EvidenceProf Blog

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

Wednesday, August 25, 2010

It Was(n't) A Privilege?: Eastern District Of Wisconsin Finds Rule 408 Didn't Create A Privilege

Federal Rule of Evidence 408 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.

(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.

So, does Rule 408 merely deem evidence of settlement negotiations inadmissible at trial (when offered for certain purposes), or does it create an evidentiary privilege protecting such evidence? According to the recent opinion of the United States District Court for the Eastern District of Wisconsin in Thermal Design, Inc. v. Guardian Bldg. Products, Inc., 2010 3238921 (E.D. Wis. 2010), Rule 408 does not create a privilege, but you'd be hard pressed to explain why the court reached this conclusion.

The opinion in Guardian Building Products did not provide any facts, but it did indicate that Guardian brought a motion to compel production of a settlement agreement entered into between Thermal Design and the American Society of Heating, Refrigerating and Air-Conditioning Engineers. In response, "Thermal Design object[ed] that the settlement agreement [wa]s confidential." The United States District Court for the Eastern District of Wisconsin, however, found that "Thermal Design's disclosure of the settlement agreement would be subject to the protective order entered in this case" and that "[m]ost cases find that a settlement agreement is discoverable despite a confidential designation, especially when there is a protective order in place to prevent unauthorized disclosure."

In turn, Thermal Design cited an opinion of the United States District Court for the Northern District of Illinois, which "refus[ed] to order the disclosure of documents related to settlement discussions because of the 'public policy regarding confidentiality during settlement negotiations' embodied in Fed.R.Evid. 408." The court again turned this argument aside, finding that this opinion was "distinguishable because it d[id] not appear that the disclosure was protected by a protective order."

Moreover, the court found that 

the use of Rule 408, a rule of evidence, to prohibit the disclosure of settlement documents during the discovery process is questionable. In re Subpoena Issued to Commodity Futures Trading Com'n, 370 F.Supp.2d 201, 211 (D.D.C.2005) ("Congress clearly enacted [Fed.R.Evid, 408] to promote the settlement of disputes outside the judicial process. However, it is equally plain that Congress chose to promote this goal through the limits on the admissibility of settlement material rather than limits on their discoverability") (emphases in original). Put simply, there is no controlling case in the Seventh Circuit, but the Court agrees with the cases which find that there is no federal privilege preventing the discovery of settlement agreements and related documents. In re Subpoena, 370 F.Supp.2d at 212 (declining to recognize federal settlement privilege); Id. at 209 n. 9, 11 (collecting cases finding for and against privilege); Tyco, 253 F.R.D. at 522.

This seems like a pretty weak conclusion to me. According to the court, some courts have found that Rule 408 creates a privilege, and some courts have found that it does not. The court then sided with the latter set of courts because....well I'm not sure. The court gave no reason. I'm also not sure that I buy the reasoning of the United States District Court for the District of Columbia in In re Subpoena Issued to Commodity Futures Trading Com'n, which found that Rule 408 "on its face contemplates that settlement documents may be used for several purposes at trial, making it unlikely that Congress anticipated that discovery into such documents would be impermissible." Evidentiary privileges also contemplate that privileged documents may be used for several purposes at trial. For example, the attorney-client privilege contemplates that privileged communications can be used to settle disputes between attorney and client at trial.

I haven't done enough research on the issue to be able to conclude that Rule 408 did or did not create a privilege, but it seems to me that the United States District Court for the Eastern District of Wisconsin didn't do enough research either or at least did not explain the findings of that research in its opinion.



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