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Univ. of South Carolina School of Law

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Saturday, March 19, 2011

What's That Mean? 11th Circuit Finds Evidence Offered To Prove Meaning Of Settlement Agreement's Terms Admissible Despite Rule 408

Federal Rule of Evidence 408 provides that

(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.

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.

And, as the recent opinion of the Eleventh Circuit in Fisk Elec. Co. v. Solo Const. Corp., 2011 WL 891797 (11th Cir. 2011), makes clear, settlement agreements and related communications also may be admitted for the purpose of resolving a factual dispute about the meaning of the settlement agreements' terms.

In Solo Const. Corp.
Solo entered into a contract with the Miami-Dade Aviation Department ("Department") to supply labor and services for an expansion project at Miami Dade International Airport. Solo served as the general contractor and hired Plaintiff as a subcontractor. The contract between Plaintiff and Solo included a pay-when-paid provision that stated Solo would pay Plaintiff when the Department paid Solo. Liberty Mutual provided Solo with a surety bond for the project.
Plaintiff initiated this suit to recover unpaid contract balances and additional expenses incurred due to construction delays. Plaintiff alleged that Solo breached their contract and that both Solo and Liberty Mutual breached the terms of the surety bond.
While this suit was pending, Plaintiff participated in mediation with Solo and the Department to resolve outstanding contract claims among Plaintiff, Solo, and the Department. As a result of the mediation, the Department negotiated a settlement and paid Solo. Plaintiff understood that Solo would pay Plaintiff after receiving the payment from the Department, but Plaintiff did not get paid.

In response to plaintiff's action for breach of contract,

Defendants later filed answers raising as an affirmative defense the pay when-paid clause. Before trial, Solo moved to exclude all evidence about the mediation between the parties. The district court denied the motion. The district court stated that Solo-by raising the pay-when-paid clause as an affirmative defense and arguing that Solo was never paid by the Department on Plaintiff's claims-had opened the door to admission of evidence that the mediation resulted in the Department's paying Solo.

After the jury found for the plaintiff, the defendants appealed, claiming, inter alia, that evidence on the parties' mediation proceedings should have been deemed inadmissible under Federal Rule of Evidence 408. The Eleventh Circuit disagreed, 

In the present case, Plaintiff introduced testimony establishing that mediation took place and resulted in a payment to Solo. This evidence was presented for the purpose of establishing that the pay-when-paid provision in Plaintiff's own contract with Solo had been satisfied. This testimony falls within the permissible "other purposes” for which evidence properly may be offered under Rule 408 . Defendants' raising of the pay-when-paid clause as an affirmative defense invited evidence rebutting that defense.[FN6]
FN6. Settlement agreements and related communications also may be admitted for the "purpose of resolving a factual dispute about the meaning of the settlement agreements' terms."...To the extent Plaintiff sought to present evidence to establish the intent behind the settlement agreement, Rule 408  does not bar its admission.

-CM

http://lawprofessors.typepad.com/evidenceprof/2011/03/408-fisk-elec-co-v-solo-const-corpslip-copy-2011-wl-891797ca11-fla2011.html

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