Wednesday, November 4, 2009
Steak Umm is a company that manufactures, advertises, and sells Steak Umm steak sandwich meat and hamburgers as part of frozen sandwich food kits (which I used to have when I was a kid but which I haven't had in years). It is also the owner of United States Registration Numbers 1,033,176 (“176”); 1,116,446 (“446”); and 2,375,933 (“933”) for the marks "STEAK-UMM," which were issued in 1976 for steak food products, 1979 for rolls, and 2000 for frozen sandwich kits, respectively. Meanwhile, Steak 'Em Up is a Pennsylvania corporation with its principal place of business, a restaurant, at 2600 South 11th Street in Philadelphia. Steak Umm has sued Steak 'Em Up, claiming that by using terms colorably similar to Steak Umm's marks, including "steak ‘em" or "steak ‘em up," Steak 'Em Up is infringing Steak Umm's marks. So, who will win the action? Who knows, but the case has already produced an interesting evidentiary ruling.
In Steak Umm Co., LLC v. Steak 'Em Up, Inc., 2009 WL 3540786 (E.D. Pa. 2009) Steak Umm made references to settlement negotiations between itself and Steak 'Em Up, and Steak 'Em Up moved to strike those references, claiming that they were inadmissible under Federal Rule of Evidence 408, which provides:
(a) Prohibited uses.--Evidence of the following is not admissible on behalf of any party, when offered to prove liability for, invalidity of, or amount of a claim that was disputed as to validity or amount, or to impeach through a prior inconsistent statement or contradiction:
(1) furnishing or offering or promising to furnish--or accepting or offering or promising to accept--a valuable consideration in compromising or attempting to compromise the claim; and
(2) conduct or statements made in compromise negotiations regarding the claim, except when offered in a criminal case and the negotiations related to a claim by a public office or agency in the exercise of regulatory, investigative, or enforcement authority.
(b) Permitted uses.--This rule does not require exclusion if the evidence is offered for purposes not prohibited by subdivision (a). Examples of permissible purposes include proving a witness's bias or prejudice; negating a contention of undue delay; and proving an effort to obstruct a criminal investigation or prosecution.
According to Steak Umm, however, evidence of settlement negotiations would be admissible at trial because it plans to use this evidence "not to prove Steak ‘Em Up's liability, but to emphasize that its conduct is wilful and deliberate." According to the court, it did not have to resolve this issue because Federal Rule of Evidence 408 is "a rule of evidence and does not govern pleadings. While the reference to settlement discussions may be inadmissible, it is not so irrelevant as to warrant striking any part of Steak Umm's complaint."
The court did acknowledge however, that
[c]ourts in this Circuit have issued divergent rulings on this issue. See McAndrews Law Offices v. School Dist. of Philadelphia, 2007 WL 515412 at *3 (E.D.Pa.2007) (denying motion to strike a complaint referencing settlement discussions even though the evidence could later be found in inadmissible at trial); but see Ciolli v. Iravani, 625 F.Supp.2d 276, 285-289 (E.D.Pa.2009) (analyzing whether Rule 408 applied to offered statements and striking references to settlement discussions contained in the complaint as immaterial); DeFazio at *2 (striking reference to settlement discussions from complaint as immaterial without engaging in an in-depth analysis of the applicability of Rule 408); Bergman v. Jefferson-Pilot Life. Ins. Co., 2003 WL 23142155 at *1 (E.D.Pa.2003) (same).
I'm not sure where I fall on the issue. Federal Rule of Evidence 408 was enacted to encourage settlement negotiations. The Rule makes evidence of such negotiations inadmissible to prove liability for, invalidity of, or amount of a claim that was disputed as to validity or amount, or to impeach through a prior inconsistent statement or contradiction because otherwise parties would be afraid to engage in such negotiations. But does the prospect of evidence of such negotiations being mentioned in a complaint discourage settlement negotiations? It seems to me that in most cases this would not be true, but I could see how the mere mention of such negotiations could be damaging to a party in a given case. Perhaps, then, the best approach is to consider the issue on a case-by-case basis, with courts striking settlement evidence from complaints only when the moving party can prove prejudice.