EvidenceProf Blog

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

Wednesday, October 27, 2010

That's Settled: Eastern District Of Missouri Finds Documents Compiled During Settlement Negotiations Not Covered by Rule 408

Federal Rule of Evidence 408 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.

Moreover, it is well established that Rule 408 covers not only statements made during settlement negotiations but also documents prepared for settlement negotiations. As the recent opinion of the United States District Court for the Eastern District of Missouri in Goodman Distribution, Inc. v. Haaf, 2010 WL 4117379 (E.D.Mo. 2010), makes clear, however, the Rule does not cover all documents prepared (or compiled or collected) during settlement negotiations.

In Haaf,

Goodman allege[d] Mary Haaf devised a scheme to submit false and fraudulent warranty claims. Goodman alleges between approximately August 21, 2009, and October 16, 2009, she submitted over 375 false claims. A list of the claims with the claim numbers, unit serial numbers, dates of approval, and check numbers [wa]s attached to the complaint as Exhibit B. According to Goodman, these claims were fraudulent in that: the work required to charge the unit ha[d] not been done; the work performed was not necessary; the unit was no longer under warranty; and/or the maximum $200.00 per unit limit under the cap replacement program had already been paid. Goodman state[d] it relied on the false statements defendants made in the warranty claims when it paid these allegedly fraudulent claims.

Plaintiff also allege[d] it inadvertently paid money to defendants that was not due or owed. Plaintiff alleges it mistakenly sent checks to defendants as a result of a typo. Plaintiff alleges it...demanded the return of this money, but defendants...refused to do so.

Goodman thus brought an action against Haaf and Herb Haaf, Inc. for  fraud, money had and received, and breach of contract. Before trial, the defendants moved, inter alia, pursuant to Federal Rule of Civil Procedure 12(f),

to strike Exhibit C from the complaint. Exhibit C contain[ed] invoices from Herb Haaf, Inc. to its customers, and warranty claim forms submitted to Goodman....

Defendants argue[d] the invoices and warranty claim forms attached as Exhibit C should be stricken because they are inadmissible under Rule 408...in that they were complied and provided to plaintiff during settlement negotiations.

In denying this motion, the court correctly noted that

The issue before the Court..., however, is not whether...the documents in the exhibit are admissible, but rather whether they are immaterial, impertinent, and scandalous matter. Rule 12 is directed to allegations in a complaint, not to the admissibility of evidence.

Moreover, the court correctly concluded that

In any event, Rule 408 would not apply to the documents at issue....

While the documents may have been complied and provided to plaintiff during settlement negotiations, they do not appear to have been prepared for the settlement negotiations. Upon examination, it would seem the documents were created by Herb Haaf, Inc. during the regular course of its business. "Rule 408 does not require the exclusion of any evidence otherwise discoverable merely because it is presented in the course of compromise negotiations."



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