Settlement Offers (FRE 408)
What is the Settlement Offers (FRE 408)?
Evidence of settlement offers, completed compromises, and statements made during settlement negotiations is not admissible to prove or disprove the validity or amount of a disputed claim. The rule promotes candid negotiation and compromise.
Source: Bankcard America, Inc. v. Universal Bancard Systems, Inc., 203 F.3d 477 (7th Cir. 2000)
Definition
Federal Rule of Evidence 408 protects the settlement process by excluding evidence of compromise offers, completed settlements, and related conduct or statements when offered to prove or disprove the validity or amount of a disputed claim, or to impeach through a prior inconsistent statement or contradiction. The rule serves a strong public policy of encouraging the resolution of disputes through negotiation rather than litigation.
The rule is broad in scope. It covers not only the offer itself but also statements of fact made during settlement negotiations. This means that a party cannot circumvent the rule by introducing a factual admission made during negotiation while claiming it is not the 'offer' itself. However, the rule requires that there be an actual dispute — both as to liability or amount — at the time the statements were made. Statements made before any dispute has arisen, such as an immediate offer to pay after an accident, may not be protected.
FRE 408 does not exclude settlement evidence when offered for purposes other than proving the validity or amount of a claim. Permissible purposes include proving witness bias or prejudice, negating a contention of undue delay, or proving an effort to obstruct a criminal investigation or prosecution. The 2006 amendment also clarified that statements made in civil settlement negotiations may be used in subsequent criminal proceedings, reflecting the view that the policy of encouraging civil settlements should not shield evidence of criminal conduct. Courts must still apply FRE 403 balancing even when evidence falls within a permitted use.
Key Elements
- 1A claim exists that is disputed as to validity or amount
- 2Evidence of furnishing, promising, offering, or accepting a compromise or valuable consideration is offered
- 3Conduct or statements made during compromise negotiations are included
- 4The evidence is offered to prove or disprove the validity or amount of the disputed claim, or to impeach
- 5Such evidence is inadmissible for those purposes
- 6The evidence may be admissible for other purposes: proving bias, prejudice, negating undue delay, or obstruction
Landmark Cases
Bankcard America, Inc. v. Universal Bancard Systems, Inc.
203 F.3d 477 (7th Cir. 2000)
Clarified that FRE 408 protects statements of fact made during negotiations, not just the offers themselves.
Cates v. Morgan Portable Building Corp.
780 F.2d 683 (7th Cir. 1985)
Held that there must be an actual dispute at the time of negotiations for FRE 408 to apply — preliminary business discussions are not protected.
Pierce v. F.R. Tripler & Co.
955 F.2d 820 (2d Cir. 1992)
Addressed the use of settlement evidence to prove bias and clarified the boundaries of permissible non-liability purposes.
McInnis v. A.M.F., Inc.
765 F.2d 240 (1st Cir. 1985)
Distinguished between settlement of the present claim (excluded) and settlement of a different claim (potentially admissible for certain purposes).
Exam Tips
- Verify that a dispute existed when the statements were made — if no dispute has yet arisen, FRE 408 may not protect the statements.
- Remember that FRE 408 covers both the offer and the factual statements made during negotiations — parties cannot cherry-pick admissions from settlement talks.
- Watch for the permitted purposes exception: bias, prejudice, undue delay, and obstruction of criminal investigation are common exam triggers.
- Distinguish FRE 408 (compromise offers in disputed claims) from FRE 409 (offers to pay medical expenses, which does NOT protect accompanying admissions of fact).
Common Mistakes to Avoid
- Confusing FRE 408 with FRE 409 — FRE 409 only excludes offers to pay medical expenses and does NOT protect factual statements accompanying the offer, while FRE 408 protects both.
- Applying FRE 408 when there is no actual dispute — the rule only applies when there is a claim disputed as to validity or amount.
- Believing settlement evidence can never be admitted — it can be admitted for purposes other than proving liability or claim amount.
Memory Aid
FRE 408: 'Negotiate freely' — everything said at the settlement table stays at the settlement table (when offered to prove liability).