The defendant’s offer to “split” the disputed difference concerning unaccounted funds was offered to show “liability” and the offer to settle was barred under FRE 408 “even if no settlement negotiations follow,” in United States v. Davis, 596 F.3d 852 (D.C. Cir. Feb. 26, 2010) (No. 07-3100)
In the case, defendant Davis was accused of fraud and theft as the national treasurer of the Phi Beta Sigma fraternity. After the financial discrepancies were discovered, the defendant was suspended from his position, and charged with fraud and theft offenses. Before trial, the defense moved in limine to exclude a statement in which the defendant offered to split some of the missing funds. At trial, the new treasurer testified that he had asked the defendant to provide the financial records. During one conversation, the new treasurer informed the defendant that $29,000 in checks were found made payable to cash which were not deposited in the fraternity bank as the defendant had stated. The new treasurer testified:
“[Defendant] Terry [Davis] asked – he said ‘Can we just split this $29,000.00 and make this situation just go away?’ . . . . I told him that [the] amount was in excess of a hundred thousand dollars. Terry’s statement to me at that point was, ‘I can’t afford to pay that amount,’ and then I told him – I said, ‘Terry, if you want to do some – negotiate some kind of settlement, you need to talk to our legal counsel or our international president.”
Davis, 596 F.3d at 854. This testimony was admitted over defense objection. The defendant was convicted. On appeal, on one issue, the defendant challenged the admission of the testimony concerning the defendant’s offer to resolve the amount of unaccounted funds.
The D.C. Circuit reversed the conviction after concluding the FRE 408 had been violated. The evidence was offered by the government to show “liability” which is barred under the rule. As the circuit explained:
“There can be no doubt that Davis offered to compromise a disputed claim. His offer was to split the $29,000 in checks to cash he thought the fraternity had discovered. The claim ‘was disputed as to validity or amount,’ … It is also clear that the government intended to introduce Davis’s settlement offer in order to prove Davis’s guilt, or in the words of Rule 408(a), his ‘liability.’ Offers to settle are excluded even if no settlement negotiations follow…. If one party attempts to initiate negotiations with a settlement offer, the offer is excluded from evidence even if the counterparty responds: ‘I’m not negotiating with you.’ It makes no sense to force the party who initiates negotiations to do so at his peril. Rule 408 bars not only evidence of settlement offers, but also ‘statements made in compromise negotiations.’ Fed. R. Evid. 408(a)(2). Davis’s other statements to Hammock during their second conversation were of that sort. Davis asked what it would take to “make this go away”; Hammock said pay back what you took; Davis countered with his offer to split the $29,000; Hammock countered that the missing funds totaled more than $100,000.”
Davis, 596 F.3d at 859 (citations omitted).
The circuit found the government’s argument that the statement was admissible to show the defendant tried to obstruct the criminal investigation. There were no obstruction charges are facts to support this theory in the case.
After finding error in admitting the settlement testimony, the circuit noted that the government did not argue whether the error was harmless. The circuit reversed the conviction and remanded the case and declined to exercise its “discretion to determine sua sponte whether an error is harmless.” Davis, 596 F.3d at 861.
The Davis case highlights the thrust and scope of FRE 408. The rule covers not only settlement negotiations that could not be resolved but also offers to settle that may not be taken seriously.
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