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Univ. of South Carolina School of Law

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Thursday, June 17, 2010

Same Claim?: Northern District Of Florida Fails To Answer Whether Rule 408 Only Covers Settlement Documents Regarding Same Claim As Lawsuit

Federal Rule of Evidence 408(a) states:

(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.

But does this Rule apply only when the claim involved in a lawsuit is the same as the claim involved in the settlement negotiations? The United States District Court for the Northern District of Florida didn't really answer that question in its recent opinion in Fluor Intercontinental, Inc. v. IAP Worldwide Services, Inc., 2010 WL 2366482 (N.D. Fla. 2010), but I think that the answer is a clear "no."

In Fluor,

In 2002, Defendant Readiness Management Support (“RMS”), a subsidiary of IAP Worldwide Services, Inc., (“IAP”) entered into a “cost-reimbursable contract” with the Air Force, in which the Air Force issued Task Order 5076 for RMS to develop military facilities in the Qatar. RMS then signed a subcontract with Plaintiff Fluor Intercontinental, Inc. (“Fluor”) to provide the construction for the project. Fluor then signed a subcontract with IBS to perform certain obligations under the contract between Fluor and RMS. IBS' performance was deficient, causing Fluor to terminate IBS for cause and correct IBS' deficient performance at additional expense.

In November of 2003, the Air Force terminated the contract with RMS on Task Order 5076. Subsequently, RMS submitted a Certified Termination for Convenience Claim to the Air Force on behalf of Fluor, contending the Air Force was liable for approximately $26 million in unpaid costs under the contract. The Contracting Officer denied the claim on the ground that RMS and Fluor had not given timely notice of the costs.

In May of 2007, RMS and Fluor appealed this decision to the Armed Services Board of Contract Appeals (“ASBCA”). In an effort to recoup their costs, RMS and Fluor presented a “united front” in the ASBCA litigation, working together against the Air Force. In 2008, while the appeal was pending, RMS, Fluor, and the Air Force engaged in mediation to resolve the dispute. During that mediation, Fluor's counsel gave a PowerPoint presentation entitled “RMS Mediation Presentation.” As a result of the mediation, the Air Force agreed to pay $14 million to settle all claims with RMS and Fluor related to Task Order 5076.

Fluor thereafter brought an action against RMS, seeking recovery for the remaining portion of its expenses not covered by the Air Force Settlement. In response, RMS sought to compel responses to discovery requests regarding the PowerPoint presentation made at the ASBCA mediation. Fluor countered that the presentation was covered by Federal Rule of Evidence 408(a) and thus inadmissible. RMS in turn responded that "because the mediation where the PowerPoint presentation was given was part of a different case, the presentation [wa]s admissible...."

The United States District Court for the Northern District of Florida agreed with Fluor, finding that

it is clear that the mediation in the ASBCA case was part of settlement of a common claim that is at issue in this case as well. The core issue of Fluor's entitlement to recovery for the same project was present in both the ASBCA litigation and the instant case. Thus, any statements made by Fluor during the ASBCA mediation, including the PowerPoint presentation, are not admissible under Rule 408.

I agree with the court that the presentation was inadmissible, but I don't see why the court even needed to mention that the mediation was part of settlement of a common claim. Even if the mediation was not part of settlement of a common claim, the presentation still would have been inadmissible as long as it was used in compromising or attempting to compromise a claim. There is no requirement under Rule 408 the evidence of settlement negotiations to be excluded involve the same claim as the claim involved in the subject lawsuit. Indeed, as I have noted before, the Rule even applies when there is an action between a party to settlement negotiations and a third party that was not involved in those negotiations.

-CM

http://lawprofessors.typepad.com/evidenceprof/2010/06/408--fluor-intercontinental-inc-v-iap-worldwide-services-incslip-copy-2010-wl-2366482ndfla2010.html

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