Many lawyers treat Federal Rule of Evidence 408 and its state analogues as a blanket confidentiality provision that precludes reliance upon—or even disclosure of—settlement communications. The language of the rule itself, however, and cases applying it, make clear that Rule 408 is not so broad: not every communication with a “Rule 408 Settlement Communication” stamp is inadmissible.
Federal Rule of Evidence 408(a) states:
Evidence of the following is not admissible—on behalf of any party—either to prove or disprove the validity or amount of a disputed claim or to impeach by a prior inconsistent statement or a contradiction:
(1) furnishing, promising, or offering—or accepting, promising to accept, or offering to accept—a valuable consideration in compromising or attempting to compromise the claim; and
(2) conduct or a statement made during compromise negotiations about the claim—except when offered in a criminal case and when the negotiations related to a claim by a public office in the exercise of its regulatory, investigative, or enforcement authority.
Rule 408’s language refers to “a disputed claim” and twice to “the claim”: the rule is tied to a particular claim—what courts have referred to as the “same claim.” That is, settlement communications regarding Claim A are inadmissible to prove or disprove the validity or amount only of that same Claim A. E.g., Vulcan Hart Corp. (St. Louis Div.) v. NLRB, 718 F.2d 269, 277 (8th Cir. 1983) (“Rule 408 excludes evidence of settlement offers only if such evidence is offered to prove liability for or invalidity of the claim under negotiation.”); Armstrong v. HRB Royalty, Inc., 392 F. Supp. 2d 1302, 1304-05 (S.D. Ala. 2005) (“Rule 408 unambiguously requires that the claim as to which a settlement offer was made and the claim at issue in the litigation in which the offer is proffered as evidence must be the same claim.”); Ostrow v. Globecast Am. Inc., 825 F. Supp. 2d 1267, 1272 (S.D. Fla. 2011); Davis v. Carrington, No. CV 11-00818 SJO (AGRx), 2012 U.S. Dist. LEXIS 200010, at *18 (C.D. Cal. June 14, 2012).
The Ninth Circuit thus held that Rule 408 did not bar admission of a party’s statements in a grievance proceeding—presumptively settlement communications—in a discrimination action where “the grievance proceeding did not concern” that party’s “not-yet-filed discrimination claim.” Josephs v. Pac. Bell, 443 F.3d 1050, 1064 (9th Cir. 2006).
Moreover, settlement communications do not trigger Rule 408 if they are offered for a purpose other than establishing liability. Fed. R. Evid. 408(b) & advisory committee’s note to 2006 amendment; see also Brocklesby v. United States, 767 F.2d 1288, 1292-93 (9th Cir. 1985); Terhune Homes, Inc. v. Nationwide Mut. Ins. Co., 20 F. Supp. 3d 1074, 1078 (W.D. Wash. 2014). Thus, even if the claim at issue in settlement negotiations is the same claim at issue in litigation, Rule 408 still will not apply where the settlement evidence is offered for a reason other than to prove or disprove the validity or amount of the claim or for impeachment.
For example, settlement communications regarding Claim B that may not be offered to prove the invalidity of that Claim B or its amount may be offered to aid interpretation of the settlement agreement compromising that Claim B. See Basha v. Mitsubishi Motor Credit of America, Inc., 336 F.3d 451, 454 n.4 (5th Cir. 2003) (Plaintiff’s attempt to invoke Rule 408 was “meritless because the [settlement communications] were not used to establish liability, but, rather, to interpret the parties’ settlement agreement”).
Rule 408 also bars the use of settlement communications “to impeach by a prior inconsistent statement or a contradiction.” This 2006 addition to the rule does not refer to “a claim,” and read in isolation might be interpreted to mean that no settlement communications can ever be offered for impeachment. No court seems to have yet ruled on whether the “same claim” approach applies to impeachment evidence, and the advisory committee’s note to the 2006 amendments does not provide guidance on this point. A party seeking to admit impeachment evidence from settlement communications regarding an unrelated claim might argue that because the Rule allows admission substantively of settlement evidence regarding the unrelated claim, there is no basis to refuse to hear impeachment evidence regarding that same unrelated claim.
While Rule 408 is relatively narrow, it is strict in that it cannot be unilaterally waived—a party’s own settlement offers and communications are inadmissible to the same extent as an opposing party’s offers and communications. Fed. R. Evid. 408 advisory committee’s note to 2006 amendment; see also Pierce v. F.R. Tripler & Co., 955 F.2d 820, 828 (2d Cir. 1992).
In short: lawyers should be careful in what they say in settlement communications, and recognize when settlement disclosures may be admissible for a proper purpose notwithstanding Rule 408.
Jacob P. Freeman
Jacob is an experienced and efficient litigator who has successfully represented plaintiffs and defendants in complex and high-stakes cases in federal and state courts and arbitral proceedings. He is adept at evaluating the uncertainties, costs, and benefits of litigation and frequently resolves disputes without the need for formal proceedings. But when going to court is best, Jacob is ready: his experience spans all stages of litigation, from pre-complaint demand to trial to appeal, and he has handled a diverse mix of disputes involving, among other things, intellectual property, restrictive covenants, the purchase and sale of companies, and commercial leases.