyright infringement. See id. In a pre-trial motion in limine, the defendants, inter alia, sought to prevent Smith from informing the jury of the values of the settlement payments pursuant to Federal Rule of Evidence 408, "which prohibits the admission of settlements to demonstrate the value or amount of the underlying claim." Id. The District Court for the Southern District of New York, however, rejected this portion of the motion, finding that the phrase “the claim” in Federal Rule of Evidence 408 "refers only to the claim whose amount is in dispute. Facially, the Rule does not bar the introduction of a settlement in any action except the one that was resolved by that settlement." Id.
With due respect to the court, this decision is directly contradictory to the legislative history behind Rule 408. As I've written before, in 1972, when Rule 408 was first proposed, the Advisory Committee noted: "While the rule is ordinarily phrased in terms of offers of compromise, it is apparent that a similar attitude must be taken with respect to completed compromises when offered against a party thereto. This latter situation will not, of course, ordinarily occur except when a party to the present litigation has compromised with a third person." In 2006, Rule 408 was amended, and the Advisory Committee noted that the amendment it made to Rule 408 "makes clear that Rule 408 excludes compromise evidence even when a party seeks to admit its own settlement offer or statements made in settlement negotiations." This is because Rule 408 protects both parties to the negotiation, so one party to the negotiations cannot unilaterally waive the protections of Rule 408.
Thus, the 1972 Note tells us that Rule 408 covers "third party" situations like the fact pattern in Smith, and the 2006 Note tells us that Rule 408 is applicable in this "third party" situation, regardless of whether the party to the settlement negotiations is offering the evidence or having the evidence offered against him. The court's decision in Smith is thus an erroneous application of Rule 408.