Statement "Perhaps" Intended To Begin "Process of Compromise" Was Not Excludable Under FRE 408

In a diversity trespass and negligence case involving accidental damage to the plaintiff's cable line, the trial judge erred by excluding a statement by the defendant's attorney to the plaintiff's employee which hoped to "begin the process of settlement discussions" as it was "likely" not excludable under FRE 408 because at the time the statement was made, no actual dispute or "difference of opinion about who caused" the cable damage, or the amount of damage suffered had arisen; however, statement was also inadmissible hearsay, in MCI Communications Services, Inc. v. Hagan, __ F.3d __ (5th Cir. May 12, 2011) (No. 09–31226)

FRE 408 applies exclusively in civil cases, banning the admission of an offer to compromise, its acceptance, and any evidence of conduct or statements made during the process of compromise negotiations. However, this bar operates only when the conduct or statement is proffered to prove a party's liability, the invalidity of a claim, or the amount of the claim. In a recent case, the Fifth Circuit addressed the application of FRE 408, noting in particular that the rule does not cover communications made to initiate the process of settling claims.

In the case, plaintiff MCI, a cable operator, claimed that defendant Hagan and co-defendant Joubert severed MCI's cable line while using a back-hoe on the Hagan property. The defendant claimed that he had not realized there had been an accident, but acknowledged "that after he arrived at the incident site on the day following Joubert's use of the backhoe, an employee of a contractor [Bergerson] enlisted by MCI to conduct the repairs informed [defendant] Hagan that the down time on the cable was costing $20,000 a minute. Hagan then called Coudrain ["an attorney who had at some point represented defendant Hagan"], who then telephoned [plaintiff MCI's contractor] Bergeron and allegedly made the statement at issue: that the defendant "had been installing a boat ramp" on the day before the incident, "and asked what the damage to the cable would cost." Hagan, __ F.3d at __.

At trial, MCI attempted to call contractor Bergeron to testify about his conversation with attorney Coudrain. The trial judge refused to admit the statement, reasoning that FRE 408 would exclude it as a statement made in settlement. The jury returned a verdict that neither defendant was negligent for the accident. MCI appealed, contending in part that the trial court misapplied FRE 408 by excluding the evidence.

The Fifth Circuit concluded any error was harmless, as the challenged evidence was admissible under neither FRE 408, nor under any other grounds:

We find that it was likely error for the district court to exclude Bergeron's testimony under Rule 408. At the point in time the call was placed, there was not yet an actual dispute or a difference of opinion about who caused the damage to MCI's cable and how much the damage was costing MCI. [Attorney] Coudrain may have intended the call to begin the process of settlement discussions, but because there was not yet an actual dispute his statement likely cannot qualify as a negotiation toward compromise.

Even so, ... [attorney] Coudrain's statement as introduced by [MCI Contractor] Bergeron is an out of court statement offered for the truth of the matter. At the time he called Bergeron, Coudrain was operating as Hagan's agent, so under Federal Rule of Evidence 801(d)(2)(D), the statement is not hearsay. However, there is no evidence that Coudrain was [co-defendant] Joubert's agent and thus Bergeron's testimony would have been inadmissible against Joubert. Because the two defendants were tried together, we find that the district court did not abuse its discretion in excluding Bergeron's testimony. The testimony could have been excluded on other grounds given that it was inadmissible hearsay against Joubert, and thus we decline to remand for a new trial on this ground.
MCI Communications Services, Inc. v. Hagan __ F.3d at __ (emphasis added) (citing Brazos River Auth. v. GE Ionics, Inc., 469 F.3d 416, 423 (5th Cir.2006) (circuit “may not disturb the district court's exclusion of the evidence ... if that ruling can be upheld on other grounds.”) (internal quotation marks omitted)).

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