Mountain Law: What is a ‘Rule 408’ discussion? (column)
July 7, 2016
Molly and Amy are involved in a legal dispute. Molly suggests to Amy that the two arrange a meeting to discuss a possible resolution. Amy says that she is willing to meet but only if it will be a "Rule 408" discussion. What is that and should Molly agree?
Rule 408 is a rule of evidence that applies in court proceedings. It basically prevents a person from presenting evidence of communications related to offers to compromise claims in order to show liability, invalidity or amount of a disputed claim. The rule reflects two legal principles.
One is that offers to compromise may be irrelevant to issues of liability, invalidity or amount because a person could make an offer to compromise for totally unrelated reasons. For instance, a person who is owed $500 might accept $250 in settlement just to avoid the expense, uncertainty and aggravation of trial. Similarly, a person with a contract to buy a widget for $1,000 might be willing to pay $1,500 for the widget for business reasons rather than go to lengths to enforce the contract. Paying more or accepting less than owed is sometimes called "buying peace."
The other is that the law encourages people to work out their differences. It would discourage a person from making a compromise offer if that offer could later be used against that person if not accepted. Rule 408 preserves the sanctity and efficacy of settlement discussions by not letting them be used as a weapon.
While Rule 408 is broad, it does not prevent the introduction of evidence for purposes other than showing liability, invalidity or amount. It also does not prevent the introduction of evidence that is not made in the context of an effort to compromise a dispute. Here are a few examples to illustrate the point:
• A defendant communicates to a plaintiff words to the effect of, "I think your claim is worth X," without making any offer to pay X. Such a statement has been deemed admissible into evidence to show the amount of the claim because it is not an offer to compromise.
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• A potential plaintiff slips on the defendant's premises, and the defendant immediately approaches and says, "I'm so sorry, I should have fixed that problem a long time ago — I will pay for everything." These statements would be admissible because there is no dispute and no offer to compromise.
• A debtor tells a creditor, "I know that I owe you $50,000, but I am offering to pay you $25,000 in compromise of the claim." Such a statement would be admissible to show the debtor's $50,000 liability because that issue is not disputed.
Rule 408 generally applies to all statements made in the course of efforts to compromise a dispute. However, if the evidence could be obtained in other ways, it is not rendered inadmissible simply because it was made in a settlement communication. For example, a defendant cannot admit in a settlement communication that he was driving while intoxicated and thereby prevent the plaintiff from presenting such evidence at trial if the plaintiff has valid means of determining that fact outside of the settlement communication.
As alluded to in the discussion between Molly and Amy above, attorneys and their clients often agree verbally or in writing that a given conversation is subject to Rule 408. Similarly, written settlement proposals will often recite that they are governed by Rule 408. Overall, Rule 408 is a good tool to further legitimate settlement objectives. There is generally no harm in a person, such as Molly in the above example, agreeing that discussions will be subject to Rule 408 subject to her understanding that certain statements of the sort illustrated above will not be governed by the rule.
Noah Klug is owner of The Klug Law Firm, LLC, in Summit County, Colorado. He may be reached at 970-468-4953 or Noah@TheKlugLawFirm.com.
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